Vol. 364 No. 4
asked the Minister for Justice how he proposes to assist house owners whose leasehold has expired, where the rateable valuation is greater than the annual ground rent; if he will enable these house owners to avail of the terms of the ground rents purchase scheme; and if he will make a statement on the matter.
27.
asked the Minister for Justice if he is aware that exorbitant demands are being made on householders whose ground rent leases have expired; and the action he proposes to curb these excessive demands by landlords.
I propose to take Question No. 3 and Priority Question No. 27 together.
The terms on which ground rent leases are renewable are prescribed by law. The relevant terms are set out in legislation enacted as recently as 1980, no doubt on the basis that those terms are fair to both landlord and tenant. The ground rent purchase scheme is, of course, applicable to a renewed lease — or, in some cases, even without formal renewal.
I have no information about any new problem arising in relation to expired ground rent leases. It is, of course, basic to the entire landlord and tenant code that, where a lease has expired, the terms of renewal are likely to differ very substantially from the terms of the expired lease, which may have been settled 100 years ago or more. This is why successive Governments have encouraged people to buy out their ground rents well before their leases expire.
Regrettably, in recent years that encouragement given by successive Governments has been countered — with what degree of success I cannot say — by campaigns discouraging people from buying out and I would urge those people to consider their position well in advance of the expiry dates of their ground rent leases.
My Question No. 3 refers to a particular difficulty which householders have whose rateable valuation is greater than their annual ground rent. This appears to be an anomaly in the 1980 Act. It is a matter that I raised previously here when debating the question of ground rents. I specifically asked if the Minister proposes to do anything to overcome that anomaly and if he could indicate whether he is going to do that or not?
The circumstance in which rateable valuation is greater than annual ground rent is one of the tests which apply to determine whether or not a tenancy is a ground rent tenancy in one very usual type of case. It does not have any general significance. There are many cases where the rateable valuation is greater than the annual ground rent. It is one of the factors taken into account in determining whether or not there is a ground rent tenancy. Apart from that, it has no further significance.
A Cheann Comhairle, could I ask——
I am calling Deputy De Rossa and then Deputy Woods.
I am aware of at least one case where the right to purchase was denied because of the issue of rateable valuation being greater than the ground rent. In the case in question the ground rent was reduced at some stage in order to come within those terms. Would the Minister consider an alteration of the Act to enable people in those circumstances, who when they come to this point are asked for literally tens of thousands of pounds to renew ground rent leases, to be covered under the 1980 Act?
As I said before, the circumstances as to whether or not the ground rent is less than the rateable valuation is not a material factor in deciding entitlement. If the Deputy has a specific case in mind here, I would be happy to examine that case with him. What may be the bigger problem in the case to which the Deputy is referring is that perhaps the person in question attempted to buy out the ground rent either at the very end of the lease or when the lease had already come to an end. In those circumstances the purchase of the lease can be very expensive because if the lease has already terminated one is dealing with a situation in which the landlord could reasonably, on the updating of the ground rent, increase the amount of the rent fairly substantially. In those circumstances the purchase of the ground rent could amount to a substantial proportion of the value of the property.
That is exactly the question that I asked the Minister — if he was aware of the exorbitant demands being made on householders whose ground rent leases had expired. The Act does not allow them to buy out their leases if this was proposed within a certain period of the enactment of the legislation. The period initially was 25 years but it is now 15 years. Some ground tenants are caught in between. In the case of an expired lease on a dwelling house valued at £40,000 the ground landlord wants £5,000, plus £500 expenses in respect of stamp duty. The ground rent is £6 per annum. The amount demanded now by the ground landlord is one-eighth of the market value of the dwelling. Does the Minister agree that he should take a new look at the Act in the near future with a view to improving the position in respect of such payments?
I think I should go back a little on the history of ground rents.
It is not in order to make speeches at Question Time.
I think I should explain the position for Deputies. The right to purchase was first given to ground rent tenants by the Landlord and Tenant (Ground Rent) Act, 1967. I am sure the House will be aware particularly of the provision for the settling of disputes between the purchaser and landlord. An Act of 1978 introduced a special purchase scheme for ground rent tenants in respect of dwellinghouses. That original scheme was due to be terminated on 31 July 1983. It was extended to 31 July 1984 and later to 31 July 1987.
The present purchase provisions are catered for by section 7 of the Landlord and Tenant (Amendment) Act, 1984, and are designed to enable the purchase price to be fixed at arbitration or by the courts on appeal, with due regard for the property rights of both the landlord and tenant. The price depends on the circumstances. It would be at its minimum in the case of an ordinary dwellinghouse when the lease has 15 years or longer to run or when a yearly tenancy applies. The price is arrived at through a formula related to the yield on Government securities, and at present that is eight to nine times the amount of the annual rent. The price is at its maximum when the ground rent lease has expired. In these circumstances the purchase price may be as high as one-eighth the market value of the property.
The point I am trying to make is that the scheme has been in existence since 1967, the better part of 20 years, and I would have thought that it would have been prudent for people to have bought out their leases before entering the last 15 years of the term. I regret that numbers of people seem to have fallen for the campaign that discouraged people from doing this.
Deputy De Rossa's question is directed not so much at the purchase price payable but at the qualification of a person to buy out at all under the Act. Would the Minister agree that using the PLV as a test for any purpose of qualification is entirely unsatisfactory, particularly having regard to the fact that the PLV figures are completely out of date, unrevised and indeed in rural areas have been held to be unconstitutional in a different context as a basis for determining anything? Might it not well be held to be unconstitutional in this urban context? Surely there must be some tests available other than those antiquated valuation figures?
The Legislature agreed up to a point with what Deputy Taylor has said. The circumstances in which rateable valuation is greater than the annual amount of rent is one test that is applied to determine whether a tenancy is a ground rent tenancy. That is not by any means the only test — it is one of a series. The Deputy's reference to the unconstitutionality of the use of PLV for certain purposes does not arise here. The rateable valuation is intended to reflect the annual letting value of the property.
Does the Minister agree that it was never the intention of the House that people should be charged sums of the order of £5,000 for a £6 a year ground rent? Would he therefore have a look at the legislation in the experience of what has been happening and see if it could be altered to give some ease to people in such circumstances?
When a lease has expired, if there is no question of purchasing the ground rent or the fee simple the other options open would be a renewal or an extension of the lease. If there was a discussion on an extension of the lease it would be perfectly open, constitutionally and in every other way, to the landlord to revise the basis of the rent. In all of these cases the rents that would now be fixed would be considerably higher than rents that were fixed in some cases 100 years or more ago. It is in such cases that difficulties arise for people who have allowed ground rents to lapse before taking any action on buying them.
So people cannot expect any assistance from the Minister.
If the only inhibiting factor in purchasing a ground rent is rateable valuation being greater than annual ground rent, would that exclude a person from the terms of the 1980 Act?
No. I have pointed out that is only one test that applies to determining whether it is a ground rent tenancy.
The Minister may be trying to cover his tracks on this issue.
I have no tracks.
Can I take it from the Minister that if a person's rateable valuation is greater than his annual ground rent that does not exclude him from the terms of the 1980 Act?
In principle, no. If the Deputy has a specific case where that has appeared to create an obstacle, I would be happy to discuss it with him.
