I move: "That the Bill be now read a Second Time."
The purpose of this short Bill is to amend section 13 of the Landlord and Tenant (Amendment) Act, 1980, so as to restrict its application in relation to certain tenements in the Custom House docks area. The amendment will enable leases to be made with financial services companies in the docks area without a statutory right to renewal of the tenancy accruing. It will be for the parties concerned to negotiate and agree on the length of the lease and the terms for its renewal. The Bill follows on from submissions made by the Custom House Docks Development Authority which is the statutory authority charged with developing the Custom House docks area. There have also been consultations with the International Financial Services Centre Committee in the matter.
The provisions of the Bill are mainly technical and, in the overall context of the landlord and tenant code, will have a very limited application. The Bill is aimed only at financial services companies locating in the Custom House docks area. It is not aimed at other kinds of tenants, for example, shopkeepers, restaurateurs etc. who will also be located in the docks area.
Before dealing with the provisions in the Bill it would help, I think, if I were to give the background to the provisions in the 1980 Act which the Bill will change. The 1980 Act, which consolidates, with amendments, earlier 1931 legislation, governs the rights of tenants of "tenements"— a technical word that is defined in section 5 of the Act. In general it means the subject matter of a lease or tenancy of any nature. The tenant has a right to compensation for improvements and to new tenancies, or compensation for disturbance. The tenant is also entitled to compensation from his landlord, on quitting the tenement on expiration of his tenancy, for every improvement made by him or his predecessor in title which adds to the letting value and is suitable to the character of the tenancy.
The right to a new tenancy is given under the 1980 Act to certain tenants of tenements on satisfaction of certain conditions. So far as business tenants are concerned, under section 13 (1) (a) of the Act the right to a new tenancy is given to all tenants of three years' standing. Apart from that, tenants in general may base their claim under section 13 (1) (b) where there is 20 years' continuous occupation or, under section 13 (1) (c) where the value of improvements made by the tenant are more than half the letting value of the tenement.
Prior to 1931 if a business tenant was disturbed in possession without good and sufficient reason he was entitled to monetary compensation for the loss of goodwill he sustained. The 1931 Landlord and Tenant Act introduced a new principle. The business tenant was to be entitled not to monetary compensation but to a new tenancy for 35 years where he was in possession for three years. The period of three years was chosen because it was felt that it would take that length of time on average to build up the goodwill of a business. A tenant was not, however, automatically entitled to a new tenancy. One could only be refused by the court for reasons set out in the 1931 Act, and now set out in the 1980 Act. If a new tenancy is not granted for one of the specified reasons the tenant is entitled to compensation for the disturbance which would include pecuniary loss arising from loss of goodwill. It is not possible to contract out of these statutory provisions.
The practical effect of the existing law, if applied to the case of international financial services companies in the docks area, would be to permit only two kinds of leases to be offered, viz. a lease for a term under three years, which under existing law would not give a right to renewal, or a long-term lease with a right to renewal. For purely commercial reasons medium-term leases are not a feature of existing commercial leasing arrangements here. The experience in other countries, however, is that international financial services companies are more concerned in having medium-term leases of, say, ten to 15 years duration.
It has been represented to me that the application of the existing law in this area to international financial service companies would adversely affect the promotion of the Financial Services Centre. It is necessary, therefore, that we make special provision so that leases can be negotiated with these companies outside of the existing legal framework. This Bill seeks, therefore, in so far as relates to the leasing of accommodation in the Financial Services Centre, to create for the financial services companies the same legal environment which they are used to in other countries where they operate, notably the US and many continental countries.
Section 1 of the Bill provides, by way of the addition of subsections to section 13 of the 1980 Act, that the rights to new tenancies in section 13 (1) (a) and (b) will not apply in cases where leases are made with the international financial services companies in the docks area. Those companies are defined in the Bill as companies carrying on a relevant trading operation, within the meaning of section 39B of the Finance Act, 1980, in the Custom House Docks Area. The effect of the provision in section 1 of the Bill will be to remove a certain amount of statutory control over landlord and tenant relations in the cases affected and allow for more flexibility in the leasing arrangements with the financial services companies in question.
I should like to point out that the amendment in the Bill to the 1980 Act will have a life of five years, that is to say, it will have effect only in relation to leases made during the period of five years after the passing of the Bill unless that period is varied or extended by regulation made by me as Minister for Justice, which variation or extension must be approved by both Houses of the Oireachtas before it would come into effect. This will enable the Oireachtas to take stock of the situation after a relatively short period.
From time to time I have had submissions from various sources seeking a general change in the law in this area, that is to increase from three years the period for which a business letting may be made without creating a right to a new tenancy. The considerations which give rise to those submissions are not the same as those which apply to the docks area amendment. They would represent a fundamental change in our law for all business tenants and because of the complexity of the issues and the need to take account of a very wide range of interests, that matter needs to be examined further. Any decisions made will be announced in due course.
A feature of our land law is its essentially historical and evolving nature. In more recent times the Landlord and Tenant Acts of 1978, 1980 and 1984 have brought about some modernisation and, in considerable measure, the consolidation of the post-1922 landlord and tenant code. The change being brought about by this Bill is a very small one, given that it will apply only to certain tenements in the docks area. Nevertheless the change is of importance in that it will meet particular needs in the docks area.
I commend the Bill to the House.