Dáil Éireann díospóireacht -
Wednesday, 24 Feb 1999

Vol. 501 No. 1

Landlord and Tenant (Amendment) Act, 1980, Regulations, 1999: Motion.

Minister for Justice, Equality and Law Reform (Mr. O'Donoghue):

I move:

That Dáil Éireann approves the following Regulations in draft:–

Landlord and Tenant (Amendment) Act, 1980, (Section 13 (4)) Regulations, 1999,

copies of which Regulations in draft were laid before Dáil Éireann on 16th February 1999.

The purpose of these regulations is to extend, by a further five years, the operation of the provisions of section 13(3) of the Landlord and Tenant (Amendment) Act, 1980, to enable leases to continue to be made with financial services companies in the International Financial Services Centre in the Custom House Docks area without rights to a new tenancy accruing. The Department of the Environment and Local Government and the Dublin Docklands Development Authority have recommended that a further extension is required having regard to the importance of the continued development of the financial services industry and its contribution to continuing growth in the economy. The extension will also give certainty to future business arrangements.

The 1980 Act provision, which was introduced by way of an amendment to that Act in section 1 of the Landlord and Tenant (Amendment) Act, 1989, gives landlords, in the form of development companies, and tenants in the form of financial services companies, flexibility to make letting arrangements in the IFSC which are appropriate to their respective needs. It does so by disapplying the provisions of section 13(1)(a) and (b) of the Landlord and Tenant (Amendment) Act, 1980 in so far as financial services companies locating in the Custom House Docks area are concerned.

Under section 13 of the Landlord and Tenant (Amendment) Act, 1980, as most recently amended by the Landlord and Tenant (Amendment) Act, 1994, tenants, or their predecessors in title, who have five years' continuous occupation of a commercial tenancy, have a right to a new tenancy of 20 years duration or of such lesser term as the tenant may nominate, subject to the proviso that it shall not be fixed for less than five years without the consent of the landlord. Tenants in general have a right to a new tenancy under section 13(1)(b) of the 1980 Act where they have been in continuous occupation for 20 years. Present landlord and tenant legislation also provides that, in respect of premises used wholly or exclusively as an office, tenants can renounce their right to a renewal of the tenancy, provided such renunciation is executed prior to the commencement of the tenancy and that the tenant has received independent legal advice in relation to the renunciation.

The 1989 Act was passed against a background where very short letting arrangements were often the norm and the only counterbalance to this were leases of very long duration. In the latter case, the length of lease acted to protect the lessor's large financial investment in premises. Having made such an investment in premises, a company would naturally wish to retain control of that investment. That would not be the case if they were to grant a medium-term lease of say ten years because under existing law a commercial tenant under such a lease has a right to a new tenancy of 20 years and applications to court to fix rent etc. could be involved.

It was then the case that, with regard to international financial services companies in other countries, the tendency was to go for medium-term leases of up to ten or 15 years duration. In all the circumstances the features of business lettings under the law as it stood needed to be adapted to meet the particular needs of both landlord and tenant in the Financial Services Centre. That need remains.

The 1989 Act was introduced after it was represented to the then Minister for Justice by the Custom House Docks Development Authority, which was charged with developing the Custom House Docks Area, that the application of existing landlord and tenant provisions to the Financial Services Centre would be satisfactory neither to landlord nor tenant and that it would be better if the parties had more flexibility to negotiate and agree on the length of the lease and the terms for its renewal. At that time this House was very sympathetic to those arguments and accepted the need for the legislation which went before it.

I will dwell briefly on the main provisions of the legislation which touch upon the regulations which are the subject of this motion. Section 1 of the 1989 Act inserted additional subsections (3), (4), (5) and (6) in section 13 of the 1980 Act. Subsection (3)(a) provides that occupation by a financial services company in the docks area shall not be regarded as occupation for the purposes of section 13 and the effect is to preclude those companies from a statutory right to renewal of a tenancy – at the same time it will still enable the parties concerned to agree their own terms under a lease.

Under subsections (4) and (5), subsection (3) only affected leases made during the period of five years after the passing of the 1989 Act unless that period was extended to cover leases made after that period. In regulations made by the Minister for Justice in February 1994, that period was extended by another five years and is due to expire at the end of this month unless further extended. The aim of these regulations is simply to provide for an extension of a further five years.

Under section 13(5) of the 1980 Act, the draft regulations, prior to signature by the Minister for Justice, Equality and Law Reform, are required to be laid before both Houses of the Oireachtas and a resolution approving the draft has to be passed by each House.

The development of the International Financial Services Centre is widely acknowledged as having made an outstanding contribution to the economic development of Dublin city and to the economy as a whole. The International Financial Services Centre has become the largest anchor project in Dublin city and is now the biggest employer in the Dublin docklands area. For every job generated in the International Financial Services Centre, additional employment opportunities in support and ancillary services have been created. The continued presence and future growth of the centre is accordingly considered essential.

The Dublin Docklands Authority's master plan for 1997 stresses the partnership dimension of the International Financial Services Centre involving a powerful combination of public and private sector organisations co-operating together to ensure the success of the centre. That partnership approach led to the existing provisions exempting the Custom House Docks area from the general provisions of landlord and tenant legislation and is also behind the proposal before the House today that these provisions be extended by a further five years.

I commend this motion to the House.

Mr. Higgins

(Mayo): I have no problem agreeing this motion to provide for an extension of a further five years to facilitate the making of leases with financial service companies in the International Financial Services Centre. I agree with the thrust of what the Minister said. Given that the Department of the Environment and Local Government and the Dublin Docklands Development Authority regard the extension as necessary for the ongoing development of the centre and the financial services industry generally, we must support this motion.

The decision to establish the International Financial Services Centre in 1987 was very opportune. It happened at a time when the removal of national restrictions on capital movements was happening. Markets were opening up and financial markets were being developed. The computer software industry here was beginning to grow at an enormous rate. Large international computer companies were beginning to locate here. Our costs were becoming much more competitive. Our stable industrial relations climate was an obvious magnet. Decades of emphasis on and investment in education produced high calibre second level students and third level graduates. We did not come from a standing start position. While the international financial services industry was not large, we had a very solid and stable tradition of retail banking and insurance, which had begun to sprout wings overseas in search of international opportunities. Twelve years down the road, the success of the IFSC speaks for itself; it is enormously impressive. It is anticipated that 5,000 people will be employed there as we approach the turn of the century and the millennium. Companies continue to succeed because they realise the importance of innovation and of keeping abreast of best international practice.

There is an obligation on the Government and on Government organisations and agencies to ensure the necessary legislative and administrative framework is in place and that the taxation regime is friendly to an industry which is sophisticated, complex and constantly changing. There is no doubt that central to the success of the IFSC are the special corporation tax incentives, access to double tax treaties and double rent allowances. However, the problem hanging over everybody is the current attitude of Brussels; the attitude of uncertainty is extremely worrying. The EU approval for the special tax rate for existing companies expires in 2005, which must be a major cause for concern. What is of more immediate concern, however, is that relief may not be afforded to new entrants after 1 January 2001; this will be a major delimiting factor. Will the Minister clarify the current state of play as regards existing concessions and what is the prognosis for future entrants? There is little doubt that moves to damage the attractive tax environment of the IFSC or to infringe on it in any way, will have a negative impact on the future scale of development there.

In May 1997, the international advisory group on the International Financial Services Centre published its report which was presented to the then Minister of State, Deputy Gay Mitchell. I do not have time to go into the recommendations of the report, but there was a list of very worthwhile recommendations as regards the promotional role of the Taoiseach in the IFSC; the relationship between the Central Bank and the IFSC; the need to avoid duplication between the Central Bank and the Department of Finance; the need to enhance the advisory role of the Revenue Commissioners on international taxation affairs; the role of telecommunications and technology; future education and training requirements; and the ongoing marketing of the centre. In that regard, I pay tribute to the Industrial Development Authority, which, as the chosen promoter of the centre, has done a tremendous job in ensuring we attract the biggest and the best. Have these recommendations been implemented or what progress has been made?

The issue of a new Landlord and Tenant Bill was raised on this morning's Order of Business by Deputy Joe Higgins. The reply was unsatisfactory. When in Opposition, the present Government introduced the Landlord and Tenant (Ground Rent Abolition) Bill, 1997; its promoter and sponsor was Deputy Woods. At the time, the Rainbow Government had the magnanimity to accept the thrust of that Bill. It was accepted for reading on Second Stage, endorsed by this House, went to Committee and has been in a cul-de-sac ever since. The purpose of the Bill was to provide for the abolition of all ground rents and for the payment of compensation to those whose interests were affected. The Bill proposed the termination of ground rents within a definite timeframe. When it was introduced it was seen as having merit; however it has not been implemented. The constitutional obligations have been analysed and dissected and yet there has been no progress. What is the timeframe for a positive response to this long overdue issue?

Mr. Howlin:

It is not usual for motions of this type to be debated; however I welcome the practice. The alternative whereby an annulling motion must be put down to deal with administrative decisions of the Government is bad practice. The argument is that everybody on this side of the House feels that but the mood changes somewhat when we enter Government. By and large it is important that secondary legislation should be closely scrutinised in this House. A huge amount of important legislative decisions are being devolved to Ministers who are signing them. I know from experience that an array of orders come before a Minister and he and his immediate advisers may not have a chance to examine them in depth. This is a negation of democracy. We will have to look again at some type of secondary legislative process to ensure that all secondary legislation and all instruments are properly scrutinised. I am not laying this criticism at the door of the current Minister or Administration; it has been practice for a very long time.

I have put down an annulling motion on another order in the area of the Minister for Justice, Equality and Law Reform and I am greatly concerned about that. I know I am out of order and I will not refer to it now. However, I would like the Minister to deal with the issues I raised as regards orders under the Aliens Act, which in my legal opinion, are not constitutional. This matter needs to be clarified, without equivocation, by the Minister.

The order before us refers to the Landlord and Tenant (Amendment) Act, 1980. Section 13 of that Act sets out the conditions for a tenant to claim a right to a new tenancy under Part II of that Act which applies to any tenement continuously occupied as a business premises for three years or continuously occupied as a private dwelling for 20 years. The amendment Act of 1989 inserted a new subsection (3) into section 13 of the 1980 Act. It provides that occupation under a tenancy in the Custom House docks area for the purposes of a relevant trading operation, within the meaning of the Finance Acts, shall not be regarded as occupation for the purposes of section 13 of the Landlord and Tenant (Amendment) Act. In other words, the three years' occupation of business premises in the docks area will not, or have not, given rise to a renewed tenancy right.

A new subsection (4) inserted by the 1989 Act provides that this restriction shall have effect only in relation to a tenancy, the terms of which commences within five years of the commencement of the 1989 Act or such longer periods as may be specified for the period being in regulations made by the Minister for Justice at any time during the said period of five years or during a period standing so specified. Such regulations require approval by both Houses of the Oireachtas.

The draft regulations before us propose to extend the specified period from five years, renewed to ten, by a further five years. This would mean the right of renewal of tenancy would not automatically apply for a period of 15 years following the enactment of the 1989 Act. As a matter of principle, I agree with the original Act; it was good to give security of tenure to allow people to make plans knowing they would have a right to renew their tenancy arrangements. For that reason, any modification of that fundamental principle should be reasoned for in a clear and good manner. I will not oppose the draft regulation before us; there is a specificity applying to the Custom House docks area and it is important to get the relaxation of this condition in order for it to thrive. However, I have not heard the Minister put forward a convincing argument, other than to say it is the opinion of the Department of the Environment and Local Government and the Dublin Docklands Development Authority that it should be the case. I dare say that many areas would like the same relief from the rigors of the Landlord and Tenant (Amendment) Act but their case has not been made. I think the Minister could have made a stronger case for the relaxation of these regulations for this case.

The Dublin Docklands Development Authority was set up under an Act which I, as Minister for the Environment, introduced. I recognised the wonderful work the Custom House Docks Development Authority did in this development. After a slow start at a time when the economic regime at the time did not facilitate the development, it lifted off with gusto. The Government shared my view, which was strongly supported by the then Minister for Finance, Deputy Quinn, that development potential should be extended to some of the derelict areas surrounding the docklands. Dublin is a marine focused city with a fine harbour on a famous river, but we have turned our back to the sea and neglected the development of the dockland area which is a prized development area in other parts of the world, for example, the dockland regeneration in cities such as Boston and Sydney. It is important in the new millennium that we develop the docklands area in a way that symbolises the new vigour, energy and economic success of Dublin as a city and Ireland as a nation. That is why I introduced and supported the Dublin Docklands Development Act.

I share Deputy Jim Higgins's concerns about the new level of scrutiny by the European Union and its implications for the strategy of the Dublin Docklands Development Authority. There is a view we no longer can give favourable treatment or tax benefits for urban renewal to development agencies, except for residential developments. That has implications not only in the Dublin docklands area but across the country. The Minister for the Environment and Local Government announced the urban renewal programme last week but towns will get a much watered down version of what was available previously when commercial heartlands were regenerated to very good effect. The Minister for Justice, Equality and Law Reform will bear testament to the magnificent work done under that scheme. Towns which were in line for urban renewal, having seen the benefits of the previous schemes, feel cheated that the same level of funding will not be available to them. I fear that New Ross and Gorey in my constituency will not be able to avail of the same level of funding afforded to Wexford and Enniscorthy under the previous urban renewal scheme. I do not know how strongly the Minister made the case in Brussels but I fear the very ambitious plans for the international conference centre and a major public-private partnership development programme in the docklands area will be adversely affected by scrutiny from Brussels. I hope the Minister will be able to reassure me in that regard.

The international financial services sector has been a boon for Ireland. However, it is important that enthusiasm for this sector does not blind us to the potential for abuse. The role of the Irish Central Bank has changed very significantly since 1 January with the advent of the euro and I hope its role as a proper watchdog will be developed to ensure there is absolute probity in the financial services sector and that no difficulties arise with our European Union partners or anybody else in relation to the reputation of Dublin at some future date. These concerns will be shared on all sides of the House. On behalf of the Labour Party I support the Minister's proposals on the Landlord and Tenant (Amendment) Act, 1980.

Minister for Justice, Equality and Law Reform (Mr. O'Donoghue):

I thank Deputies who contributed to the debate on this motion for their general welcome for these regulations. Deputy Jim Higgins referred to recent controversies surrounding the tax incentives in the Custom House docks area. Strictly speaking, these matters are wholly unconnected with the landlord and tenant issue, the heart of the regulations before the House, and I have no intention of straying too far into the interesting taxation byways that have been set out before me. It is a matter of public record that the European Commission has approved the capital allowance for buildings in the Custom House docks area but has initiated formal proceedings in respect of the double rent relief and rates remissions granted to tenants of buildings in this area since May 1993. The Government is putting the strongest possible case in reply to the Commission and hopes to bring the matter to a successful conclusion. The corporation tax regime governing the International Financial Services Centre is as follows: for new projects approved up to and including July 1998 the preferential tax rate will apply to the end of the year 2005 and thereafter the then standard corporation tax rate of 12.5 per cent will apply, for projects approved after July 1998 the preferential rate will apply until the end of the year 2002 and the rate of 12.5 per cent will apply thereafter. The recommendations of Deputy Mitchell's advisory group have been broadly accepted by the Government and the strategy for future development of the International Financial Services Centre taking account of issues such as the changing environment in relation to corporation tax, is now being put in place.

Deputy Higgins referred also to the ground rents Bill and I am advised that constitutional matters connected with this Bill have yet to be resolved and therefore I am not in a position to give a firm date for the publication of a new Bill.

Mr. Howlin:

The Minister would have dismissed that argument when in Opposition he argued the case in the House.

Mr. O'Donoghue:

I welcome Deputy Howlin's intervention but I am dealing with the matter as of now and the position is as I have outlined it. I am not in a position to say when the constitutional issues will be resolved. There are in the region of 370 stand alone projects in active operation in the International Financial Services Centre. These projects cover the broad spectrum of financial service activity including fund management and administration, banking, treasury and insurance. Some 5,000 jobs have so far been created in these projects, not to mention the many indirect jobs that have been created in the accounting, legal, information technology and other support sectors. Deputies will certainly join me in welcoming these initiatives and the extremely important and positive developments which are of tremendous significance to our economy and our prosperity. This further extension provided by these draft regulations will continue to disapply provisions in the law which in the view of the Dublin Docklands Authority are inappropriate in the context of the International Financial Services Centre and adversely affect the promotion and development of that centre.

I thank the Opposition spokespersons for their contributions and their positive attitude to the motion. The motion will be of considerable benefit to the community.

Question put and agreed to.