I move: "That the Bill be now read a Second Time".
The Government supports this Bill which was originally tabled as a Private Members' Bill in the Seanad. It contains proposals to amend the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 to facilitate the acquisition of freehold title to their properties by ground rent tenants. The Government’s strong support for the Bill is evident in the tabling of the Bill in Government time this evening. I thank Senators Gallagher, Swanick and Ardagh for introducing this Bill in the Seanad. The Bill seeks to address the effects of a Supreme Court decision in a case in Carrickmacross, County Monaghan, which has repercussions throughout the country. I acknowledge the presence here this evening of a number of people from Carrickmacross. In particular I acknowledge the work of Mr. Pat Byrne, Mr. Tony Donagher and Mr. Michael Fisher in highlighting this important matter.
As indicated during Seanad discussions, it has been necessary to subject the Bill to detailed legal analysis and scrutiny to ensure, as far as possible, that its provisions are consistent with the property rights safeguards enshrined in the Constitution and to ensure coherence with other statutory provisions governing the purchase of ground rents by ground rent tenants. For that purpose, following the Seanad’s approval of the Bill, I was pleased to work with the Minister for Justice and Equality to establish a small expert group comprising senior officials from his Department and the Office of the Attorney General together with a number of outside experts in the area of land law, including Professor John Wylie, who is a leading expert on Irish land law. I thank Professor Wylie for his interest and work on the expert group. The group’s task was to examine the provisions of the Bill and determine what amendments would be necessary to address the issues raised by the Supreme Court ruling in the Shirley case, while remaining within constitutional limits. The group has reported and has made a number of detailed technical recommendations which, following extensive discussions with the Attorney General’s office and the Office of the Parliamentary Counsel, the Minister for Justice and Equality intends to table as Committee Stage amendments to the Bill in due course. These amendments will seek to ensure, as far as possible, that the Bill’s provisions will not be subject to successful constitutional challenge.
As Deputies here today are aware, the rights of tenants occupying property under long leases to acquire freehold title has been a contentious issue since at least the 19th century. Such tenants are normally required to pay a small yearly rent to the ground rent landlord, and the issue that arises is the nature and extent of the tenant’s rights to acquire the freehold title in the property. Statutory reforms introduced by successive Governments since the 1960s have sought to strengthen the rights of such tenants to acquire the freehold in the property. The Landlord and Tenant (Ground Rents) Act 1967 gave statutory effect to the principal recommendation of the report of the Ground Rents Commission under the chairmanship of Judge Conroy. Under the Act, certain ground rent tenants, both business and residential, acquired the right to purchase the ground rent in their property. The Landlord and Tenant (Ground Rents) (No. 2) Act 1978 prohibited the creation of new ground rents in respect of dwellings, and leases after that date are only valid if they operate as a renewal of an existing lease. The Landlord and Tenant (Ground Rents) (No. 2) Act 1978 gave the then Land Registry, now the Property Registration Authority, responsibility for operating a low-cost scheme for tenants acquiring the freehold of dwelling houses. To date, tenants have bought out well in excess of 80,000 ground rents under this statutory scheme. These important statutes have sought to establish an appropriate balance between, on the one hand, the tenant’s right to acquire the freehold title for reasons of public interest and, on the other, the property rights of ground rent landlords that are protected under Article 40.3 and Article 43 of the Constitution.
The Bill that we are discussing seeks to address what are seen as adverse consequences for ground rent tenants arising from a Supreme Court ruling in 2012. On 2 February 2012, the Supreme Court delivered judgment in protracted legal proceedings, the Shirley v. O’Gorman case, concerning the right of ground rent tenants to purchase ground rents in their properties. The case in question arose from an application to acquire freehold title in Carrickmacross, County Monaghan. While the tenant’s application in this case was ultimately successful, the manner in which the Supreme Court interpreted certain technical provisions of the Landlord and Tenant (Ground Rents) (No. 2) Act appears effectively to have narrowed the scope of ground rent acquisition rights under that Act. The ruling means that certain ground rent tenants who had been eligible to acquire the freehold title in their properties may no longer be able to do so. This narrowing of the grounds on which a ground rent tenant is permitted to acquire freehold title affects other ground rent tenants in Carrickmacross and elsewhere in the State.
As I mentioned, a ground rent tenant’s right to acquire the freehold in property, that is, to purchase the ground rent, was first introduced in the Landlord and Tenant (Ground Rents) Act 1967. While this legislation remains relevant in the case of many commercial properties, the later Landlord and Tenant Ground Rents (No. 2) Act 1978 contains the statutory rules that generally apply to acquisition of the freehold title in the case of dwellings. Sections 9 and 10 of the 1978 Landlord and Tenant Ground Rents (No. 2) Act specify the criteria that determine a ground rent tenant’s eligibility to acquire the freehold title in the case of dwellings. Section 9 provides, inter alia, that such tenants have a right to acquire freehold title where there are permanent buildings on the land, that these buildings are not an "improvement" within the meaning of the Act, and that one of the conditions set out in section 10 applies to the property. One of the most widely used conditions in section 10, condition No. 2, is where the lease in question is for a period of less than 50 years and the annual ground rent is less than the rateable valuation of the property. Moreover, while this condition recognises that there were buildings already on the land when such a lease was granted, there is a statutory presumption arising from the fact that the rent is at a low level that the buildings were not erected by the ground rent landlord or the landlord’s predecessor in title. However, that presumption may be rebutted in any particular case.
In its ruling in the Shirley case, the Supreme Court appears to take the view that the ground rent tenant is ineligible to acquire the freehold unless all the buildings had been built by him or her and not by the landlord. Second, the court ruled that the definition of "predecessors in title" should be interpreted in a wide manner to include works by all previous owners, that is, not only the ground rent landlord but also any earlier tenants of the property in cases in which the landlord had taken repossession between tenancies. The overall effect of the ruling in the Shirley case appears to be a narrowing of the scope of the ground rent purchase arrangements.
The Private Member's Bill before the House today seeks to address the matters arising from the Supreme Court in its ruling in the Shirley case by means of amendments to sections 9 and 10 of the Landlord and Tenant Ground Rents (No. 2) Act 1978. The Bill proposes to repeal both subsection 1(b) and subsection (2) of section 9 of the Act which contain the "improvement" conditions and to insert a revised definition of "permanent buildings" in a new subsection (6). It would provide that the right to acquire the freehold would in future apply where additions, alterations or extensions to the original buildings had caused it to lose its original identity or had caused an extension in its useable area by not less than 50%. In addition, the Bill proposes an amendment to condition No. 2 in section 10 that would seek to make it clear that the reference to "predecessors in title" would exclude any building works carried out by any previous tenants of the property.
While there is considerable merit in the Bill’s objective to broaden ground rents tenants’ right to acquire the fee simple of property, the amendments to the Landlord and Tenant Ground Rents (No. 2) Act 1978 contained in the Bill could give rise to further legal challenges on constitutional grounds and may also have unintended effects for other existing ground rents legislation. For these reasons, as I mentioned, the Minister for Justice and Equality will be tabling detailed technical amendments to the Bill on Committee Stage. These amendments flow from a detailed examination of the Bill by the expert group.
As I also stated, the Government supports the aim and policy objective of the Bill, as demonstrated by the fact that Government time has been dedicated for discussion of the Bill this evening. Moreover, the amendments on Committee Stage will seek to ensure that the Bill’s provisions are, as far as possible, consistent with other ground rents legislation and with the Constitution. I commend the Bill to the House.