The object of this Bill is to amend the provisions of Sections 11 and 17 of the Rent Restrictions Act, 1946, in relation to the special lawful additions to the basic rent in respect of what I may describe as exceptional repairs executed by the landlord. The provisions in question have given rise to unforeseen difficulties in practice which have made amending legislation imperative and a matter of urgency. It is only right that I should, at the outset of my remarks, express my gratitude to Senator Miss Pearse for drawing my attention to the matter in the first instance and so enabling the situation that had arisen to be brought under review.
Paragraph (g) of Section 11 (2) and paragraph (e) of Section 17 (2) of the Act of 1946, which the Bill proposes to amend, are identical. They provide that if a landlord, in any of the five pairs of years in the period 1945 to 1950, inclusive, expends an amount in excess of two-thirds of the basic rent on putting the premises into a reasonable state of repair, he shall be entitled to increase the lawful rent by a sum equal to 15 per cent. per annum of the amount by which his expenditure exceeds two-thirds of the basic rent. I think it is clear that the Legislature, when enacting these provisions in 1946, had in mind the difficult situation in which the landlords of controlled property were placed. On the one hand they were compelled by the law to accept restricted rents—severely restricted, one might say, particularly in the case of premises that were still controlled on the 1914 basis—while, on the other hand, the Rent Code had, from the beginning, made the position of landlords more difficult, so far as liability for repairs was concerned, by placing special remedies at the disposal of tenants and, moreover, there were the powers of local authorities under the Public Health and Housing Acts to compel the carrying out of repairs by landlords.
Landlords were able to complain with some force that controlled rents were inadequate to permit of the discharge even in a limited degree of their liabilities in respect of repairs, especially in view of the greatly increased cost of repairs. One solution would have been to have allowed rents to be increased to such an extent as might have been considered necessary to compensate landlords for the increased cost of repairs. But this would have resulted in automatic and, perhaps, substantial increases of rents for all tenants—a situation which, I am bound to say, could scarcely have been viewed with equanimity.
Confronted with the dilemma which I have endeavoured briefly to outline, the Legislature in 1946 decided that an increase of rent should be allowed in respect of repairs, only when the repairs had actually been executed by the landlord to an extent which involved outlay in a particular period in excess of a specified proportion of the basic rent. Such a provision seemed to have the advantage that tenants could not be asked to pay increased rents until the repairs had been done and that landlords would be encouraged, or could be compelled, to carry out necessary repairs and be assured of an increase in rent to recoup them their expenditure. It is true, perhaps, that the provision was, in principle, open to the objection that it placed a premium upon neglect of repairs but to labour this objection too much would be to ignore the realities of the situation in which landlords had been placed for many years during which rents had continued to be severely restricted while repair costs had continued to mount. At all events, it seemed to accord with the requirements of a sound public policy, apart from any question of endeavouring to do justice to landlords, to have the state of the law such that there would be an incentive for landlords to carry out necessary repairs even though this might involve some increase of rents for tenants.
In the examination of the various lawful additions to the basic rent permitted by Sections 11 and 17 of the 1946 Act, one is struck by the curious circumstances that whereas, in the case of expenditure on improvements or structural alterations, the lawful addition is reckoned at 8 per cent. of the amount expended, the percentage rate in respect of expenditure on repairs is fixed at the seemingly high figure of 15. To find an explanation for this it is necessary to go back to the Rent Act of 1923. That Act contained provisions on identical lines to the provisions of Sections 11 (2) (g) and 17 (2) (e) of the 1946 Act, but the 1923 Act's provisions (as extended by the amending Act of 1926) applied, of course, to repair work carried out in any of the pairs of years from 1923 to 1928. The provisions in the 1923 Act had been recommended by a committee which had been appointed by the then Minister for Home Affairs to inquire into the operation of the 1920 Rent Act. The 1920 Act allowed a maximum increase of 25 per cent. of the standard rent in respect of the landlord's liability for repairs. The committee criticised this provision on the ground that the 25 per cent. increase could be and was in fact usually claimed by landlords irrespective of whether the repairs were carried out or not. They recommended that the automatic increase in respect of repair liability should be restricted to 10 per cent. of the standard rent and that the remaining 15 per cent. should be assessed, not on the standard rent, but on the actual outlay on repairs during a limited period over and above the normal outlay. The committee regarded one-third of the standard rent as representing at that time normal outlay on repairs. They considered that this change in the law would serve to induce landlords to undertake without delay the work of putting their houses into a reasonable state of repair. But it is clear from the committee's report—and this is a point which I desire to stress as being of particular relevance now—that the kind of expenditure which the committee envisaged was expenditure that would, in the words of the report, "absorb from one to two years' profit rent."
It may be doubted now whether the 1923 committee's reasoning was altogether sound or logical, but, however this may be, their recommendation was adopted and the resultant provisions of the 1923 Act appear to have worked satisfactorily or, at any rate, did not occasion any complaints or critical comment. In the light of this, the decision taken in 1946 to meet the demands of landlords for concessions in the matter of the allowances for repairs by reviving the idea first adumbrated by the 1923 committee is one about which we cannot now afford to be unduly critical. However, it does now appear as if certain factors were overlooked, namely: (a) the greatly increased cost of repairs as compared even with 1923 costs; (b) the possibility that repairs amounting almost to complete reconstruction might be necessary, involving expenditure, not of the order of one or two years' profit rent as envisaged by the 1923 committee, but of such an amount as to absorb, perhaps, 20 or more years' rent; and (c) the possibility that some landlords, having purposely neglected to do any repairs for years, might set out, as a matter of deliberate policy, to incur heavy expenditure with the object of bringing about a very substantial increase in the rent. To a certain extent, of course, the greatly increased cost of repairs is merely an aggravation of the other two factors I have mentioned.
As Senators will readily realise, when a sum running into several hundreds of pounds or, perhaps, £1,000 or more is spent by the landlord on repairs and the landlord is allowed to increase the rent by 15 per cent. per annum of the amount by which that expenditure exceeds two-thirds of the basic rent (which would be a relatively insignificant figure), the result is a wholly disproportionate increase in the rent of the premises. Cases have actually occurred in which, as a result of the operation of the provisions which the Bill proposes to amend, rents have been increased threefold, fourfold and even fivefold. Clearly, if this situation were allowed to continue, it could only result for many tenants in the complete deprivation of the protection which the Rent Restrictions Code was intended to provide for them as their rents might be increased to such an extent as to leave them with no alternative but to give up possession. In these circumstances, I felt that the matter was one which called for the immediate attention of the Legislature and the Government's proposals for dealing with the situation are embodied in the Bill now before the House.
In considering the proposals in the Bill I want Senators to bear in mind two things. Firstly, the proposals are of an ad hoc character framed to deal with the de facto situation that now confronts us in a number of actual cases and, secondly, these proposals fall to be considered in the light of the fact that the Act of 1946 is itself due to expire at the end of next year so that there will be a further opportunity of reviewing the whole position in the near future. The Bill proposes that, as on and from its enactment, the allowance to the landlord in respect of expenditure on repairs should be modified to a sum calculated in accordance with the scale set out in the Schedule, that is, at the rate of 15 per cent. per annum on the first £100 of the excess of the landlord's expenditure over two-thirds of the basic rent, 8 per cent. on the second £100 and 6 per cent. on any amount over £200. It is true that, even on this modified scale, comparatively substantial increases of rent will still be possible. But we have to face the fact that landlords, apart from their liability in the matter of repairs under contract or at common law or under the Rent Restrictions Act, are often compelled by the local authority to carry out substantial repairs and that it would be wholly unreasonable, having regard to the severely restricted rents permitted under the Act, to expect landlords to carry out such repairs without giving them some increase of rent.
As regards those cases in which rents have been already increased under Sections 11 (2) (g) or 17 (2) (e) of the 1946 Act, the rents will be automatically adjusted as from the passing of this Bill on the basis of the new scale and Section 3 of the Bill contains provisions which will enable any tenant who, through being unaware of the passage of this amending legislation, goes on paying the increased rent to recover the difference between that rent and the adjusted rent in respect of any period after the enactment of the Bill. In addition to any other method of recovery, the tenant will be able to recover any such sum by withholding the rent until he has recouped himself the amount.
I do not wish to pretend that the proposals in the Bill provide the ideal solution, but I feel that I can recommend them to the Seanad as providing the best practicable solution in the circumstances confronting us. Senators will appreciate that, as I have already mentioned, we are legislating to deal with a de facto situation in which a number of landlords have exercised their legitimate rights under the Act of 1946 and this is something which we cannot entirely ignore. It may well be that, when the whole question comes to be dealt with again, a more radical solution may have to be attempted for the problem presented by the conflicting needs of a reasonable standard of repair on the one hand and of a rent within the means of the tenant on the other hand. I am bound to say that at this stage it is not easy to see what the solution for this problem may be and we can only hope that it will not prove wholly intractable.
