CHECK AGAINST DELIVERY
Let me state at the outset that the Government is not opposed in principle to this Private Members Bill, which contains proposals to amend the Landlord and Tenant (Ground Rents)(No.2) Act 1978 in order to facilitate acquisition of freehold titles by lessees and ground rent tenants.
Having said that, I must add that the Bill requires detailed scrutiny in order to ensure consistency with the property rights safeguards set out in the Constitution, as well as coherence with other statutory provisions governing the purchase of ground rents. The Minister informs me that his Department is consulting with the Office of the Attorney General on these issues. Arising from this, he expects to be in a position to table a number of Committee Stage amendments in due course.
I must add that Minister Heather Humphries has been in regular contact with Minister Flanagan on the issue of ground rents.
As Senators will be aware, the rights of tenants occupying property under long leases to acquire freehold title has been a contentious issue since at least the nineteenth century. Such tenants normally 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.
Statutory reforms since the 1960s have strengthened the rights of such tenants to acquire the freehold in the property:
o The Landlord and Tenant (Ground Rents) Act 1967 gave statutory effect to the principal recommendation of the Report of the Ground Rents Commission chaired by Judge Conroy. Under the Act, certain ground rent tenants – both business and residential tenants – acquired the right to purchase the ground rent in their property;
o The Landlord and Tenant (Ground Rents) Act 1978 prohibited the creation of new ground rents in respect of dwellings; leases after that date are only valid if they operate as a renewal of an existing lease;
o The Landlord and Tenant (Ground Rents) (No.2) Act 1978 gave the Land Registry (now the Property Registration Authority) responsibility for operating a low cost scheme for tenants acquiring the freehold of dwelling houses. To date, over 80,000 ground rents have been bought out under this statutory scheme.
These important statutes seek to establish an appropriate balance between, on the one hand, a tenant’s right to acquire the freehold title for reasons of public interest, and the property rights of ground rent landlords that are protected under Article 40.3 and Article 43 of the Constitution on the other.
The Private Members Bill that we are discussing today 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 – Shirley - v - O’Gorman – concerning the right of ground rent tenants to purchase ground rents in their properties in certain circumstances.
The case arose from an application to acquire freehold title in Carrickmacross, Co 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 has effectively narrowed the scope of the ground rents purchase scheme 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 earlier, a ground rent tenant’s right to acquire the freehold in property, i.e. 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 (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 also applies to the property.
One of the most widely used conditions in section 10 (i.e. condition number 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 took 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. Secondly, the Court ruled that the definition of “predecessors in title” should be interpreted in a wide manner to include works by all previous owners, i.e. 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 is to narrow the scope of the ground rent purchase scheme. The Private Members Bill before the House today seeks to address the matters arising from the Supreme Court in its ruling in the Shirley case that I have referred to by means of amendments to sections 9 and 10 of the 1978 (No.2) Act.
In section 9, the Bill proposes to repeal both subsection 1(b) and subsection (2), which contain the “improvement” conditions. Instead, the Bill proposes the insertion of a revised definition of “permanent builds” 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 usable area by not less than 50%.
In addition, the Bill proposes an amendment to condition 2 in section 10 that would seek to make it clear that the reference to “predecessor in title” would exclude any building works carried out by any previous tenants of the property.
There is merit in the Bill’s objective to broaden ground rents tenants’ right to acquire the fee simple of property and that is why the Government has decided not to oppose it today.
However, as I mentioned earlier, a number of references in the Bill require careful scrutiny in order to ensure that they do not clash with existing ground rent legislation. The Minister refers, particularly, of references to “extension of its usable area” and “previous holder of the lessee’s interest”. The Minister is, of course, anxious to ensure that any amendments to ground rents legislation will not lead to further litigation challenging its constitutionality.
That is why I have indicated that certain Committee Stage amendments may be required following completion of the examination that is currently taking place in the Office of the Attorney General.
As I have stated the Government is not opposed to the aim and policy objective of the Bill, and will not be opposing it at Second Stage. Moreover, any future amendments that may be tabled at later Stages will seek to ensure that the Bill’s provisions are coherent with other ground rents legislation and consistent with the Constitution.