Paul Coghlan (Fine Gael)

I move: "That the Bill be now read a Second Time."

I welcome the Minister of State to the House for this important Bill which I am delighted to introduce. As the House is aware, it aims to address a serious loophole in the law which leaves consumers at a distinct disadvantage when purchasing houses. In particular it reduces their bargaining power, adds considerably to their costs and involves them spending up to 90% of the price of their house before getting possession of the property.

This Bill proposes to abolish the practice whereby developers demand stage payments from house purchasers for houses built on housing estate developments. Such houses are generally built to the specification, timescale and requirements of the developer and are not specifically constructed for individual purchasers. This Bill seeks to address the demanding of stage payments by the developer for such developments. It does not seek to outlaw the provision and contracts for stage payments where a single house is being built to the specification of a consumer, particularly for one-off housing. In such instances the practice of stage payments may be justified, given that the consumer is intimately involved in the design, construction specification and financing of the project. In that case the builder is constructing the house specifically for an identified named consumer and payments are made on certification by the client's architects.

The practice of stage payments being demanded for houses in housing developments occurs only in certain parts of the country. I am sure the Minister of State will agree that the country is a little too small to be lacking in uniformity. In most cases house purchasers pay a deposit of 10% on a new house and pay the balance when they occupy the premises. This is the normal practice throughout most of the country. However, in Cork, Limerick, Galway, Sligo and Mayo, purchasers of new houses in housing estates are required to make stage payments before and during the construction phase of such houses. There is also evidence that the practice is re-emerging in other areas and that must be of concern to the Minister of State and his Department.

This practice is wholly one-sided and entirely anti-consumer. It is entirely inequitable that a consumer ends up paying up to 90% of the price of a house before gaining possession of it. As a direct result of stage payments being demanded in such circumstances, purchasers end up paying their mortgage repayments well in advance of living in the house. This is entirely unfair. I am sure the Minister of State agrees.

The fact the consumer has paid over the bulk of the purchase price of the house before the house is completed inevitably lessens the consumer's bargaining power with the builder and provides little incentive for the builder to complete the project on time and to specification. It also involves transferring certain financial risk inherent in the stage payments system to the consumer in addition to imposing unwarranted costs on consumers. This is unreasonable and incompatible with the ability of many consumers to carry such one-sided impositions.

A recent report commissioned by the Law Society outlined the cost of stage payments to consumers. This report was prepared by an eminent firm of accountants, Peelo & Partners. It determined that stage payments cost consumers an extra €7,000 each. The majority of these additional costs come in the form of extra interest on obligatory payments drawn down before the consumer got possession of the house. In addition there were certification and survey costs that had to be met. When one considers the 25,000 new houses being built annually in the affected counties, the total cost to consumers is €75 million annually.

It is rare that we in this House can implement legislation that can have such a direct and immediate benefit for consumers. By accepting this Bill and allowing it to survive beyond Second Stage we can alleviate a considerable burden for house buyers. I appeal to the Minister of State. He can take heed of his own expert advice if the Bill needs amendment and we can live with that.

The reality of stage payments in these instances was brought home to me by an article in the Irish Examiner yesterday. None of us could fail to be moved by the plight of the two families who purchased houses in housing estates that were subject to stage payments. One woman purchased a house in October 2002 yet along with her boyfriend and six year old daughter is still living in a flat attached to her parents' house. The total house purchase price was €146,000 and the couple paid the builders €110,000 in three stages for the house in Castledermot in County Kildare. The mortgage payments are already costing the couple €500 per month, but the house is not ready for occupation. The purchaser believes the house will not be ready for another few months. In addition to the costs imposed on this couple, they are also unhappy with the specification of the house. The purchaser was quoted as saying: "The fireplace, windows and sockets are all in different places and the survey includes a six page list of defects". I cannot help thinking that if the builder had only received 10% of the purchase price as a normal deposit, the house would have been completed on time and to the specification required. Another ancillary aspect to the stage payments system is that the couple missed the deadline for the first-time buyer's grant because the house was not completed and occupied by 2 April this year. In this case, the stage payments system is likely to cost the couple nearly €10,800 at a time when their finances are already stretched.

Another woman purchased a house from the same developer and was due to move in in April 2003, several months before her wedding last September. However, her house is still not complete and her husband is now sleeping in the dining room of her parents house while she shares a room with her sisters. The couple's wedding presents are being stored by friends and relatives.

No Member of this House can be satisfied that a loophole in the law is causing such direct and avoidable hardship for consumers and house purchasers. There is no justification for continuing the system of stage payments. It is imposing additional cost, inconvenience and heartache for purchasers of houses around the country. I was encouraged that the Consumers' Association of Ireland is steadfastly against the practice and has told me, thorough its general secretary, that it supports this measure wholeheartedly. It is a one-sided practice that offers no benefit to consumers.

I do not accept the arguments advanced by some in the construction sector that abolishing the practice of demanding stage payments would result in dearer houses for consumers. Due to an absence of transparency, there is no evidence that house prices in counties where the practice persists are any cheaper than those in other parts of the country where it does not. This is a plain and simple rip-off which consumers must continue to endure unless the practice is outlawed.

In recent weeks, as we have campaigned in the local and European elections and since the results were announced, there has been comment on the need to be responsive to consumer needs. I understand from today's newspapers that there was also comment at the Fianna Fáil parliamentary party meeting yesterday about the plight of first-time buyers and the need to be responsive to them. This measure, if adopted by the Government, could go a considerable distance towards helping first-time buyers. Allowing this system to persist for even another month will be to perpetuate a continued injustice against consumers.

From discussions with the Minister of State, I know his heart is in the right place on this issue and that he is in agreement with me, and I respect his interest in the subject. Therefore, I hope he is willing to accept this legislation. Some 25,000 house purchasers and their families will be interested in the response of the Minister of State, and they have long memories. The Government can amend this legislation in any way it sees fit. It has been discussed on the Order of Business in the House and there is broad agreement on it. Nobody is claiming a monopoly of wisdom on this issue and I see no divisions between us. I commend the Bill to the House.