John Minihan (Progressive Democrats)

I welcome and congratulate Senator Coghlan's initiative in introducing this Private Members' Bill. I have spoken to the Senator on this matter on a number of occasions outside the House and was surprised that the Bill was moved so quickly. I would have liked to have had further discussions prior to its introduction.

Having experienced stage payments in County Cork, where the scheme is normal practice, I have a certain insight. The problem has been the abuse of stage payments. There have been many cases where stage payments have operated effectively to the benefit both of the consumer and the builder. My concern is that a knee-jerk reaction in changing a practice which has operated in parts of the country for over 40 years would suddenly result in us tweaking the housing market in a way which could damage or interrupt supply which is so important. Due to initiatives taken by the Minister, on which I compliment him, we have increased the supply of housing. I am a little concerned that enforcing this legislation at this time could interrupt this process, particularly for smaller builders. It is true that the big builder should be able to carry the cost, but if we are to limit major housing developments to large builders only, we are in a way being anti-competitive.

It is interesting to consider the variation in practices throughout this small country. These have grown up over the years. There are two particular types of stage payments. In one type, the title to the site is transferred on completion of the transaction; in the other, the title is transferred before completion. In my experience, and according to the people to whom I have spoken, the practice has been to transfer the title before completion of the transaction.

The site purchase is a separate transaction and the site is transferred at a very early stage, thereby giving the house purchaser security of the site. A few years ago in Cork the builder of a large and expensive development went bust when the development was 75% built. As the code of practice, as outlined by the Minister, had been adhered to, the purchasers of the partially built houses, after a period of deliberation, were able to continue the development. That was the stage at which I became involved. I was concerned at the possibility that the rights of the consumers might not be protected, but after a wobbly period of a few weeks it was found that their rights were upheld according to the code of practice.

Senator Coghlan outlined the cases highlighted in yesterday's newspaper. Nobody can stand over cases such as these and I would like to hear an explanation from the developer responsible. Certainly, legislation should be enacted to protect the consumer in this regard. My concern, however, is that if we were to enact this Bill in a short timeframe, we would disrupt and interfere with the out-turn of houses in the areas in which the system of stage payments is practised. I am not concerned about big developers but about small and medium-sized builders who are building badly needed houses. I would like to emphasise that the code of practice as agreed is something that needs to be considered and developed further. I welcome the statement of the Minister of State that he intends to enter into discussions and consider the issue carefully.

In Cork, the financial institutions have set up a system under which mortgages are released at an early stage, thereby avoiding the bridging finance that is otherwise required, and paid in stages where the institutions are satisfied that the money advanced does not exceed the value of the work carried out. The financial institutions that have been supporting house purchasers in the areas where stage payments take place have embraced this.

The system also has legal implications. There is no doubt that the amount of legal work for a solicitor operating on behalf of a consumer who has entered into a contract involving stage payments is greater. There is less work involved if there is only a deposit stage and a completion stage. If a solicitor is working for a scaled fee based on the purchase price of a house, he must do more work for the same fee in the case of a client who is purchasing in staged payments. This means the legal profession will be interested in streamlining the system.

We have a responsibility to protect the consumer. I sincerely believe that is Senator Coghlan's aim and I commend that. Equally, however, we have a responsibility to ensure we do not take swift action that results in an interruption in the housing supply at this time. For that reason, I am disappointed that the Bill was introduced so quickly. I support the Minister of State's somewhat cautious approach. I acknowledge his statement that if he feels there is a need to enact legislation in this area he will do so. He has given a commitment to this effect. I urge the Minister to continue his talks with the Construction Industry Federation and those in the legal profession. Ms Carmel Foley, the Director of Consumer Affairs, has taken a court case in this regard, as a result of which there may be legal difficulties in trying to enact this legislation. For these reasons, we need much more discussion on this issue. We should support the Minister in his endeavours. I commend Senator Coghlan on his initiative. His motivation is right, but we need a little more time to discuss the issue further.