Noel Ahern (Dublin North West, Fianna Fail)

I thank the House for taking this debate today. When I was here on 10 December last, I referred to the Bill, which I had hoped to bring to this House before now. It has had a very lengthy passage through the Dáil and while it has been substantially amended in that process, it is the better for it. The reforms it will bring to the private rented sector remain true to the report of the commission on the private residential sector.

The Bill provides for a modern, efficient, user-friendly and largely litigation-free legal framework for the private rented sector. Key provisions relate to improved security of tenure, restriction of rent to market level, clarification of obligations of tenants and landlords, and the establishment of a private residential tenancies board to operate a State-subsidised statutory dispute resolution service, a new tenancy registration system and to undertake a number of other key functions and reform of certain legal provisions that have been problematic. It is a progressive measure that will benefit both landlords and tenants and will help to promote the development of the private rented sector and underpin an enhanced role for it in meeting housing needs in the future.

There were a large number of amendments to the Bill on Committee and Report Stages in the Dáil. Many of these were made in response to comments by interested parties subsequent to its publication and by Deputies during the various Stages in the Dáil. The changes have strengthened and improved the Bill by giving the provisions greater clarity and addressing concerns about some aspects of their operation. While progress has not been as fast as we would have liked, the passage of the Bill will make a real difference to many people's quality of life.

Apart from one exception, the amended Bill that Senators will consider implements the recommendations of the private rented sector commission as accepted by Government. I am aware of a document circulated to Members of the Oireachtas by the Irish Property Owners Association, and also of a recent media article by its chairman. Both of these allege that the Bill is imbalanced and inconsistent with the commission's recommendations, which is unfair and untrue. The Residential Tenancies Bill, like the commission report on which it is based, is balanced and contains provisions of benefit to both landlords and tenants. It sets out the respective obligations applying to both parties in a tenancy. It introduces a measure of security of tenure that provides greater protection for tenants while at the same time preserving a landlord's right to recover possession of his or her property should a reasonable need arise. The content of this Bill mirrors to a remarkable degree the chapter of the commission report containing its recommendations for reform of the sector. The Bill obviously has to be much more explicit in detailing how exactly the provisions will work in practice and that requirement has resulted in a rather lengthy piece of draft legislation containing 202 sections. While there is greater detail in the Bill, the substance of its content is exactly what was recommended by the commission for the sector. Therefore, not only does it reflect Government policy, but also the considered conclusions of the representative group of 18 people appointed to that commission for their expertise on the private rented sector. Notwithstanding that fact, the Opposition tabled a large number of amendments that sought to overturn some of the commission's recommendations, particularly on all aspects of the security of tenure measure.

Many commentators on the private rented sector would like to see legislation introduced that dramatically tilts the balance of advantage towards tenants. While I appreciate their motives and good intentions, such an approach does not take account of the bigger picture. First and foremost, the changes we make must be consistent with the Constitution. Second, they must benefit the sector as a whole. If the reforms deter investment or motivate existing providers to leave the business, there will be an inadequate supply of accommodation for renting and that is not in the interests of existing or future tenants. Therefore, I did not amend the Bill more substantially in favour of tenants because I believe that such a move would be detrimental to their long-term interests. The commission and this Bill have tried to find a balance between the two sides and I feel we have achieved it.

I intend to adhere to the commission's recommendations. That is why it is disappointing to see the misrepresentation recently put about by the IPOA which is well aware that this Bill, apart from the notice periods applying to tenants, is based on, and faithful to, the private rented sector commission's recommendations. I will outline the provisions of the Bill shortly and Senators will notice that it does not make any changes to the taxation code, which is another criticism of the IPOA. The commission recommendations on tax incentives accepted by the Government were implemented as far back as the Finance Acts 2001 and 2002. At the time it was felt that this legislation would be produced soon after that, but it has taken longer than we hoped. The prior implementation of those tax benefits, together with the fact that taxation measures are always dealt with in annual Finance Acts, is the reason no such measures are contained in this Bill. I know the IPOA has also raised the wider issue of the tax treatment of rental income as unearned income, but that is also outside the scope of this legislation.

I will now summarise the provisions of the Bill in sequence and outline briefly the main changes since its publication. Part 1 contains the standard preliminary and general provisions such as citation, commencement, offences and interpretation. Section 3 defines the scope of the Bill. It does not apply to social or owner occupied housing, formerly the rent controlled sector, long occupation equity tenancies, business or holiday lettings. It is my intention that all of the provisions of the Bill will be brought into operation at the earliest possible date. There will be a phased commencement over a period of approximately four months and I assure the House that this process will start soon after enactment and be front loaded as much as possible.

Part 2 outlines the minimum tenancy obligations applying to all landlords and tenants, regardless of whether there is a written tenancy agreement or lease. Regarding the maintenance of rented dwellings, it imposes an explicit requirement on landlords to maintain the structure and the interior to the standard that applied at the beginning of the letting. There is a corresponding responsibility on the tenant to remedy any disrepair, other than normal wear and tear, attributable to the tenant's acts or omissions. The obligations applying to tenants include a prohibition on anti-social behaviour. There is an explicit onus on landlords to enforce tenant obligations. Failure to do so will enable another party, who can show that he or she is adversely affected by a tenant's non-compliance with the tenancy obligations, to refer a complaint to the board concerning the landlord's failure to enforce.

Part 3 deals with rent setting and reviewing. As recommended by the commission, it provides that the rent may not be greater than the open market rate and may normally only be reviewed, upward or downward, once per annum. Making market rent the legal benchmark has been criticised by commentators representing tenants who would prefer a form of rent regulation or rent control introduced. I know that rent regulation versus market rent was the subject of intense debate within the commission. The overwhelming majority of the members considered market rent to be the most appropriate system having regard to the negative aspects of rent control, especially its impact on new supply, on the maintenance of existing rented stock and avoiding the front loading of rent increases on future tenants.

Rent control has been tried before, both here and elsewhere, and it has done more harm than good. Rent regulation also prevents tenants from capturing the benefits of falls in market rates. The Central Statistics Office recently released figures indicating that average rents have decreased by 7.5% since March 2002, while some estate agencies have reported a greater decline in rents. This fall can be attributed to the huge increase in housing supply generally and to the provision of tax incentives for investment in private rented accommodation to which I have referred. It is only right and proper that, as the policies pursued by this Government result in an increased supply of accommodation, tenants should reap the harvest of falling market rents.

Part 4 of the Bill provides for a new security of tenure regime based on four year cycles. The first cycle is called in the Bill a Part 4 tenancy and each subsequent one is called a further Part 4 tenancy. Once a tenancy has lasted six months, the landlord will only be able to terminate during the following three and a half years when one of the six grounds listed in section 34 applies. Those grounds are a failure by the tenant to comply with the obligations of the tenancy; the dwelling being no longer suited to the accommodation needs of the occupying household by reference to the number of bed spaces; the landlord intending to enter into a contract to sell the dwelling in the next three months; the landlord requiring the dwelling for own or family member occupation; the landlord intending to refurbish substantially the dwelling such that vacant possession would be required; and the landlord intending to change the business use of the dwelling.

Arising from commentators' concerns that the section 34 termination grounds as drafted were vulnerable to abuse by landlords, I expanded on the detail of the operation of three of the grounds as follows: need for occupation by landlord or a family member, change of use, and substantial refurbishment. This change merely requires a tenant, who keeps the landlord updated with his or her contact details, to be offered first refusal of the dwelling should it again become available for re-letting after refurbishment or within six months of a change of use or family member occupation. I emphasise that this expansion of the operational detail is not a departure from or dilution of the commission's recommendations as to what grounds should at all times entitle landlords to recover possession of their dwellings. These changes in the detail will, however, strengthen the provisions against possible abuse.

The tenant will be free to terminate the tenancy at any time. There is no question of four year tenancies being forced on tenants nor does the Bill require all tenancies to be governed by a lease. The four year tenancies will repeat in successive cycles. Part 4 does not apply to section 50 student accommodation or to employment-related lettings. I acknowledge that the security of tenure provision might be considered relatively modest in the context of what is available in some other jurisdictions. However, it is a major advance on our present situation of virtually no protection for the majority of private sector tenancies.

In the Dáil, the Opposition tabled a large number of amendments to the security of tenure measure, including ones to reduce the six-month qualifying period to three months or one month, or to delete it entirely. Other amendments sought to delete some or most of the section 34 grounds for recovery of possession by the landlord and to delete the four-year cycles. I rejected those proposed changes, which would have totally undermined the system recommended by the commission. Part 4 still rigidly reflects the security of tenure measure as proposed by the commission. I have expressed the hope, however, that in time it will be possible to build on that measure as the new system becomes established and accepted.

Part 5 deals with the process of terminating a tenancy. In the future, except where a fixed-term tenancy expires, termination must always be by a formal notice, regardless of who is terminating or what is the reason. Section 66 details the notice periods that apply in two tables. Table 1 applies to landlords, and the notice period ranges from 28 days in the first six months to 112 days where the tenancy has lasted more than four years. Table 2 applies to tenants, and the period ranges from 28 days in the first six months to 56 days where the tenancy has lasted two or more years.

Originally the notice periods for landlords and tenants were the same as recommended by the commission. However, very strong arguments were advanced by all sides on Committee Stage in the Dáil against the longer periods applying to tenants, so I agreed to bring forward an amendment reducing the period for them. Once a decision to terminate the tenancy has been notified to the other party the Bill allows the parties to agree a shorter notice period. Shorter notice periods also apply in cases of failure to comply with tenancy obligations or serious anti-social behaviour by either party. A longer notice period may also be given but may not, in the case of a tenancy that has lasted less than six months, exceed 70 days. That limit was introduced to prevent possible abuse of long notice whereby landlords might be able to let accommodation for reasonably long periods without allowing tenants to qualify for four-year tenure.

The dispute resolution process is outlined in Part 6. Any dispute that arises between landlords and tenants covered by the Bill, including those arising from or relating to provisions of the Bill itself, will be dealt with by the private residential tenancies board established in Part 8. The overall limitations applying to the board's functions will be €20,000 in damages and, in the case of arrears of rent or other charges, twice the annual rent or €20,000, whichever is greater, but subject to an overall maximum of €60,000. Cases involving monetary amounts greater than those will still have to be taken through the courts. However, the board should be in a position to deal with the vast majority of disputes that may arise. The intention is to replace a court system that is frequently confrontational, expensive and difficult to access with a non-confrontational, affordable, user-friendly and accessible mechanism.

The dispute resolution process prescribed in Part 6 consists of two stages. Stage one is either mediation or adjudication, depending on the preference of the parties, and will be confidential. If the dispute is still unresolved, stage two is a public hearing by a tenancy tribunal of the board. Mediators and adjudicators with experience in landlord and tenant issues and a background or skills in conflict resolution will be appointed to panels and assigned to cases as they arise. Each tribunal will consist of three members drawn from the dispute resolution committee of the board. The final decision in respect of each dispute will be published in a determination order of the board. Those are binding, subject to appeal to the High Court on a point of law. The enforcement of determination orders that are not complied with will be through the Circuit Court in accordance with section 124. The interim board, which is currently constituted on a non-statutory basis, has made great progress in assembling a strong panel of mediators and adjudicators.

Part 7 contains the registration procedure that is replacing the 1996 registration regulations. Landlords are being required to register details of all tenancies with the private residential tenancies board instead of local authorities. The board needs those data for its information provision function and also to deal with certain aspects of tenancy disputes. The administrative burden imposed on landlords by that requirement is being kept as light as possible. The requirement to register arises only where a new tenancy is created, so in many cases that will mean registering no more frequently than every four years. While the rent amount must be updated in the register before a rent review takes effect, that notification will not require to be accompanied by a fee. Other relevant changes that occur in the details of the registered tenancy need only be notified as part of a rent review update.

Landlords will no longer be required to register their units with local authorities, since the relevant details will be transmitted by the board to the authorities. Chapter 7 deals with the exchange of registration data between the board, local authorities and the Minister for Social and Family Affairs and with the transfer of data from the board to the Revenue Commissioners in respect of a stated landlord. The registration fee is €70 per unit, and a composite fee of €300 is available where a number of units in one property are being registered at the same time. It will be revised in line with inflation. I provided for some exemptions from the fee requirement in section 134 on Committee and Report Stages in response to concerns voiced by the IPOA about fees. However, I see no scope to make any further concessions on what is a fully tax-allowable letting expense.

I am confident that a high rate of registrations will be achieved under the new system. Late registrations will attract a fee of €140 per unit, and compliance will be rigorously pursued by the board. Failure to register is an offence and will attract a fine of up to €3,000 on conviction. I hope and fully expect that landlords will comply with their legal obligation to register their tenancies with the board. There are benefits from doing so in that a registered landlord will have access to the board's dispute resolution service, and disputes about when a Part 4 tenancy commenced or concluded will be less likely to arise. Unregistered tenancies should come to the board's attention in a number of ways, including tenant dispute referrals, tenants querying non-receipt of a registration number from the board, lists of rent supplement recipients from the Minister for Social and Family Affairs, local authority inspections, etc.

I will be emphasising to the board the importance I attach to its achieving a high level of compliance with the registration requirement. Local authority functions under the standards and rent books regulations will continue. I am anxious to see a much more proactive approach by authorities to enforce those requirements. That will happen as disputes dealt with by the private residential tenancies board relating to sub-standard accommodation will be referred to the local authority. In addition, the distribution of funding to authorities from the registration fee income will be related to their level of enforcement activity in the previous year. More needs to be done in the area of rented accommodation standards, and when we get this legislation up and running I will be directing attention to the development of a strategic approach to eliminating sub-standard rental accommodation, including the formulation of good practice guidelines in the area.

Part 8 establishes the private residential tenancies board to perform the functions listed in section 151 relating to the resolution of disputes under Part 6, the registration of tenancies under Part 7, the provision of policy advice, review of the operation of the legislation, research and information provision regarding the sector. While many of the provisions in this part are standard and apply to most statutory bodies, there are also specific provisions arising from the board's dispute resolution role. An interim board has been in place for some time and has contributed to the development of this legislation, particularly as regards the dispute resolution process. I would like to record my gratitude for the work of the interim board members, and in particular, its chairman, Mr. Tom Dunne, who also did a marvellous job of chairing the commission on the private rented sector.

Part 9 contains a number of miscellaneous and consequential amending provisions to the housing Acts and the landlord and tenant Acts. A particularly important provision is the abolition in five years time of the entitlement to apply, for the first time, for a long occupation equity lease under the Landlord and Tenant (Amendment) Act 1980, with a renunciation option during that five-year period. It provides for injunctive-type applications for serious emergency disputes coming before the board, for example imminent danger to life, illegal evictions etc. Section 197, as amended on Report Stage in the Dáil, substantially strengthens the Housing (Miscellaneous Provisions) Act 1997 dealing with anti-social behaviour in local authority estates. It extends the excluding order powers of authorities to tenant purchased houses in these estates.

In summary, this Bill brings overdue protection for tenants in terms of rent reviews and much needed security of tenure and gives landlords and tenants an effective means of resolving disputes that arise between them. These measures should encourage greater investment and professionalism in the sector and should make renting a more attractive housing option so that the sector can play a greater role in meeting the housing needs of the State.

The Bill is the core element of the Government's programme of action to reform and develop the private rented housing sector. Other initiatives will be pursued to help develop the sector and enhance its role in meeting housing needs. For example, I expect that the Government will shortly decide on new arrangements to meet long-term housing needs involving direct engagement between local authorities and the private rented sector. The Bill will help this development by providing the legal framework for an efficient, vibrant and responsive private rented sector and by reforming aspects of landlord and tenant law that have been a deterrent to institutional investment.

As was the case with the commission report on which it is based, this is a comprehensive, progressive, and well-balanced Bill. It balances the rights, responsibilities and interests of rented accommodation providers and of rented accommodation occupiers. Although it introduces a greater level of regulation of the sector, I am satisfied this is the minimum required to enable it to function efficiently and that unnecessary bureaucracy has been avoided. The Bill gives tenants a better deal, without making unreasonable demands on landlords — something that could depress new investment in the sector. It will promote greater stability in the private rented sector, which, according to the last census, accounts for over 141,000 households or some 11 % of total housing stock in the State. The Bill will be a platform on which future and further development of the sector can be built. I commend the Bill to the House.