John Minihan (Progressive Democrats)

I welcome the Minister of State and his officials to the House this evening. I congratulate Senator Coghlan on maintaining his initiative on this issue. This is not the first time I have spoken about stage payments — inside or outside this House — and I am grateful for the opportunity to outline my views again.

I have a certain level of experience of stage payments in County Cork, where the scheme is normal practice. Without doubt, there has been abuse of stage payments and that is a real problem. On the other hand, there are many occasions in which stage payments have operated effectively, both to the benefit of the builder and to the benefit of the house purchaser. My concern remains that we might see some reactive measure to alter a practice which has operated in parts of the country for more than 40 years.

Housing provision is a hot topic and one that creates anxieties for many people, especially young people. It is a complex issue and the housing market should not be tweaked in a way that could damage or interrupt supply. The Government's policies are having a positive impact, but in the face of sheer demand, relief is difficult to identify. Tinkering around the edges of the problem achieves little. This was tried in the mid-1990s, but it was only when we started to get really serious about supply that progress of any sort was made. Initiatives taken by the Government have resulted in increased housing supply. We should be concerned that any legislation at this time could interrupt that process, especially for smaller developers. While larger developers should be able to carry the cost, we should not even inadvertently limit major housing developments to the larger builders. To do so could be anti-competitive and, ultimately, anti-consumer.

Despite being a small country, a wide variation in practices has emerged over many years. This has resulted in two particular types of stage payments. In one case, the title to the site is transferred on completion of the transaction. In the second instance, the title is transferred before completion. From my understanding, the practice has been to transfer the title before completion of the transaction. As the site purchase is a separate transaction and the site is transferred at a very early stage, this provides the house purchaser with security of the site.

I would like to give an example of this. A number of years ago in Cork, the builder of a large and expensive development went bust when three quarters of the development had been completed. The code of practice had been adhered to. After a period of deliberation, those purchasing the partially-built houses were able to continue the development. I became involved at that point as I was concerned about the rights of the purchasers. In the heel of the hunt, their rights were thankfully upheld according to the code of practice. Nevertheless, one can see how problems can emerge and can generate enormous distress. Outside of that instance, I have never received a complaint from a house purchaser in Cork about stage payments.

Nobody can stand over the cases alluded to by Senator Coghlan and the horror stories reported widely in the media. There is a duty on the developers in question to provide answers. Legislation should be enacted to protect consumers. However, this does not mean that we should act in a way that could disrupt or interfere with the outturn and supply of houses in areas where a system of stage payments is practised. Lest anyone misunderstand me, I am concerned about small and medium-sized builders who are operating this practice and who are building badly needed houses. I am not referring to the big developers. The code of practice needs to be considered and developed further. Any action in this area is welcome and to be supported.

Financial institutions in Cork have established a system under which mortgages can be released at an early stage. This can remove the need for bridging finance. It is 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 have embraced this and have been supporting house purchasers in the areas where stage payments take place. The amount of legal work for a solicitor operating on behalf of a consumer who has entered into a contract involving stage payments is undoubtedly greater. If there is only a deposit stage and a completion stage, there is less work involved. Should a solicitor be 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 stage payments. Consequently, there in an incentive for the legal profession to see a streamlining of the system.

My primary concern remains the consumer. We must not underestimate our responsibility to protect home buyers. Senator Coghlan's Bill has this concern at its heart and I commend that. However, there are three entities involved, namely, the consumer, the builder and the legal profession. Who is driving this change? Given the sensitivity of the housing market and the importance of supply, I support both the Government's somewhat cautious approach and the acknowledgment that if there is a need to enact legislation in this area, then it will be done. Such action should include discussion with the Construction Industry Federation, the legal profession, the Director of Consumer Affairs and other relevant stakeholders. I seriously suggest that we look at the role of the legal profession in this process. There are search fees for housing estates and for individual houses. In an estate of 200 houses, 200 consumers each pay a search fee.

It is clear that no legislative provisions currently exist to deal specifically with the operation of stage payments. It would seem preferable to phase out stage payments, assuming an agreed basis for doing so can be found. However, there will always be an option to take legislative measures should the issues not be resolved adequately. Notwithstanding the commendable work of Senator Coghlan, it appears the proposed Private Members' Bill is not the most appropriate way to proceed. Given the linkage with conveyancing and contract law and that the Bill is a stand-alone measure, more work is required. The Law Reform Commission recommended in 2005 that should legislative action be necessary, it should be part of a broader approach on legislation affecting house purchase contracts and the regulation of conveyancing. In this context, I support the Government's proposals on the issue.