Tuesday, 25 September 2012
Ground Rents Abolition
I welcome the Minister of State to the House. I wish to raise the issue of ground rents, a long-standing issue for many individuals and families in the State. Ground rents are something of an oddity and an anomaly, but they do not comprise a benign anomaly. They are, in effect, a hangover from a colonial past. It is shameful that, almost 100 years since the proclamation of the Irish Republic, citizens are still paying rent to absentee landlords. I refer not only to individual citizens as I understand the Office of Public Works pays ground rent of ¤14.44 per annum to the Duke of Leinster for the National Library of Ireland's premises. While this may be seen as a small amount, it is preposterous that State and Government buildings are still subject to ground rents to absentee landlords.
Ground rent landlords do not need to be compensated in the event of the abolition of ground rents. As a legacy of colonialism, ground rents have been unjust from the beginning. Therefore, compensation would legitimise what is manifestly unjust. Those who are bearing the real brunt of this ongoing ground rents fiasco are those private homeowners who find that their ground rent leases are about to expire and who face having to choose between buying out their ground rent lease, paying one eighth of the value of their home to the ground rent landlord or renewing the lease for a far higher rate than they had previously been paying. People are faced with demands for huge sums from the ground rent landlords and this is causing severe hardship for many.
I was motivated to raise this issue because I was contacted by the chairperson of the Lismore Park residents' association in Waterford, an association that covers hundreds of houses in Lismore Park, Lismore Heights and Lismore Lawn in Waterford city. Many people find that their leases are up for renewal and they face bills. The alternative for those who cannot afford to buy out the expired lease is to sign a renewal of the lease for 35 years. Many of those who find themselves in this invidious position are elderly and have no income other than their pensions. The rents are an unjust feudal imposition and are uncommon and unacceptable in many other countries. Ground rents primarily affect elderly people whose leases often expire when they reach a senior age. Ground rent landlords and their legal professionals capitalise actively on the frailty of the elderly.
I will not get into the detail of the Shirley case, of which I am sure the Minister of State is aware. Based on this case, the Tánaiste and the Taoiseach once made very clear commitments that, if they ever were in government, they would legislate on this issue. When in opposition, the Taoiseach, when supporting a Fianna Fáil-led Bill following the Shirley case, stated his party shared the then Government's view on the important issue and looked forward to being in a position to act following the general election. He was speaking about abolishing ground rents.
In March 2007 when in opposition, Deputy Gilmore, now Tánaiste, said:
- As you know, the Labour Party wishes to abolish ground rents. As you know we brought forward a Private Members? Bill some time ago to this effect. If in government, we intend to introduce legislation along those lines.
I am standing in for my colleague, the Minister for Justice and Equality, who is unavailable. I thank the Senator for raising this matter on the Adjournment. The Minister has asked me to inform the House that he is not in a position to comment on the particular situation in the Lismore Park area of Waterford but welcomes this opportunity to outline the current situation with regard to ground rents.
The rights of tenants occupying residential property under long leases have been under discussion since the latter half of the 19th century. In such situations, the tenant normally pays a ground rent to the landlord. The problem that arises is the tenant's rights on expiry of such a lease. Under common law, the land and buildings reverted to the ground landlord leaving tenants with no right to compensation for losing the houses they, or their predecessors, had bought and no guarantee of any renewal or extension of their leases. In the event of renewal or extension, there was no guarantee that the terms were fair or reasonable.
A number of changes in the law during the 20th century greatly improved the situation for tenants. Under the Landlord and Tenant Act 1931, as amended by the Landlord and Tenant Act 1943, tenants with a "long family equity" became entitled to new tenancies on expiry of the original lease, or up to seven years before expiry, at rents fixed by the Circuit Court, in default of agreement. The Landlord and Tenant (Ground Rents) Act 1967 gave tenants the right to acquire the freehold - that is, to acquire the fee simple - of the property. The ground landlord has no option in the matter. The Landlord and Tenant (Ground Rents) Act 1978 prohibited the creation of new ground rents in respect of dwellings, and leases after that date are only valid if they operate as a renewal of an existing lease. The Landlord and Tenant (Ground Rents) (No.2) Act 1978 simplified procedures and gave the Land Registry, now the Property Registration Authority, responsibility for operating a special scheme for dwelling houses. This scheme greatly reduces the costs involved for tenants and, to date, over 80,000 ground rents have been bought out under this scheme. Of course, other ground rents may have been dealt with without recourse to the scheme.
In summary, the Landlord and Tenant Acts from 1967 to 2005 have improved conditions for ground rent tenants and contain provisions which permit certain tenants to acquire the fee simple, thereby ending their liability for the payment of ground rent to the ground rent landlord. The Acts provide a general right to such tenants to acquire the fee simple and for mechanisms for determining the purchase price in order to compensate the landlord. One further aspect of the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 worth noting is that section 27 provides that a landlord cannot re-enter or take possession of a premises where the tenant is in arrears with a ground rent. While prohibiting the creation of new ground rents on dwellings, the 1978 Act did not abolish existing ground rents and this has given rise to periodic demands for their abolition.
The position on the possible abolition of ground rents is that legal advice obtained from the Attorney General's office in recent years has drawn attention to possible constitutional difficulties with proposals to abolish remaining ground rents.
These relate mainly to the possible infringement of property rights. First, difficulties in respect of the rights of tenants could arise by forcing such a tenant to acquire the fee simple, that is, the act of transforming a current right into an obligation. Such a tenant may have no wish to purchase the ground rent, or not immediately at any rate. The current scheme is open ended. On the other hand, a tenant might not be able to afford the purchase price despite the reasonable way in which it is calculated. Second, removing for compensation purposes the distinction between leases with more than 15 years to run and those that have either expired or have less than 15 years to run could be seen as infringing upon the property rights of ground landlords. Third, securing payment of the ground rent purchase price as a charge on the property, for example, in order that the tenant does not need to pay cash up front for the buy-out of the ground rent, could also create problems, in that there could be an accumulation of interest charges until the dwelling changed hands. Payment of the accumulated debt might then require that the property be sold.
The Minister, Deputy Shatter, would add that the All-Party Oireachtas Committee on the Constitution, which published its ninth progress report, dealing with private property, in April 2004, also noted that a ground landlord's ground rent represented a right to an income that, in principle, was constitutionally protected and that any legislation to abolish ground rents must include a scheme of adequate compensation.
I thank the Minister of State for his response. I will be helpful and suggest something. The most obvious and achievable step is to pass legislation in order that the one eighth of the land's value that is due on the expiry of a lease can be reviewed downwards as well as upwards and lowered to a number close to zero so as to negate the value. After a year or so, ground rents would become well established as not being meaningful sources of income. The rents having no effective value, the Oireachtas could pass legislation to eradicate ground rents altogether by making them illegal.
A number of propositions could be put to the Attorney General to determine whether they were possible instead of simply tabling a blanket question on abolishing ground rents. All parties have grappled with this issue. In opposition, the Taoiseach and the Tánaiste clearly supported the concept of abolishing ground rents. Will the issue be re-examined? It is a burden on many residents and the State has a responsibility to act.
This is a complex legal issue. The owners of the ground rents have significant constitutional protections afforded to them. The Senator mentioned the Shirley judgment, which was issued by the Supreme Court in February. The judgment is being examined by the Department of Justice and Equality and the Attorney General's office to determine whether it has an effect on current ground rent legislation. There may be further developments following that review. In that context, if the Senator wishes to submit his opinions to the Department, I am sure they would be most welcome.