The Rent Reform White Paper

uploaded on 1 July 2008 at 11.55am

 

In this contribution I will limit myself to commenting on the 33 recommendations which the Rent Reform White Paper brings forward for our consideration. The comments are the following :

 

The White Paper starts off  by requesting a guarantee not to advocate interventionist measures. This is obviously directed at the MLP in order to declare itself not to reverse any changes made. AD is in agreement in principle with the general thrust of the White Paper, though there are a number of details which are not to our liking.

 

As a first point we deal with exemptions. Political parties should not be exempted. They should shoulder  the burden. Secondly rather then exempting band clubs and sports associations government should fund these associations through specially allocated monies earmarked for culture and sports. Thirdly agricultural holdings have been left out of this exercise. Hopefully an additional exercise limited to agriculture will be carried out separately.

 

The White Paper discusses the issue of vacant property. Obviously this can only be resolved if the causes for property staying vacant are tackled. Having easier procedures to resolve such inheritance disputes would be a help – both time-wise and moneywise. The second cause is identified as being that of owners not being known – this should relate to a very small amount of properties : land registration of property should further reduce these cases. The third cause is economic cost of rehabilitation : MEPA has reduced the size of a number of Urban Conservation Areas in 2006 thereby reducing restrictions on the redevelopment of properties in the effected areas. But in the case of properties in sensitive areas rehabilitation will undoubtedly remain costly. This could be tackled through identifying a use compatible to the property  and making available public funds to assist in the rehabilitation. Owners have a duty of care in the case of our historical heritage and other properties in sensitive areas but the state should shoulder part of the financial responsibility on behalf of the community.

 

Existing tenants are to be recognised. The surviving spouse (except where legal or de facto separation is the case) will have the right of substitution. The recognition of the surviving spouse brings to the fore one of the deficiencies of the proposed reform. It only recognises the traditional family unit. It does not recognise the civil rights of cohabiting couples, both heterosexual and same sex couples. These are emerging partnerships which cannot be ignored. Tenancy rights of civil partnerships should be recognised and applied in this reform.

 

Beneficiaries of a lease (ie those that can inherit a lease) from a sitting tenant or his/her spouse are children (natural, adopted or foster) and ascendants who are older than 60 years. Beneficiaries who must have lived for at least five years with the tenant must satisfy  their eligibility criteria as on the 1^st June 2008. This is an improvement on the most contentious of issues related to rent. It narrows down the numbers of those that can inherit a lease by being specific. The numbers cannot increase as only those who qualify as on the 1^st June 2008 are eligible.

 

Although many would have preferred the complete elimination of inherited leases, AD believes that the proposed solution is an acceptable compromise. It is also fair and reasonable that the right to inherit a lease is a one time right.

 

Occupants who do not qualify for an inherited tenancy are treated humanely by the proposed reform : they are permitted a transition period of five years. Their 5 year tenancy will be temporary subject to the payment of the full market rent and governed by post 1995 legislation. Subject to agreement with the landlord they can extend their stay. Some will require Housing Authority assistance in the payment of rent.

 

Offspring of deceased tenants and ascendants who are entitled to inherit a lease will only be able to do so if they do not surpass the established means threshold : an economic worth of €125,000 or an income higher than €25,000.  This is a realistic measure of social responsibility. As a transitory provision they would be entitled to a temporary lease of  a 3 year duration on the basis of paying a rental value calculated at 3% of the value of the property. This is fair and I would say that it eliminates a sizable chunk of potential cases of lease inheritance.

 

Tenants in long-term residential care would be entitled to transfer their tenancy to an eligible beneficiary. If this option is not exercised within six months the title reverts back to the owner. This is a fair proposal. In addition it deals with an area which has been abused for ages.

 

Exceptional circumstances will undoubtedly arise which are not catered for in the White Paper proposals. A line is drawn, there will be no exceptions. The state will shoulder the responsibility for all those cases which fall between two stools.  Some sense at last.

 

Minimum rent payable is established at €185. Though this level of rent may be considered as too low by most, it will effect negatively a number of tenants who are already on the edge of decent subsistence. Some which are on the poverty line may suffer hardship as a result of this increase which is astronomic when viewed from their economic perspective. The White Paper proposes mitigation measures to those whose means of income are the non-contributory Old Age Pension or social security. This is positive as effectively it is the means through which government is transferring back onto its shoulders the responsibility for assisting social cases.

 

Rental value adjustment for inflation will be carried out every 3 years. There is no established upper limit.

 

The landlord’s responsibility will be limited to the structure of the building, including the roof. All other maintenance and repairs will be borne by the tenant. This is as it should be ! When repair works are carried out by the landlord rent will be increased by 10% of the costs. The tenant may opt to carry out the works himself in which case he will not be entitled to any compensation on termination of the lease. This would ensure that the tenant takes due care of the property rented out to him. Tenants will be able to use existing and future Housing Authority schemes to finance  repairs. It is not clear whether landlords would be able to participate in such schemes, nor whether it would be possible for landlords to part finance the repairs through an application submitted by the tenant  to the appropriate authorities.

 

The White Paper proposes that contracts for commercial properties that include a clause which triggers contract termination by increasing abnormally the rent due at a particular date will remain in effect for a transition period of 20 years (called their “sunset”) unless they are brought to an end earlier by operation of the said clause. At that point the title will revert back to the owner.  AD feels that this transition period of 20 years to be excessive and considers that a 10 year transition would be more than reasonable.

 

Likewise the White Paper proposes a 12 year transition period for the rental value of commercial properties to be adjusted to full rental value. Different routes are proposed dependent on the economic worth of the tenants. AD considers that this transition period to be excessive and considers that it could be reduced to 6 years.

 

Legal entities listed on the Stock Exchange will have a shorter transition period in respect of their pre-1995 tenanted commercial property. Their bonanza will cease on the 1^st June 2009.  AD considers this to be discriminatory. Their should not be any distinction between tenants on the basis of Stock Exchange listing.

 

Sub-letting is henceforth prohibited unless there is agreement between landlord and tenant to this effect. And to close a major loop-hole the White Paper proposes that management agreements will be deemed to be sub-letting. Where sub-letting of a commercial tenancy has taken place prior to the 1^st June 2008 without having been agreed to by the landlord, the White Paper dishes out another very generous transition of  10 years.  AD considers that this is could be reduced to 5 years.

 

Government intends to involve itself in determining what is a fair market value.  For this purpose the White Paper recommends the introduction of an index to establish the market value level of rent for premises in particular localities and areas. AD considers that Government should not intervene in this manner. It should rather establish a fast track mechanism to settle disputes, of which initially there will be a number. The fair rent can be and in most cases will be established amicably between the parties.

 

All controls relative to summer residences and garages will be dismantled as from the 1^st January 2010.

 

When considering the above, AD is of the opinion that overall the White Paper is a positive exercise. If government takes serious note of all the alternative proposals that will be announced in the coming weeks the White Paper recommendations may be substantially. This is the spirit of AD’s criticism.