The Residential Tenancies Bill 2003: A Tentative First Step
Seamus Murphy SJ is a lecturer at the Milltown Institute
After many decades of neglect, the government is proposing a major reform of the law governing landlord-tenant relations in residential premises. The proposals are contained in the Residential Tenancies Bill 2003 (hereafter referred to as ‘the bill’)(i). As is well known in informed circles, but less so to the general public, the Irish tenant’s lack of rights and legal protection is embarrassing to the point of being shameful when compared to such tenants’ status in other EU jurisdictions. The government’s bill comes not a moment too soon.
The government’s decision to reform landlord-tenant law goes back to the end of the 1990s, when it established a commission to investigate and make recommendations on the private rented sector(ii). The bill adopts many of the commission’s recommendations.
It is interesting to speculate on the reasons for the government’s decision to reform the private rented sector. Prior to the 1990s, the sector had undergone a long decline since at least the 1940s, but in the 1990s it suddenly and unexpectedly began to grow. Remarkably, in a period of enormous expansion of house-building, the private rented stock increased, not merely in real numbers, but also as a proportion of the housing stock (from about 8% to about 13%). Given that tenants in the private rented sector are a politically powerless group, often not even registered to vote (since they are rarely living long enough in the one place), it seems that the shift in government thinking has resulted, not so much from political pressure, as from a growing awareness that the private rented sector is becoming important to Irish housing.
Problems in the private rented sector affect several groups in Irish society. When some of us think of tenants in private rented accommodation, students are the primary group that comes to mind. While the number of students seeking accommodation has grown, they are by no means the most vulnerable and there is a case to be made for encouraging and subsidizing third-level institutes so that they provide special student accommodation. There are also asylum seekers who, on this score at least, are less vulnerable than others using private rented accommodation since the Health Boards pay top rents. The ‘Celtic tiger’ years brought more single people to Dublin and the bigger urban areas as their work-place, and typically they would look to rent. In addition, (single) people in transition from prison or residential mental care would find themselves seeking private rented accommodation(iii). Overall, there are a growing number of people, many of them poor, vulnerable and on the margins of society who, because the public housing sector is not expanding, are almost entirely dependent on the private rented sector.
The bill has positive aspects; on balance, it is to be welcomed. However, it is a limited, tentative step, and further reforms will be needed in the future. It also has weaknesses. In this article, we set the bill in context, reviewing the situation which it seeks to address, evaluating its strengths and offering proposals for amendments.
Why Security of Tenure Matters
At the ‘top’ expensive end of the market for private rented accommodation, leases are normal. Such leases usually ensure balance between landlord’s interests and tenant’s interests. In particular, a lease provides security of tenure for the duration of the lease. Security of tenure is precisely what has been lacking in the rest of the private rented sector, and the bill is an attempt to provide such security of tenure for a (renewable) 4-year period for tenants with six-months’ continuous tenancy..
Those with no experience of the private rented sector often have little grasp of how all-important security of tenure is. If a landlord can get rid of a tenant more or less at will, it follows that a tenant is in no position to resist demands for rent-increases. It is idle to decry high rents, as long as tenants have no bargaining power with respect to the landlord’s demands.
If a landlord can get rid of a tenant for any or no reason, then the tenant’s other legal rights are largely irrelevant because the absence of security of tenure renders them ineffectual. For example, a tenant has legal rights to a rent book, to have the structure and outside of the premises maintained by the landlord, and to certain minimum standards as regards sanitation, cooking and the like. But the landlord can (and many do) make it clear to the tenant that any attempt to enforce such rights will be met with a notice to quit(iv). While a notice to quit does not of itself legally compel the tenant to vacate the premises, a landlord who goes to court to get the tenant out will invariably succeed in acquiring a court order for eviction by the sheriff. Knowing that this is so, the tenant cannot really fight for the above-mentioned rights, since doing so might lead to loss of the tenancy, which would be self-defeating.
Some people would say that the state or local authority should employ sufficient inspectors to ensure that the tenant’s rights are protected. Perhaps, but practically speaking this is rather unrealistic at present. For a start, the cost to the public authority would be exorbitant. Furthermore, if a local authority inspector asks a tenant about the conditions in the dwelling, the tenant’s telling the truth about sub-standard conditions or that she received no rent book, and its leading to action against the landlord may lead to vindictive notice to quit. The harsh reality is that it is often not in the interest of the tenant to cooperate with the local authority, even when the local authority is trying to protect the tenant’ rights.
In today’s Ireland, approximately 82% of Irish dwellings are owner-occupied. As a result, there is often only limited understanding of the plight of tenants in private rented accommodation. As owner-occupiers, we tend to identify having a home with owning a house or apartment, and that perspective alienates us from the tenant’s perspective. Irish society tends to a possessor-culture or ethic, as opposed to a performance-culture(v). Given this fact, it cannot be said often enough: a tenant who lacks some reasonable measure of security of tenure is vulnerable to various forms of illegal exploitation by the landlord, and without security of tenure the tenant cannot fight it, and if the tenant will not fight, the state really cannot make up for that.
The state cannot fight the tenant’s corner. It isn’t feasible, nor is it in accord with human dignity that adults should be so without effective rights that they cannot fight for themselves. The solution lies in an appropriate balance of rights and duties between landlord and tenant to ensure fairness. There will always be some unscrupulous landlords and some irresponsible tenants: no law can guarantee that there won’t be conflicts. But what can be pursued is a reasonable legal provision whereby a tenant is able to hold her own against an unscrupulous landlord, and a landlord has effective redress against an irresponsible tenant.
What exactly an ‘appropriate balance of rights’ or a ‘reasonable legal provision’ is has to be worked out and negotiated. Getting it right is not easy. However, it should not be too hard to avoid the two extremes: where the landlord holds all the cards (as at present) so that the tenant is in effect a ‘grace-and-favour’ tenant, or where the law is so stacked against the landlord that no reasonable profit can be made from letting, thus leading to disinvestment and the decline of the private rented sector.
At present, Irish law is very close to the first extreme, and the bill is a welcome attempt to rectify that imbalance. However, there is still considerable political resistance to doing so. It is important then that politicians, civil servants and shapers of public policy and public opinion be aware of the reasons in favour of security of tenure.
1. A tenant has a right to a home: A person who has no security of tenure for some reasonable period of time is not much better off than a person staying in a homeless shelter, since she is always on the verge of homelessness. This is particularly hard if the tenant has dependent children. The bill goes some way to meeting this.
2. A tenant should be able to exercise her rights. It is in the interest of good government that both landlords and tenants be able to vindicate their rights. It is bad policy to assign legal rights to a category of person – and then fail to ensure that exercise of those rights does not (more or less automatically) lead to loss of that very interest upon which the rights in question are grounded. The obvious solution: legal provision to ensure that no tenant may be evicted where a court finds, on balance of probabilities, that the landlord’s seeking possession arises from a desire for revenge against a tenant for demanding their rights or for drawing the local authority’s attention to the fact that the landlord (perhaps for tax-evasion purposes) had failed to register the premises, thereby breaking the law. The Report of the Commission on the Private Rented Sector proposed doing just that(vi). But the bill does not make provision for it.
3. Following from the second, it is bad policy to make ineffectual laws: it brings the law into disrepute. Previous governments made regulations for dwelling standards (roofs, toilets, etc), for provision of rent books, for registration of the letting, and so forth. The fact that actions by tenants which draw the public authority’s attention to violation of such regulations are likely to lead to the eviction of the tenant, the ultimate sanction by the landlord, coupled with the fact that the government does nothing about it, undermines those legal regulations. It is not only unjust to the tenant, it also undermines the law. The harsh reality of life for many tenants is that those regulations might just as well not exist.
4. Exorbitant, rapid and arbitrary rent increases should be curtailed. This doesn’t mean rents shouldn’t increase; but they should do so in a reasonable manner. Some measure of security of tenure, lasting a few years, is necessary if this goal is to be achieved. Whatever about the initial rent agreed upon between a landlord and a new tenant, security of tenure would give the tenant some leverage, some ability to negotiate with respect to demands for future rent-increases. Fairness (which is the relevant ethical category here) between landlord and tenant requires that it be not impossible for landlords to obtain rent increases, and not impossible for tenants to limit the increase or even have a reduction. Provision of security of tenure will not ensure low rents, nor will it lead to rent-freeze or any significant rent-control. But it should help to check unrestricted, inflationary rises in rent.
The Bill’s Positive Elements
Among the positive proposals put forward are, listing them in order of importance:
1. Tenants in continuous possession of the premises for 6 months without receiving notice to quit will be entitled to a further 3.5 years security of tenure, making 4 years in all, and renewable for further periods of 4 years (sects. 25-46, especially sect. 28)(vii).
2. The Private Residential Tenancies Board (hereafter referred to as ‘the Board’) will be established, with powers for resolving disputes between landlords and tenants (sects. 74-123). The Board will be able to set up Tenancy Tribunals, with power to summon witnesses, hear evidence, and determine cases (sects.101-107). It is to replace the district court and small claims court in dealing with landlord-tenant disputes.
3. (a) Rents shall not be set, whether at the beginning of the tenancy or in subsequent revision, at higher than market rent. (b) Rent reviews shall not occur more than once a year (sects. 19-20).
These are progressive steps. However, no. 3’s effectiveness will depend on the effectiveness of the Board (no. 2), and the Board in turn would have little to offer tenants if no security of tenure were being provided (no. 1).
As regards no. 3, the concept of ‘market rent’ is somewhat vague. However, the kind of specialist powers the Board will give it some effectiveness. In general, the establishment of the Board is sensible, since landlord-tenant disputes are better handled by specialist boards than by the district court(viii). So far so good. No. 1 is the controversial issue.
The awarding of 4-year security of tenure is the main change in the rights of tenants (sects. 28-30). The bill provides for subsequent 4-year periods of tenure under the same conditions. Although a minor benefit to the tenant by the standards of countries such as Germany or Sweden, it is almost revolutionary in the Irish context. Not surprisingly, it has drawn howls of outrage from the Irish Property Owners’ Association (IPOA)(ix).
Yet what is offered to the tenant is modest. First, a landlord can ensure that no tenant ever qualifies for such a period of tenure by giving notice to quit before the tenant has completed 6 months’ tenancy. He can also get rid of the tenant at the end of the 4-year period in the same way. Second, the tenant’s rights under this kind of security of tenure are less than those provided by a lease (prescinding, for the moment, from the fact that most leases are for 1 year). The landlord can still recover possession, not only if the tenant defaults on any obligation, but also if the landlord needs the dwelling for his own or a member of his family’s use, or wishes to sell it, substantially renovate it, or use it for a different purpose for which he has planning permission. All that has changed is that the landlord now must have a reason to get the tenant out within the 4-year period.
Only time and experience will tell if the government’s scheme will work. Accordingly, it would be foolish to think that one piece of legislation will reform the private rented sector, once and for all. What is provided here is a cautious, limited reform. If, after the bill becomes law, a large number of landlords start clearing out tenants close to being in residence for 6 months, with the result that, on balance, the tenure situation for tenants is worsened and not improved, then the government will have to provide amending legislation.
While such an outcome might look like a victory for landlords, it might be a Pyrrhic victory. The IPOA might prefer the current unregulated system to continue, but that is becoming politically unacceptable, not just morally objectionable. With the rise in the proportion of the population availing of private rented accommodation, and the enormous rise in the cost of owner-occupation, the private rented sector has become important and must perform adequately. While responsible legislators would want to encourage investment in order to increase the available stock and alleviate the housing shortage, landlords (or rather the IPOA) have to realize that there is a limit to what can be tolerated for the sake of maintaining supply. Even leaving aside consideration of housing as a basic human right, and thinking instead of it as a commercial product or service provided for interested consumers able to pay, sooner or later it has to be accepted by landlords that, just as most forms of commerce are regulated by law, providing private rented accommodation also has to be regulated. In other areas of commerce, consumers have statutory rights, there are legal standards for product-quality, price-increases are sometimes limited, and profits are taxed. Refusal to accept this on the part of landlords and their representatives could ultimately lead to more radical policies less palatable to landlords.
Needed Amendments to the Bill
The bill has shortcomings, some of which have been highlighted by Threshold(x). While recognizing that there is a certain prudence in the government’s proceeding cautiously, it would be appropriate to recognize that part of such prudence would be to give the Board wider discretionary powers than the bill appears to do. The wider the discretionary power, the more the Board can learn from experience, and in consequence the better positioned future governments will be to draft amending legislation.
1. The Board is, in certain ways, restricted to dealing with registered tenancies only (sect. 82). Since it is estimated that only about 20% of private rented tenancies are registered by landlords (despite its being legally required since the mid-‘90s), relatively few tenancies will fall within the immediate competence of the Board. Admittedly, the bill allows the tenant (though not the landlord) of an unregistered tenancy to bring a dispute to the Board, but it appears to offer no protection to a tenant who does so. The bill is vague on what stance the Board can take towards a landlord who fails to register, or on whether it has the discretion to penalize such a landlord.
Recommendation: Amend the bill to give discretionary powers to the Board (or its Tribunal) to take the fact that the tenancy is unregistered into account in adjudicating between landlord and tenant, and to proceed against such a landlord. The Board may very well choose not to penalize the landlord, but it should have the discretion to do so, which it could employ in cases where the landlord had a large number of unregistered tenancies and where there were aggravating circumstances.
2. In cases where the tenancy is unregistered, and the tenant’s bringing a dispute to the Board at some stage during the first six months of tenancy is followed by the tenant’s receiving notice to quit, it is probable that the notice to quit arises from vindictive motives. In such a case, the tenant who is instrumental in bringing it (or some other illegal action or omission, such as refusal to provide a rent book or standards violations) to the Board’s attention deserves protection against retaliation by the landlord. The government may not at present wish, for its own reasons, to pursue landlords actively for non-registration or violation of standards requirements. But such reasons ought not prevent the Board from blocking a tenant’s eviction. It is illegal for a landlord not to register a letting; it would be appallingly unjust that the Board would lack the power to protect tenants who bring that illegality to light. Sect. 14 prohibits penalization of the tenant by the landlord, and it is also listed (sect. 77 (n)) as grounds of complaint to the board, but no penalty is specified.
In other jurisdictions, including many US states (e.g. Massachusetts), the landlord will be denied possession by the courts for a definite period (e.g. 1 year) following action by the tenant which brings legal violations by the landlord (e.g. sub-standard accommodation, non-registration) to the notice of the public authority. In such cases, the courts assume a vindictive motive for any suit to repossess for the duration of that period of time. There is no reason why the bill cannot incorporate such a provision.
If the bill is amended to give the Board the powers suggested, then the landlord of an unregistered tenancy may be careful to refrain from getting into dispute with the tenant. That at least promotes fairness, even if it doesn’t promote registration.
Recommendation: Amend part 6 (and sect. 14) of the bill to give the Board the power to deny possession to a landlord where the grounds may reasonably be construed to be vindictive, seeking to penalize the tenant for bringing the existence of the letting to the notice of the public authority. Since such amendment is unnecessary for tenants enjoying security of tenure, it must specifically apply to tenants in the first six months of tenancy, or in the final six months of a four-year tenancy.
3. It is regrettable that the bill does not enable the Board to pass information on lettings to the Revenue Commissioners. This has drawn strong and not undeserved criticism(xi). No doubt the government is trying to be ‘prudent’ and not scare off landlords. However, if the government is worried that doing so may alienate too many landlords, it could ‘square the circle’ by amending the bill to insert provisions for ministerial orders giving the Board the power to do so. There would become operative at some undetermined date in the future, and might require some further legislation. While the government may be uncertain as to how best to proceed against landlords breaking the law, it cannot afford to give the impression that it is complacent about it, or that it regards acquiescence as unachievable. The advantage of this proposal is that it brings in an element of fairness to balance the ‘prudence’, and indicates that tax-evasion by landlords is not ultimately acceptable, even if the government intends to proceed circumspectly as regards enforcement.
Recommendation: Amend the bill as suggested in the foregoing paragraph.
4. The bill has little to say about standards for rented accommodation. While legislation exists already on this score, the bill has little to say about it. This is unfortunate, as it gives a wrong impression as to the government’s attitude on the matter.
Recommendation: Amend the bill to give the Board (or its Tribunal) power to take into account failure by the landlord to keep standards up to legally required levels, when adjudicating on rent-levels or rent-reviews.
Beyond enacting an improved bill, the public authority must monitor its implementation. It is good that landlord-tenant law is being reformed. It is important to realize that the Residential Tenancies Bill 2003 is only the beginning of that process.
[i) The proposed legislation deals only with private residential tenancies: not with commercial tenancies, nor with public sector residential tenancies (where the local authority is the landlord). Part of the private rented sector traditionally was rent-controlled with lifetime security of tenure, but for various reasons that sector has now all but disappeared.
[ii] For our analysis of the commission’s report, see ‘The Report of the Commission on the Private Rented Sector: reaction’, Working Notes 38 (Nov. 2000).
[iii] On this area, see the excellent survey by Bill Toner, ‘Dying on the streets’, Working Notes 38 (Nov. 2000). Also available at www.cfj.ie
[iv] The points being made here have nothing to do with the quality of the typical Irish landlord. Some unscrupulously exploit their tenants: most are probably honest and fair. Most do not raise the rent as high and as often as possible, being prepared to forgo higher rents for the sake of holding on to good tenants. The points at issue here have to do, not with what Irish landlords are like, but with what Irish law allows.
[v] J.J. Lee, Ireland 1912-85: Politics and Society (Cambridge1990).
[vi] Report 8.5.4: ‘Safeguards, such as applying a burden of proof on landlords, will also need to be introduced to protect tenants from eviction in circumstances where the tenant has made a complaint or taken other action in pursuit of compliance with the provisions of the statutory regulations applying to the sector.’
[vii] All references are to the section-numbers of the Residential Tenancies Bill 2003 as published in June.
[viii] The Rent Tribunal, set up in the mid-1980s to deal with cases affecting rent-controlled tenants (dealt with basically under the Housing Act 1982), proved far more effective than did the district court.
[ix] See The Irish Times June 5, 2003.
[x] For the text of Threshold’s comments, see its website atwww.threshold.ie
[xi] ‘The commitment within the bill to keeping information concerning rents and rented accommodation away from the Revenue Commissioners is outrageous. After all the inquiries and public scandals linked to tax evasion in recent years, here is a provision from the Irish Dark Ages. It effectively reassures wealthy property owners that they need not worry about disclosure of their affairs to the Revenue Commissioners and, by extension, paying their legitimate taxes. It should not be allowed to stand. The Department of the Environment appears to have taken the view that the disclosure of such information would act as a deterrent to landlords registering their properties and tenancies with the new PRTB. Such an inference will be deeply resented by those citizens who provide good quality accommodation and pay their taxes, while those operating within the black economy will continue to behave as they see fit. Certainly, the latter group will not be motivated to register by the ludicrous penalty of €140 that has been set out in the Bill.’ - The Irish Times, editorial, June 9, 2003.