Finance Committee Northern Ireland Assembly 1/00 Report

COMMITEE FOR FINANCE AND PERSONNEL

Report on Ground Rents Bill
(NIA Bill 6/99)

VOLUME 2 - Proceedings and Evidence

APPENDICES

APPENDIX 1. Minutes of Proceedings of the Committee Relating to the Report
APPENDIX 2. Minutes of Evidence of the Committee
APPENDIX 3. Annexes to the Minutes of Evidence

Appendix 1

Minutes of Proceedings
of the Committee Relating to the Report

The Minutes of Proceedings of the Committee that relate to the Report on the Ground Rents Bill are given below for the following dates:

Date: Subject/Witnesses:

5 July 2000 Briefing by Office of Law Reform
7 September Evidence session with Law Society, RICS
12 September Committee consideration with Office of Law Reform
19 September Committee consideration with Office of Law Reform and Lands Registers of Northern Ireland
26 September Committee consideration
10 October Committee consideration
12 October Committee consideration
19 October Committee consideration
24 October Clause-by-clause scrutiny with Office of Law Reform
7 November Meeting postponed
16 November Clause-by-clause scrutiny with Office of Law Reform
21 November Draft Report agreed

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Seventeenth Meeting
Wednesday, 5 July 2000
Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Billy Bell
Mr Seamus Close
Mr Oliver Gibson
Mr Derek Hussey
Mr Gardiner Kane
Mr Alex Maskey
Mr Donovan McClelland
Mr Peter Weir

Apologies: None

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Mr Easton Vance (Administrative Support)

The Chairman declared the meeting open at 2.00 pm. The meeting was held in closed session except for agenda items 4 to 8, which were opened to the public.

Consider any Bills:

Committee Stage - Ground Rents Bill

The Committee took evidence on the purpose and scope of the Ground Rents Bill from Ms Judena Goldring and Mr Neill Lamb, Office of Law Reform.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Nineteenth Meeting
Thursday, 7 September 2000
Room 135, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Seamus Close
Mr Oliver Gibson
Mr Derek Hussey
Mr Gardiner Kane
Mr Peter Weir

Apologies: Mr William Bell

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.00 pm. The meeting was held in closed session except for agenda item 1, which was opened to the public.

Mr Oliver Gibson attended from 2.46 pm.

Committee Stage - Ground Rents Bill (cont'd)

The Committee took evidence on the Ground Rents Bill. Mr John Neill, Mr Donald Eakin, Mr Brian Walker, and Ms Sarah Witchell gave evidence on behalf of the Law Society of Northern Ireland. Mr John Frazier and Mr David Smyth gave evidence on behalf of the Royal Institution of Chartered Surveyors in Northern Ireland.

Resolved: The Committee agreed to seek specialist advice on the Ground Rents Bill.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twentieth Meeting
Tuesday, 12 September 2000
Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Alex Attwood
Mr William Bell
Mr Seamus Close
Mr Oliver Gibson
Mr Derek Hussey
Mr Gardiner Kane
Mr Peter Weir

Apologies: None

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)
Mr Hugh Widdis (Researcher for Ground Rents Bill)

The Chairman declared the meeting open at 2.00 pm. The meeting was held in public session.

Mr Gibson

Committee Stage - Ground Rents Bill (NIA Bill 6/99) (cont'd)

The Committee commenced the clause-by-clause scrutiny of the Ground Rents Bill. Ms Judena Goldring and Mr Neil Lambe, Office of Law Reform appeared before the Committee and were questioned on the Bill. The Committee deliberated on the intent of the Bill.

Resolved: The Office of Law Reform agreed to examine and report to the Committee on a change to the Long and Short Title of the Bill. This should specify that the Bill would cover the redemption of ground rents on residential property only.

The Committee considered Clause 1 and agreed that it should stand part of the Bill.

The Committee considered Clause 2 and agreed that it should stand part of the Bill.

Mr Kane left the meeting at 3.31 pm.

Mr Attwood left the meeting at approximately 3.50 pm.

Mr Close left the meeting at 4.00 pm.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO REPORT]

Twenty First Meeting
Tuesday, 19 September 2000
Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr William Bell
Mr Seamus Close
Mr Oliver Gibson
Mr Derek Hussey
Mr Gardiner Kane
Mr Alex Maskey
Mr Peter Weir

Apologies: None

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)
Mr Hugh Widdis (Researcher/Adviser for Ground Rents Bill)

The Chairman declared the meeting open at 2.00 pm. The meeting was held in public session.

Mr Leslie attended from 2.28 pm. Mr Hussey attended from 2.40 pm.

Committee Stage - Ground Rents Bill (NIA Bill 6/99) (cont'd)

The Committee continued its clause-by-clause scrutiny of the Ground Rents Bill. Ms Judena Goldring and Mr Neil Lambe, Office of Law Reform appeared before the Committee and were questioned on the Bill. The Office of Law Reform was supported by Mr Arthur Moir, Chief Executive and Mr John Gibson, Lands Register of Northern Ireland. The Committee deliberated on the Long and Short Title and Clauses 3 to 11.

Resolved: The Committee agreed to consider the Long and Short Title at the next meeting when the Office of Law Reform would report to the Committee on amendment of the title.

The Committee agreed that Clause 3, subsections (1) to (6) should stand part of the Bill.

The Committee agreed to consider subsections (7) and (8) of Clause 3 at the next meeting. The Office of Law Reform would report to the Committee on a proposed change to the Bill's definition of a flat, as provided by the Law Society of Northern Ireland in its letter of 15 September.

The Committee agreed that Clause 4, subsections (1) to (6) should stand part of the Bill.

The Committee agreed that Clause 5, subsections (1) to (3) should stand part of the Bill.

Mr Maskey left the meeting at 2.45 pm and returned at 3.40 pm.

Mr Hussey left the meeting at 3.40 pm.

The Chairman adjourned the meeting from 3.40 pm to 3.50 pm.

The Committee agreed to re-consider Clause 6 at the next meeting. The Office of Law Reform would report to the Committee on whether the aims of the clause could be achieved by means of a simpler process.

The Committee agreed that Clause 7, subsections (1) to (3) should stand part of the Bill.

The Committee agreed that Clause 8, subsections (1) to (3) should stand part of the Bill, subject to a recommendation that a motion be made to amend subsection (1) (b) as follows:

"page 6, line 15, after ( '(c.154)' ) insert ( '(' )"

The Committee agreed that Clause 9, subsections (1) to (2) should stand part of the Bill.

The Committee agreed that Clause 10, subsections (1) to (2) should stand part of the Bill.

The Committee agreed that Clause 11, subsections (1) to (2) should stand part of the Bill.

Mr Leslie left the meeting at 4.15 pm.

The Chairman adjourned scrutiny of the Bill at 4.15 pm.

Resolved: The Committee agreed to seek an extension of the Committee Stage of the Ground Rents Bill to 27 November 2000.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twenty Second Meeting
Tuesday, 26 September 2000
Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Billy Bell
Mr Seamus Close
Mr Derek Hussey
Mr Gardiner Kane
Mr Alex Maskey
Mr Peter Weir

Apologies: Mr Alex Attwood

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)
Mr Hugh Widdis (Researcher/Adviser for Ground Rents Bill)

The Chairman declared the meeting open at 2.00 pm. The meeting was held in public session.

Mr Weir attended from 2.18 pm. Mr Maskey attended from 2.38 pm. Mr Kane attended from 3.05 pm.

Consider any Bills - Ground Rents Bill (NIA Bill 6/99) (cont'd)

The Chairman asked that members declare any pecuniary interests relevant to the proceedings. Mr Leslie declared that his father had an interest in four properties with a ground rent value of less than £100 per annum. The Committee deliberated on Clauses 1 to 12 of the Ground Rents Bill.

Resolved: The Committee agreed to write to the Office of Law Reform to ask for clarification on a number of issues.

Mr Maskey left the meeting at 3.10 pm.

The Chairman adjourned scrutiny of the Bill at 4.00 pm.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twenty Fourth Meeting
Tuesday, 10 October 2000
Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Billy Bell
Mr Seamus Close
Mr Nigel Dodds
Mr Peter Weir

Apologies: Mr Derek Hussey

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.00 pm. The meeting was held in public session.

Mr Dodds attended from 2.50 pm.

Mr Hussey left the meeting at 3.00 pm.

The Chairman declared the meeting closed at 4.20 pm.

Consider any Bills: Committee Stage of Ground Rents Bill (NIA Bill 6/99) (cont'd)

The Committee deliberated on the Ground Rents Bill.

Resolved: The Committee agreed to seek clarification from the Office of Law Reform on a number of issues related to Clauses 13 to 16.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twenty Fifth Meeting
Thursday, 12 October 2000
Long Gallery, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Alex Attwood
Mr Seamus Close
Mr Nigel Dodds
Mr Derek Hussey
Mr Donovan McClelland
Mr Peter Robinson MP
Mr Peter Weir

Apologies: Mr Billy Bell

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 1.45 pm. The meeting was held in public session.

Mr Robinson attended from 2.06 pm. Mr Dodds attended from 2.10 pm. Mr Maskey attended from 2.15 pm. Mr Hussey attended from approximately 2.20 pm.

Mr Attwood, Mr Dodds, Mr McClelland, Mr Maskey and Mr Robinson left the meeting at approximately 3.00 pm.

Consider any Bills: Committee Stage of Ground Rents Bill (NIA Bill 6/99) (cont'd)

The Committee deliberated on the Ground Rents Bill.

Resolved: The Committee considered Clauses 17 to 19. It agreed to seek clarification from the Office of Law Reform on Clauses 17 and 18.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twenty Seventh Meeting
Thursday, 19 October 2000
Committee Room 135, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Alex Attwood
Mr Billy Bell
Mr Seamus Close
Mr Nigel Dodds
Mr Peter Robinson MP
Mr Peter Weir

Apologies:
Mr Derek Hussey
Mr Alex Maskey

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.05 p.m.

Ground Rents Bill (NIA Bill 6/99) Committee Stage (cont'd)

The Committee deliberated on the arrangements for concluding consideration of the Ground Rents Bill.

Resolved: The Committee agreed to establish a Sub-group of at least four members to consider the Ground Rents Bill during any period of suspension of the proceeding of the Committee. The Sub-group would report to the Committee on its consideration of the Bill and would seek ratification of any conclusions reached.

Mr Bell, Mr Dodds and Mr Robinson left the meeting at 2.35 p.m.

The Chairman suspended the meeting at 2.35 p.m. due to the lack of a quorum.

Mr Weir attended from 2.40 p.m.

The Sub-group deliberated on Clauses 20 to 26 of the Ground Rents Bill. The Sub-group raised the following queries:

Clause 20 - no questions were raised.

Clause 21 - the interpretation of a "controller" and who could act as "controller" within the meaning of the Mental Health (NI) Order 1986.

Clause 22 - no questions were raised.

Clause 23 - the interpretation of "The Registrar" and "The Land Registry".

Clauses 24 to 26 - no questions were raised.

Mr Bell returned to the meeting at 2.56 p.m.

The Chairman re-opened the meeting at 2.56 p.m.

Resolved: That the queries raised by the Sub-group on Clauses 20 to 26 are sent to the Office of Law Reform for comment.

The Committee deliberated on Clause 27.

Resolved: That the interpretation of "controller", "The Registrar" and "The Land Registry" be considered under this Clause.

Mr Weir left the meeting at 2.59 p.m.

The Chairman suspended the meeting at 2.59 p.m. due to the lack of a quorum.

The Sub-group deliberated on Clauses 28 to 31. The Sub-group raised the following queries:

Clause 28 (2) - a concern raised by the Law Society of Northern Ireland on the Bill's interpretation of a "nominal rent"

Clauses 29 to 31 - no questions were raised.

Mr Attwood attended from 3.38 p.m.

The Chairman re-opened the meeting at 3.38 p.m.

Resolved: That the queries raised by the Sub-group on Clauses 28 to 31 are sent to the Office of Law Reform for comment.

The Committee deliberated on Clauses 32 to 33 and Schedules 1 to 3.

Clauses 32 to 32 - no questions were raised.

Clause 33 - a concern was raised on the purpose of the Bill and the interpretation of the Long and Short Title.

Schedule 1- a concern was raised on the application of the multiplier to the redemption money.

Schedule 2 - the Law Society's concern on the application of Article 35 of The Property (NI) Order 1997 to the Bill was raised.

Schedule 3 - no questions were raised.

Resolved: That the Office of Law Reform be called to appear before the Committee to answer questions on the Bill.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twenty eighth Meeting
Thursday, 24 October 2000
Committee Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Billy Bell
Mr Seamus Close
Mr Derek Hussey
Mr Donovan McClelland

Apologies: No apologies were made.

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.02 p.m. The meeting was held in public session.

Ground Rents Bill (NIA Bill 6/99) Committee Stage (cont'd)

The Committee deliberated on the Ground Rents Bill. Ms Judena Goldring and Mr Neil Lambe, Office of Law Reform appeared before the Committee and answered questions on the Bill.

Mr McClelland left the meeting at 2.20 p.m.

The Committee deliberated on the Ground Rents Bill:

Resolved:

That Clauses 1 to 5 stand part of the Bill.

That Clause 6 be agreed at a later date when the proposed arrangements for a streamlined procedure for the disposal of money when the identity of the rent owner is know and the rent payer has served notice would be re-considered.

That Clauses 7 to 14 stand part of the Bill.

That Clause 15 be agreed at a later date when amendments proposed by the Office of Law Reform would be considered.

That Clause 16 be agreed at a later date when the interpretation of "neighbours" and the restrictions on covenants would be re-considered.

That Clause 17 be agreed at a later date when points raised by the Committee and amendments proposed by the Office of Law Reform would be considered.

That Clauses 18 to 33 stand part of the Bill.

That Schedules 1 to 3 be considered at a later date.

That the Office of Law Reform be called before the Committee to answer questions on the Bill.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Twenty ninth Meeting
Thursday, 7 NOVEMBER 2000
Committee Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr Seamus Close
Mr Nigel Dodds
Mr Derek Hussey
Mr Alex Maskey
Mr Peter Robinson
Mr Peter Weir

Apologies: Apologies were received from Mr James Leslie and Mr Billy Bell.

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.10 p.m. The meeting was held in public session.

Consider any Bills:

Ground Rents Bill (NIA Bill 6/99) Committee Stage (cont'd)

Deliberation on the Ground Rents Bill was postponed until 16 November 2000.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[extract relating to the Report]

Thirtieth Meeting
Thursday, 16 November 2000
Committee Room 135, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Seamus Close
Mr Derek Hussey
Mr Alex Maskey
Mr Peter Robinson
Mr Peter Weir

Apologies: Apologies were received from Mr Billy Bell.

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.20 p.m. The meeting was held in public session.

Consider any Bills:

Ground Rents Bill (NIA Bill 6/99) Committee Stage (cont'd)

The Committee deliberated on the remaining Clauses and Schedules of the Ground Rents Bill. Officials from the Office of Law Reform attended and were questioned by the Committee.

The Committee considered Clause 3, with particular reference to the definition of a 'flat' and common parts, and an amendment proposed by the Office of Law Reform to protect the position of housing associations on the redemption of ground rents.

Motion: That Clause 3 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Clause 3, page 3, line 42, at end insert-

'(9) Section 2 does not apply to the conveyance or transfer of a dwelling house to-

(a) the Northern Ireland Co-ownership Housing Association; or

any other housing association (within the meaning of the Housing (Northern Ireland) Order 1992 (NI 15)) specified by an order made by the Department for Social Development subject to negative resolution.'

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Clause 3, as amended, stand part of the Bill.

The Committee considered Clause 6, with particular reference to a simpler procedure to enable rent owners to claim redemption money owed to them and an amendment proposed by the Office of Law Reform to make a technical amendment to the Clause.

Motion: That Clause 6 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Clause 6, page 5, line 33, leave out 'issue out of the Consolidated Fund and'

[Mr Francie Molloy]

Resolved: The Committee agreed to recommend that Clause 6, as amended, stand part of the Bill.

Mr Hussey attended at 2.36 p.m.

The Committee considered Clause 15, with particular reference to mortgages and redemption of ground rents. The Office of Law Reform proposed two amendments to the Clause.

Motion: That Clause 15 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Clause 15, page 10, line 24, at end add 'and any provision in the instrument providing for an estate acquired by the mortgagor to be held in trust for the mortgagee or appointing the mortgagee as the mortgagor's attorney in relation to such estate applies to the fee simple.'

Clause 15, page 10, line 38, leave out subsection (3)

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Clause 15, as amended, stand part of the Bill.

The Committee considered Clause 16, with particular reference to covenants and the position of the Northern Ireland Housing Executive, party walls and the definition of neighbours. The Office of Law Reform proposed three amendments to the Clause.

Motion: That Clause 16 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Clause 16, page 12, line 6, leave out from 'his' to end of line 11 and insert 'other participants in a relevant building scheme immediately before the redemption of the ground rent by virtue of that scheme.'

Clause 16, page 12, line 11, at end insert-

'(j) any covenant, not falling within any of the preceding paragraphs, which is contained in a lease granted by the Northern Ireland Housing Executive before 10th January 2000 and relates-

(i) to a district heating supply provided by the Executive; or

(ii) to the repayment to the Executive of any discount of part of the purchase price under a house sales scheme made under the Housing (Northern Ireland) Order 1983 (NI 15).'

Clause 16, page 12, line 26, leave out from '(2)(g)' to the end of 28 and insert '(2)(i)-

"building scheme" means a scheme (express or implied) under which land (whether freehold or leasehold) is divided into two or more parcels subject to obligations which are reciprocally enforceable (whether at law or in equity) between owners of the parcels; and

"relevant building scheme", in relation to any land, means a building scheme which includes the land or which is taken to subsist in respect of the land by virtue of section 17(6).'

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Clause 16, as amended, stand part of the Bill.

The Committee considered Clause 17, with particular reference to the enforcement of covenants. The Office of Law Reform proposed three amendments to the Clause, the first of which referred to successors in title, the second and third were consequential to the changes in Clause 16.

Motion: That Clause 16 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Clause 17, page 12, line 40, leave out 'or (h)' and insert ', (h) or (j)'

Clause 17, page 13, line 17, after 'successors' insert 'in title'

Clause 17, page 13, line 37, leave out 'same meaning as in section 16(2)(i)' and insert 'meaning given in section 16(7)'

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Clause 17, as amended, stand part of the Bill.

The Committee considered Schedule 1, with particular reference to the redemption money provision for an increase of ground rent. The Office of Law Reform proposed three amendments to the Schedule.

Motion: That Schedule 1 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Schedule 1, page 22, line 36, leave out 'is more than 12 years after the application date' and insert 'falls after the expiration of the relevant period'

Schedule 1, page 23, line 1, leave out from 'is 12 years' to the end of line 9 and insert 'falls within the relevant period, the yearly amount of the ground rent shall be determined in such manner as may be specified in an order under paragraph 2.

(4) In this paragraph "the relevant period", in relation to a ground rent, means the period commencing on the application date and consisting of the number of years fixed by an order under paragraph 2 as the number of years purchase applicable to ground rents (or, as the case may be, applicable to ground rents of the same class or description as that ground rent).'

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Schedule 1, as amended, stand part of the Bill.

The Committee considered Schedule 2, with particular reference to amendment of Article 35 of the Property (Northern Ireland) Order 1997. The Office of Law Reform proposed an amendment to the Schedule.

Motion: That Schedule 2 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Schedule 2, page 23, line 34 after '35(8)' insert 'or 35A(7)'

Schedule 2, page 24, line 12, leave out '(7) to (10)' and insert '(7), (8) and (10)'

Schedule 2, page 24, line 18, at end insert-

'( ) After Article 35 insert-

"Redemption of nominal ground rent

35A.-(1) Subject to paragraph (2), this Article applies where the rent payable under a fee farm grant is a nominal rent.

(2) This Article does not apply at a time when-

(a) the land is used wholly for business purposes; or

(b) the rent-payer is prohibited by any term of his title from using the land otherwise than wholly for business purposes;

but land is not prevented from being used wholly for business purposes by reason only of the fact that part of it is occupied as a dwelling by a person who is required or permitted to reside there in consequence of his employment or of holding an office.

(3) The rent-payer may by deed ("the deed of declaration") declare to the effect that the ground rent is discharged and may, in accordance with rules, make application to the Registrar for the purpose mentioned in paragraph (4)(a) or (b).

(4) On an application under paragraph (3)-

(a) if the land is registered land, the deed of declaration is sufficient authority for the Registrar (subject to compliance with rules)-

(i) to discharge any burden such as is mentioned in paragraph 2 of Part I of Schedule 6 to the Land Registration Act; and

(ii) to make such alteration in the class of title with which the land is registered as appears to him to be appropriate;

(b) if the land is not registered, the Registrar may register the rent-payer's title with such class of title as appears to him to be appropriate (and until the rent-payer's title to the land is so registered , the deed of declaration has no effect);

(c) in either case, the deed of declaration is sufficient authority (notwithstanding any caution or inhibition) for the Registrar to make in the register such consequential entries, changes, cancellations or notes as appear to him to be appropriate;

(5) Except where the Registrar is satisfied that the land was subject to no or nominal superior rent on the date of execution of the deed of declaration, the Registrar shall enter on the register a note to the effect that the fee simple estate is subject to a rentcharge of so much (if any) of any superior rent as would have been redeemed by virtue of Article 11(1) of the Ground Rents Act (Northern Ireland) 2001 if a ground rent to which the land was subject had been redeemed under section 1 of that Act on that date; and such a note may be discharged in accordance with rules, and it is sufficient to satisfy the Registrar as to the matter mentioned at the beginning of this paragraph that he is furnished by a solicitor with a certificate to that effect.

(6) Subject to paragraphs (4), (5) and (7), the deed of declaration operates by virtue of this paragraph to discharge the estate of the rent payer from all estates in the land of the rent-owner and any superior owners to the extent that those estates carry entitlement to ground rent or a superior rent or relate to matters connected with the rent and to that extent those estates are extinguished.

(7) Where a ground rent is discharged under this Article, section 13(8) (read with subsection (10)) and sections 15(2), 16 and 17 of the Ground Rents Act (Northern Ireland) 2001 apply in relation to the land as if the ground rent had been redeemed under that Act; and, accordingly, for the purposes of this Article those sections shall be read with the necessary modifications.

(8) For the purposes of paragraph (6) matters are connected with rent if they are concerned with the amount of the rent or its payment or recovery or are otherwise concerned (directly or indirectly) with the rent.

(9) In this Article "nominal rent" has the same meaning as in Article 35.'

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Schedule 2, as amended, stand part of the Bill.

The Committee considered Schedule 3 with reference to amendment to the Schedule of Repeals, The Office of Law Reform proposed an amendment to the Schedule.

Motion: That Schedule 3 of the Ground Rents Bill (NIA Bill 6/99) be amended as follows:

Schedule 3, page 24, line 29, at end insert 'and in the definitions of "rent-owner" and "rent-payer" the words ", without prejudice to Article 32,"'

Schedule 3, page 24, line 32, at end insert 'Article 3(2)(a).'

[Mr Francie Molloy]

The question being put, the motion was carried without division.

Resolved: The Committee agreed to recommend that Schedule 3, as amended, stand part of the Bill.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL

MINUTES OF PROCEEDINGS
[EXTRACT RELATING TO THE REPORT]

Thirty First Meeting
Tuesday, 21 November 2000
Committee Room 144, Parliament Buildings

Present:
Mr Francie Molloy (Chairman)
Mr Billy Bell.
Mr Seamus Close
Mr Nigel Dodds
Mr Derek Hussey
Mr Peter Weir

Apologies: Apologies were received from Mr James Leslie.

In attendence:
Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.25 p.m. The meeting was held in public session.

Minutes of Proceedings

Resolved: The Committee agreed the Minutes of Proceedings for 16 November 2000.

Consider any Bills:

Ground Rents Bill (NIA Bill 6/99) Committee Stage (cont'd)

The Committee deliberated on the draft Report on the Ground Rents Bill

Resolved: The Committee agreed the draft Report and ordered that it be printed.

FRANCIE MOLLOY
Chairman
TOP
Appendix 2

Minutes of Evidence of the Committee

The Minutes of Evidence of the Committee that relate to the Report on the Ground Rents Bill are given below for the following dates:

Date: Subject/Witnesses:

MINUTES OF EVIDENCE

Wednesday 5 July 2000

Members Present:
Mr F Molloy (Chairman)
Mr J Leslie (Deputy Chairman)
Mr W Bell
Mr S Close
Mr D Hussey
Mr G Kane
Mr A Maskey
Mr P Weir

Witnesses:
Miss J Goldring ) Office of Law Reform
Mr N Lambe )

The Chairman: Can I just remind members that Hansard is with us and we are being recorded.Mobile phones need to be switched off completely so that they will not interfere with the equipment. Welcome Ms Goldring and Mr Lambe. Perhaps you would take the opportunity to open with an introduction and then we can proceed with going through the paper.

Ms Goldring: I take it that the Committee does not need a summary of the ground rents legislation it has been provided with. The legislation has passed the second stage and the Committee will have been provided with all the material.

The purpose of ground rents legislation is to simplify the conveyancing procedure in Northern Ireland. We have a complex 19th century property title system, and the aim is to clean up that system so as to facilitate a modern, simplified conveyancing process. This piece of legislation achieves that objective. I am happy to take questions.

Mr Close: The broad brush approach in the Bill is certainly welcome. It does exactly what you are setting out to do, and it is much preferable to the 1997 legislation. The concern I hear from people who are dependent upon ground rent incomes, is the aspect of the multiplier. I accept that that is a matter primarily for the Minister, but a comment from yourselves would help the cause.

A multiplier of nine, for example, has already been mentioned. Those who are dependent upon ground rent income are looking for a considerably higher figure, and I sympathise with that, particularly with charities. A very strong case can be made for a higher figure because they have been established to provide an income for their charitable causes. If the multiplier is struck too low, this could have a detrimental effect - and they argue that nine is too low.

Ms Goldring: A multiplier figure of nine has been decided upon at this stage. It was a source of considerable debate, and we are aware of all the issues and the various representations. The original figure was set at 12, but we had strong representations from the Law Society, Royal Institution of Chartered Surveyors and other practitioners in the field that 12 was too high. We investigated the matter further and sought expert advice from the Valuation and Lands Agency, the public authority responsible for the valuation of government property and with experience of buying out ground rents. Its view was that nine reflected the market value fairly accurately.

We are aware that some organisations bought ground rents as an investment and that they are concerned that the capitalisation, when the multiplier is used, will not yield the same income. A multiplier of nine reflects a yield of about 11%, which is really quite high and takes into account the difficulty of collecting ground rents and the high void value. But nine is pitching it about right because it is the market value, and the market value inherently takes account of interest rates. We are quite content that at this stage nine is a fair reflection of the market value.

On the wider issue, there is a public interest in the Government's imposing a compulsory buyout scheme. That interferes with the right of people to hold their property, but under European law and jurisprudence, the Government are not required in these circumstances to provide full market value as long as there is a fair level of compensation. As far as human rights law and jurisprudence is concerned, a multiplier of nine would be considered very fair because it closely approximates to the market value.

Mr Close: A lot of these investments are long-term and if we assume a figure x, that figure x must be reviewed periodically, and the legislation take account of that. When figure x is struck, it must also be in conjunction with what an investment would produce at the time. If one looks at long-term investments currently, and then relates them to a multiplier of nine, I do not necessarily agree that nine should be considered adequate.

10.

Ms Goldring: We are basing our figure on expert advice which says that nine reflects the market value, and we are content that that advice is robust and sound. Back in the 1980s, when interest rates were much higher, the Valuation and Lands Agency was buying out ground rents at a multiplier of four.

11.

Mr J Leslie: If interest rates are 20% then the multiplier will be five, and if interest rates are 5% the multiplier needed is twenty. That is essentially the situation. For figures in between, the relationship is direct.

12.

The Chairman: I have been surprised by some of the correspondence I have already received on this issue. How would it have come to be the case that charities and trusts are the holders of ground rents? Would some ground rents have been inherited, or would a trust or charity have bought property and then let the ground rents?

13.

Ms Goldring: Over the last twenty years, ground rents have been seen as an investment in property, and over those years - and in fairly recent times - ground rents would have been bought up by those organisations as investments yielding income. Presumably what those organisations paid for them would reflect the difficulties in collecting rents and voids.

14.

Returning to the point about interest rates and the fact that they are set at what is accepted as market value. Market value will inherently reflect interest rates, and the legislation allows for the multiplier to be changed and to be periodically reviewed. A huge rise or fall in interest rates would be taken into account in any review of the multiplier used.

15.

Mr J Leslie: The change would not need to be that huge to merit a review. If interest rates rise from 5% to 6% - and it is more a function of long gilt yields then of interest rates - then they will have gone up by one fifth, so the multiplier should go up by the same factor.

16.

Ms Goldring: The overriding objective of this legislation- I am not sure about the mathematics, but I take your general point - is not to provide full and accurate market value levels for investors. There is a wider public policy and wider public interest involved here and that is to simplify what is a very complex, cumbersome, outdated conveyencing system.

17.

Mr S Close: I accept that particular point.

18.

The Chairman: This is going to be a very interesting Bill.

19.

Mr S Close: While accepting the principle, there are individual organisations and groups which should not suffer because of it. All that is required is some fixing. For example, the multiplier should be set at the appropriate rate to start with, and then it should be linked to some criteria, be it interest rates or the FT index, which increases or reduces it on a six monthly or annual basis.

20.

If we get it right at the start we can have an excellent Bill, the principles of which will be accepted by everyone. I have not come across anyone who queries the principle. They are very happy with the improvements and the changes since 1997. However, there is a group of people affected by this, and I think part of our job should be to ensure insofar as possible that the principle is right and nobody is falling outside the loop.

21.

Ms Goldring: Well, with respect, I would suggest that the key mechanism would be to base the multiplier on market value. I am not sure that there is any better mechanism than that.

22.

Mr Maskey: Some of us feel that ground rent is an unfair rent for a variety of reasons. However, there is something in what Ms Goldring says about wider public interest, and I accept the need to clear up the antiquated way of dealing with all of this. By the same token, I feel that some of these organisations, charitable or otherwise, have engaged in speculation. Why should we protect speculators?

23.

We have had the recent controversy about prices in the housing market. Prices there have been driven up for a lot of reasons, not just simply by market value. I do not think that we should be underpinning the speculators because of other factors that are causing the housing market to rocket, which is causing difficulties, particularly for first time buyers. I am not so sure about that principle.

24.

If there is to be a ground rent at all, I take the point that the multiplier has to be benchmarked somewhere. I am not happy that we should just say "Put it to something which allows the thing to keep going up". It is fair enough that people have speculated, but they have to take their chances.

25.

Ms Goldring: We also need to guard against replacing one outdated complex system with a modern complex system. We have tried to get a fairly simple procedure that is easy to use and has flexibility built in.

26.

Mr Maskey: Is there any way that these ground rents can be bought out in a compulsory way? It is a clear anomaly in the whole system.

27.

Ms Goldring: There is a compulsory phase, the compulsory buying out, which is at the kernel of this, and that phase will be brought in at the end of 2001.

28.

Mr Lambe: It should begin to be phased in 2002, but it will be a rolling programme.

29.

Mr Maskey: For what?

30.

Mr Lambe: It has always been envisaged that it would be a long-term process. The original expectation was five to ten years.

31.

Mr Leslie: There is a difference between a voluntary and a compulsory scheme. On a compulsory scheme it takes place on the sale. If the multiplier is quoted wrong, in the eye of the party selling, it can easily be adjusted through the sale price of the property. Under a voluntary scheme you have to motivate the ground rent owner to sell. The message we are getting is that at nine you will not. You would be entirely justified in having different multipliers for the different schemes, because the market will tell you, under the voluntary scheme, whether you have got the multiplier right or not through whether or not it volunteers.

32.

Ms Goldring: That is true in a sense. The voluntary scheme is something of a pilot and we can see how it operates. The Minister said during the Second Reading that the voluntary phase would be used to see how the process is operating.

33.

Mr Lambe: We call it the voluntary redemption scheme, but it is also compulsory as regards the rent owner. The rent owner cannot object to the redemption of the ground rent.

34.

The Chairman: So it is a compulsory voluntary scheme?

35.

Mr Lambe: It is voluntary in the sense that the initiative must be taken by the rent payer. As soon as the rent payer initiates the process, it is carried through. The rent owner is given notice that the process has been initiated, but the rent owner has no say in the matter.

36.

Mr Leslie: Maybe that is how you fix it then. If it were voluntary on both sides then, in effect, the market would set the rate and would let you know whether you had the right rate. It seems to be draconian to say that you have to set the fixed multiplier. That is very anti open market.

37.

Mr Lambe: The problem with the original scheme, in the Property (Northern Ireland) Order 1997, was that it did require the mutual co-operation of the rent owner and the rent payer and the service of a cumbersome notice procedure. It is the Law Society and estate agents who say that it is not going to work because the rent owner and the rent payer will not co-operate with each other.

38.

The Chairman: One issue that has been raised is consultation and how detailed it has been. Can you provide us with evidence or documentation on the consultation that would become part of our Consideration Stage?

39.

Ms Goldring: I understood, Mr Chairman, that you have a copy of a note which we submitted that sets out the consultation details.

40.

Mr Lambe: I certainly e-mailed the note.

41.

Ms Goldring: We can provide you with that. In it we have set out the consultation process, including the various stages, the details as to who was consulted and the mechanisms used.

42.

The Chairman: We have some way to go but the other thing that we will require is assistance with going through the different stages of the Bill. Perhaps you will come back before this Committee to take us through it. That would be helpful.

43.

Ms Goldring: Yes, with pleasure.

44.

Mr Leslie: During the debate I raised a number of question that were not necessarily answered. One of them was about the effect on mortgages and the existing leases. I would like the comfort of knowing you are confident that we are not going to accidentally trigger the redocumenting of mortgages where a ground rent is redeemed. I know that that should not happen, but I wonder how confident you are about the robustness of the proposals. What have mortgage providers said about it?

45.

Mr Lambe: Very little. It is not an issue that has been raised with us since the process began in 1971 when the original survey of land law in Northern Ireland was published.

46.

Mr Leslie: Have you asked the mortgage market point blank for their views?

47.

Mr Lambe: We did not ask specifically for their views on that question. Northern Irelands banks and building societies were consulted but, unfortunately, chose to make very few comments.

48.

Ms Goldring: They have not raised that issue as presenting a problem.

49.

Mr Leslie: It would seem prudent that we make sure that they are not concerned about the issue.

50.

The Chairman: I have also raised another broader issue. Why was it thought inappropriate to include in this Bill the subject of ground rents for land that is not used for dwellings, such as the bed of Lough Neagh? This is a big issue.

51.

Ms Goldring: The present legislation is confined to dealing with domestic houses and buildings. Are you talking about undeveloped land?

52.

The Chairman: It is not only undeveloped land. I am using the example of Lough Neagh, which is owned by the Shaftesbury Estate. The ground rent would have to be paid by any of the district councils wishing to develop it, and, as a consequence, it has not been developed in some areas.

53.

Ms Goldring: You are quite right- it is not considered in this Bill. However, if the Committee believes that this matter should be considered then we would be happy to provide an initial assessment of the problem, if there is a problem.

54.

Mr Leslie: During the debate I raised the issue of nominal rents, which the legislation defines as being below one pound. The Minister commented on the run and said that he was "considering an alternative mechanism for sweeping up these nominal rents" and that "such a mechanism may be the subject of an amendment at Committee Stage". Are you able to enlighten us on that?

55.

Mr Lambe: Within the Property (Northern Ireland) Order 1997 there is a mechanism whereby nominal rents can be extinguished on leasehold estates by the execution of a deed of declaration. At present that procedure is confined to nominal rents on a leasehold estate. It does not deal with a nominal rent on a free farm grant, but we are currently exploring solutions to that problem.

56.

The procedure to solve it could well be the simple amendment of article 35 of the Property (Northern Ireland Order) 1997 in order to create a mechanism whereby nominal free farm rents could be extinguished by the rent payer executing the declaration that would be lodged with the Land Registry. Draft precedent forms have already been created.

57.

In relation to nominal free farm rents, the biggest problem arises in relation to houses that have been sold by the Housing Executive.

58.

There are approximately 85,000 on the market and they are all subject to a nominal five pence rent which the Housing Executive does not yet collect. Those would not fall within the redemption scheme in this Bill, so we are trying to cater for a specific problem in relation to Housing Executive houses. We already have a scheme for existing leasehold property with nominal rents.

59.

The Chairman: We will be returning to the Ground Rents Bill in September. We will be going through it clause by clause and taking evidence. Obviously, there will be quite a bit of discussion in the detail of it.

MINUTES OF EVIDENCE

Thursday 7 September 2000

Members Present:
Mr Molloy (Chairman)
Mr Leslie (Deputy Chairman)
Mr A Attwood
Mr B Bell
Mr Close
Mr Gibson
Mr Hussey
Mr Kane
Mr Maskey
Mr McClelland
Mr Weir

Witnesses:
Mr J Neill )
Mr B Walker ) Law Society of
Mr D Eakin ) Northern Ireland
Ms S Witchell )

START NOT RECORDED

60.

Thirdly, under article 35 of the Property (Northern Ireland) Order 1997 there is a procedure whereby a lease, subject to a nominal ground rent, can be enlarged to a freehold estate by means of a declaration. We think that its scope should be extended to include fee-farm grants, which are subject to a nominal rent. Logically the same rules should apply equally to fee-farm grants and to leases.

61.

Fourthly, article 3 of the Property (Northern Ireland) Order 1997 has not been repealed by the Ground Rents Bill. In subsection 2(a) of the Order it is provided that

"where a ground rent is of a yearly amount of less than £1 or is a peppercorn or other rent having no money value, it shall be treated as a yearly amount of £1."

It seems that Article 35 can therefore never apply, as it only operates where no or nominal rent is incident to the reversion. We suspect that this was not intended. Perhaps the drafting of this could be revisited and Articles 3.(2)(a) and 35 of the Property (Northern Ireland) Order 1997 amended, to enable nominal ground rents and fee-farm rents to be redeemed by the declaration procedure. Indeed, looking at the notes that were published with the Bill, page 9, it is clear that the intention was that Article 35 should continue to have effect. This ambiguity needs to be addressed when drafting the legislation.

62.

Finally, in Section 28(2) of the Ground Rents Bill a nominal rent is defined as a rent of below than £1. As there are a significant number of £1 rents in existence, the definition should be amended in order to cover yearly payments of £1 or less, as opposed to below £1. One of our members has suggested that the definition should be extended to include rents of up to £10, because the capital value of such rents do not testify the use of proposed redemption procedure.

63.

In connection with my comments on Article 35 we have prepared a supplementary memo which suggests how the appropriate clause might be amended. We will give this to you as well.

64.

In conclusion, we would be grateful if you would consider these points. We request that the Law Society and our colleagues in the estate agency profession are consulted when the detailed rules and forms - which will set out the requirements under the redemption scheme - are being prepared.

65.

Mr Leslie: I was interested in the points you raised about the nominal rents and whether they should be £1 or less, or whether £1 is too low. I raised this point in the debate, but at that time was coming from the opposite direction to yourselves. Would it be better if you were able to get rid of a nominal rent if you chose to do so, using the procedures in the Bill?

66.

Mr Neill: I am trying to draw out what you are saying.

67.

Mr Leslie: If the Bill were to pass as drafted and there were a nominal rent of £2, where would we be? The Bill could be used to redeem the ground rent. Do you think it might not be worth doing?

68.

Mr Neil: That is one view.

69.

Mr Eakin: Nine times £2 is £18. The land registry fee will not be less than £25, so the figures do not add up for small nominal rents.

70.

Mr Leslie: Yes.

71.

Mr Eakin: Even the application to get the rent out would probably, from a Land Registry point of view, not be operative at a figure of less than that.

72.

Mr Leslie: Yes, but it seemed to me that if it were only compulsory on a conveyance, you would have to pay a Land Registry fee anyway. Therefore how significant will the extra cost be in the redemption of ground rent in the context of conveyance that has already taken place?

73.

Ms Witchell: The Land Registry intends to charge extra for that. It is not just going to charge the conveyance fee; it is going to charge an extra fee to redeem the ground rent.

74.

Mr Walker: Land Registry fees in Northern Ireland are already considerably higher than those in the rest of the United Kingdom.

75.

Mr Leslie: That raises an interesting issue. In which direction are we trying to pull it? Should we be seeking to get rid of as many ground rents as possible, including very small ones? In that case, perhaps we should circumscribe how much the Land Registry can charge to do it, if it is part of a conveyance that is going to take place anyway. On the other hand, maybe it is not worth doing that.

76.

Mr Neill: The policy, ultimately, is to get rid of leasehold titles. That is the overriding policy. There are three ways of getting rid of ground rent. First, compulsory redemption. Secondly, voluntary redemption. Thirdly, there is the Article 35 procedure, which provides for a declaration to be entered into. It is only a small corner of the legislation, but it is a part that needs to be better drafted. As it stands, compulsory redemption of any ground rent of £1 or more has to go through the whole procedure. There is a suggestion that, in the interest of economy, a simpler procedure be provided under Article 35 for nominal rents.

77.

There are political considerations here. It is not our job to have a view on those. There are conflicting interests between landlord and tenant, and we have to be careful that we keep a balanced view for all our clients. However, the legislation has been put forward, and it is our job to try and make sure it works. It must be clear, consistent and readily applicable.

78.

Mr Eakin: There is also a human rights consideration in raising the threshold. If someone is entitled to a £3 rent, or £5 or £2, and you say that that goes by the board with no compensation, there is the question of loss of property rights under the Human Rights Act 1998.

79.

Ms Witchell: The origin of the enlargement procedure seems to be Section 65 of the Conveyancing Act 1881, which created the possibility for a lessee at a lease with no rent to enlarge it. It seems to have been thought that it was a good idea to preserve that procedure. For that reason, one could argue that it would be as well to keep the nominal rent as low as possible. It was never envisaged that it would include anything more than that.

80.

Mr Weir: I assume that you have no objections to the aspects of the Bill which you have not commented on. One area I have looked at is the question of covenants. This is addressed in Clause 16. The general rule seems to be that the covenants will be extinguished, with a fairly lengthy list of exceptions. Am I right in inferring from your silence that you are happy with that list?

81.

Mr Eakin: The covenants followed through from the Property (Northern Ireland) Order 1997, and, by and large, we were happy with that, but it does bring in Mr Neill's point about reversionary interest. If the person entitled to the benefit of those covenants does not have an estate in the land because the fee simple has passed to the rent payer, how does he protect those rights, particularly in relation to his successors in title? Over a period of time, how does that benefit of the covenant pass on to his successors?

82.

Mr Weir: I appreciate the issue of succession. It may well be that one of the reasons for writing a covenant into a lease is a desire on the part of the person leasing the land to protect it in some way, by restricting particular activities on that land, or whatever. In some cases, the lease might not have been agreed without that covenant written into it. It may only be a small number of cases. There needs to be some way to protect the retention of that interest.

83.

Mr Neill: That is the point that we are focusing on. The legislation says that the old estate is extinguished, but it goes on to say that in some vague way, the obligation remains as a graft on the new fee simple estate that has been created. To answer your direct question, we are happy enough with the category of covenants. There is no problem there at all.

84.

In Northern Ireland, the lease is what is called a conveyancing expedient. There is no commercial reason why so many properties have been sold by way of lease. We broadly support the policy of bringing us in line with the rest of the British Isles and having freehold properties. There are exceptions, which have to be acknowledged and accommodated. The legislation is careful to do that. There may be good reasons for particular covenants that are alive and relevant. They must be protected. A lot of leases contain meaningless and repetitious covenants that are of no interest to anybody, particularly when the person who created the lease has moved on, goodness knows where.

85.

It is a matter of striking a balance. Given that there is a need to protect certain covenants, it could perhaps be made clearer how they are to be identified, so they can be disposed of and protected.

86.

Mr Weir: You say that you provided drafting in relation to Article 35. One other area that you suggested you were unhappy with was the definition of a flat. You felt it was too narrow. Have you given any thought to an alternative definition?

87.

Mr Neill: We do not have a definition, but we have a concept. You get blocks of flats having their own separate entrances. They are quite clearly flats, by any sensible definition, but arguably they are not covered by this definition, and therefore you cannot create leases.

88.

Mr Weir: Without being facetious, we cannot change legislation on the basis of a concept. We must have a definition. If you do not have one now, perhaps it is something that you could think about. We want to make sure that the legislation is comprehensive.

89.

Mr Neill: With respect, this is a new experience for us. We are not sure how it works. We thought that if the point had substance, it would go back to the parliamentary draftsmen. We will be happy to accommodate you if that is what you want us to do. Perhaps we can come to an understanding on that.

90.

The Chairman: It would certainly be beneficial when making amendments to the Bill. While it may be the parliamentary draftsmen who end up drafting it again, from our own point of view it would be beneficial if we have outlines and ideas.

91.

Mr Close: My question was very appropriate. It was on the definition of the flat. I would encourage you to give consideration to a definition. That would be very helpful.

92.

A matter unrelated to that, but relevant both to your submission and your comments, is the whole impact that this could have on human rights law. What are the areas in which there is, or may be, a conflict?

93.

Mr Eakin: The Ground Rents Bill partly addresses that matter. As you will recall, the original Property Order required the vendor to redeem the rent before he could sell, and it was argued that that would hold up the conveyancing procedure. The initial concept was that of a notice procedure. It is now acknowledged that that would have been unworkable. Having looked at the matter, it was decided in conjunction with various people such as ourselves, the valuers and Professor Wylie that the purchaser should redeem the rent.

94.

In a sense, that has partially addressed the human rights issue, because the purchaser is going to be involved in the procedure anyway. He is going to pay a redemption fee to redeem his rent, but he is also going to be absolved from liability to pay ongoing ground rent. He is paying something, but he is also gaining something. The landlord is capitalising his rent in that he will no longer be entitled to collect the rent, but he will be entitled to a capital value. Therefore, broadly speaking, the human rights aspect has been addressed.

95.

It will run into difficulty in relation to the issue of low rents, where any procedure will have benefit/ cost ratio problems. The cost of implementing the procedure for any small rent - and the multiple now suggested by the Minister is nine - will cause difficulties and there will be ramifications.

96.

I would have thought, subject to the query as to what the nominal rent to be redeemed at no cost is, that, broadly speaking, this is as good an attempt as we could come up with.

97.

Mr Neill: We are concerned about human rights issues relating to the interests of the rent owner - those who have been bought out - and the people whose covenants are arguably no longer going to be enforceable. That is why it is very important that provision is made not to deprive, in appropriate cases, people of the right to enforce those covenants.

98.

Apart from that, it is a question of balancing the wider public interest and putting into the mix the compensation which people are getting, what it is costing them, and what they are losing. It is a pretty good effort at getting that balance right.

99.

Mr Eakin: A challenge to the Property (Northern Ireland) Order 1978 about the extinguishing of covenants was defeated on a human rights issue. Professor Wylie takes the view that, in relation to proportionality, this is the best way of proceeding.

100.

The Chairman: In relation to the broader issue of ground rents where land is attached to a dwelling, or where it is a question of land only and a ground rent is involved, do you have any feelings on that?

101.

Mr Eakin: It is difficult for the society to take a view on that. In practice, because of the operation of the Land Purchase Acts there would be very little agricultural land subject to rents, and the old land purchase annuities are virtually obsolete now. It would not be perceived to be a problem as far as agricultural land is concerned. Agricultural tenancies in Northern Ireland up to the present have been an exception. People have tended to operate the conacre and agistment arrangements rather than agricultural leases.

102.

Mr Walker: If you have an agricultural lease then you are entitled to get it purchased under the land purchasing aegis. That is why we do not have agricultural tenancies in Northern Ireland. It is due to an obscure section in the legislation. That is why we have coin acre rental in Northern Ireland and not in England and Wales.

103.

The Chairman: I was thinking of Lough Neagh, where we have the bed of the lough - the Shaftesbury estate - which is subject to a ground rent. That situation is not provided for.

104.

Mr Neill: That raises the broader issue that the legislation does not apply to matters other than private dwellings. We do not have a policy on that. However, our view would be that Government, in their wisdom, take the view that commercial relationships between landlord and tenant are necessarily different in essence from the view that "my home is my castle". However, if it is a commercial letting there have to be all kinds of ongoing restrictions and regulations. The principle of excluding commercial property and short leases is, therefore, wise. Short leases are normally short lettings, where the owner will recover the property after the letting period, so it is important to have almost the historical landlord/tenant relationship.

105.

Mr Walker: We recognise that you are referring to Lough Neagh and the Shaftesburys, who own the bed and soil. That is unique, and there may well be a political argument - and it is for you to say whether it is right - that a resource such as Lough Neagh should be under public ownership. Some public authorities have bought out parts of the bed and soil of Lough Neagh. For reasons, such as pollution, that issue might become significant.

106.

Mr Eakin: It is fair to say that the tenor of all legislation from the land purchase scheme onwards has been to differentiate, with, for example, the Rent Restriction Acts applying to the landlord/tenant, but not to the commercial landlord/tenant. Also, the protection given to commercial tenants under the Business Tenancies (Northern Ireland) Order 1996 differs substantially from that given to domestic situations under the Rent (Northern Ireland) Order 1978 - the successor of the Rent Restriction Act.

107.

Mr Close: Do you have any views on the levels at which the multiplier should be pitched? Is nine about right or should there be a variation?

108.

Mr Neill: I will give an oblique answer to that. Whatever level it is pitched at, it should enable the rent owner to get at it without any fee deductions. If it is nine years' purchase, then the rent owner should get nine years' purchase, without it being eaten into. However, it is a difficult question and, arguably, it varies with the interest rate and the return on compensation if it were to be invested. That fluctuates, and we would not be qualified to comment further.

109.

Mr Walker: There might be an argument for saying that it should fluctuate. At present, the normal rate of return on investments is, on average, 6%. Over the last 10 years that figure has fluctuated widely. Therefore, consideration might be given to a variation clause to cover the possibility of interest rates rocketing.

110.

Mr Close: Would you relate the variation to interest rates or to price indices?

111.

Mr Eakin: This is a personal view, not a Society one. The initial multiplier in The Property (Northern Ireland) Order 1997 was 12, and I took the view that it was out of step with the market for ground rents. I felt that a multiple between eight and 10 was appropriate, and I made my views known. I am aware - I have it in front of me - that the Office of Law Reform got an opinion from the Valuation and Lands Agency in January 1999. It happily concurred with my view, and took the in-between figure of nine. The Minister, in introducing the Bill, said that it would give him the right to have various multipliers for different situations. I have not been able to think of a situation that would justify different multipliers for different situations.

112.

Mr Gibson: There might be a multiplier, say, of nine. However, could I make a private deal giving my client a multiplier of 11, because he feels that that is a realistic level of compensation? Perhaps it is a small ground rent and the legal fees would eat into it. Is there anything, legally, to stop me doing that? I do not particularly like the landlords, but sometimes I am a landlord myself so I have to think differently.

113.

Has anyone given thought to the idea of a basic minimum? There is great consensus determination on the part of the general public to own their homes freehold. As has been said, a man's home is his castle. Is there still room in the proposed legislation for the private owner to do his own thing to a modest extent?

114.

Mr Eakin: Absolutely. Another aspect of this - which we have not highlighted today, since it is in the Bill and not, in my opinion, contentious - is the provision for voluntary redemption on paying the multiple, so that if one is outside the compulsory registration area but wishes to get rid of one's ground rent, this mechanism is available. One simply goes to Land Registry, paying the multiple of nine and the other aspects and receives one's certificate of redemption. That is as important as the compulsory redemption aspect.

115.

Mr Weir: I should like to return to the point made about the right level for the multiplier. You mentioned the Minister introducing this had said he was open to the idea of a different or variable multiplier depending on circumstances. You could not think of a practical case where there would be good reason for it. However, let us leave aside for a moment the practical side of things. If a different multiplier applied depending on circumstances, would it be legally vulnerable to some sort of human-rights challenge, for example based on some of the equality legislation?

116.

Mr Neill: Do you mean different multipliers in different situations?

117.

Mr Weir: Let us take an example. I am not saying we shall look at this, but let us say for the sake of argument that one wished particular protection for charities owning land, or something of that nature. The desire would be to reflect a higher multiple in the legislation in those circumstances. Would this be vulnerable to a challenge on the basis of human rights or discrimination because one group was being treated differently from another?

118.

Mr Neill: I feel it would be dangerous.

119.

Mr Eakin: Someone asked during the first reading whether the legislation kicks in if there is a reversion of 50 years or more. The person asked what would happen if there were 60 years left. Is there an argument for saying it should have a higher multiple, since the landlord would theoretically get his property back in a shorter period of time? That is a question more of valuation than of law. It might be appropriate to ask the valuers.

120.

Mr Gibson: In the part of the world I come from, some people have university interests. Property is left to universities and charitable institutions, so the income goes to them. I imagine neither University College nor Trinity College in Dublin would have a great desire to surrender annual income, nor indeed would charities. Does an individual who has bought out his property still have the right in those particular cases to say, "Whether you like it or not, I am entitled to my hide." and force the issue?

121.

Mr Eakin: Absolutely.

122.

Mr Neill: He has the right.

123.

Mr Gibson: So the salient fact is that the universities are charitable organisations without any business or commercial element?

124.

Ms Witchell: The South has had similar legislation for much longer. Apparently, when it was introduced on a voluntary basis, many of the big landlords like the universities - I also believe insurance companies owned large numbers of rents - offered tenants deals to make it worthwhile for both parties to come to an arrangement and allow them to be bought out.

125.

Mr Gibson: Eagle Star was very generous, the universities perhaps not quite so.

126.

The Chairman: We shall wind up. Thank you very much for your presentation. I should like to remind you once again that this Committee will be making a recommendation to the Assembly. If you have any comments or proposals for us, it would certainly be beneficial to have the written document.

127.

If you have any other questions during the consideration, the Committee will take them on board. Thank you.

MINUTES OF EVIDENCE

Thursday 7 September 2000

Members Present:
Mr Molloy (Chairman)
Mr Leslie (Deputy Chairman)
Mr Attwood
Mr B Bell
Mr Close
Mr Gibson
Mr Hussey
Mr Kane
Mr Maskey
Mr McClelland
Mr Weir

Witnesses:
Mr J Frazer ) Royal Institution of Chartered
Mr D Smyth ) Surveyors in Northern Ireland

128.

The Chairman: Gentlemen, we will resume again. Welcome to the committee meeting Mr Frazer and Mr Smyth.

129.

Mr Frazer: I will highlight a few points that have already arisen in the letter that we wrote to you previously. One is the suggestion of nine years' purchase; end of story solves the problem. Where there is just the freeholder and the party paying the ground rent, it is a relatively simple process. Unfortunately in and around Belfast however, there are superior interests between the party paying the ground rent and the freeholder, and there is probably three or four different interests lying between one and the other. Various paid head rents are probably also connected with varying degrees of percentages between gross and net income.

130.

It is all well to say the ground landlord pays his 10 or 9 years purchase land registry, but consider all the superior interests before coming to the freeholder - how does the legislation propose to deal with that? It is entirely silent on the matter. It is also entirely silent on the question of apportionment and how these apportionments are recorded. The party at the bottom, namely the tenant, who has bought his rent out and acquired his freehold, has however left behind a problem that must be resolved and recorded for prosperity. Presumably up the line it will not be a total redemption, because the head landlord will have ten rents and pay a head rent of which a portion will have to be redeemed to take account of the reduction in his income. All that must be addressed and resolved. There must be some form of apportionment and a means of recording how this happens, because in 10 years time when that head landlord sells his documents will say he is entitled to a ground rent of £100, but it will have been redeemed by various parties.

131.

I accept in the country areas that there is probably just the freeholder and tenant, but in Belfast there is a pyramid of title. I am sure the Law Society could confirm that, where there is not just the person paying the rent and the freeholder, there are various intermediate leasehold interests.

132.

Mr Smyth: We have both the difficulty and advantage of arriving after our friends from the Law Society.

133.

We have no presentation to make but are following on from what has gone before. The question asked was about whether the multiplier was reasonable, but it is very difficult to answer that question because it depends upon the value of present rents. I think that there are probably - and I am sure you will correct me if I am not right - something like 300,000 to 350,000 rents in the Province; I saw that years ago somewhere. It is very unlikely that a high percentage, or even a small percentage, have ever been valued. They tend to be valued upon death or upon a company winding-up et cetera. Now and again some are sold, and this is the only headline figure that is normally available to the Commissioner of Valuation, who may have advised on this figure. Therein lies the difficulty.

134.

The present headline figure is probably around 7 years purchase whenever ground rents go on the open market. That is what the public sees if something is reported at auction. The question is what does that represent to the person who has just paid it? The Committee has received correspondence from Roy Huston of the Capstone Trust, who has apologised for being unable to address the Committee because he is on holidays. Roy has sent me some of his papers. He represents a charity and is one of the few collectors who does nothing except collect ground rents. As a matter of record he collects around 7,000 of them with a gross income of about £160,000, which is a sufficiently large collection for him to say that the collection costs are around 32%. If you would like an example. He pays 7 years' purchase being £700. He receives £100 per year and pays £32 for administration expenses, and he has £68 left. So he has bought an income of £68 net for his purchase price of £700. He has paid more than 9 years' purchase, which is a direct answer to a direct question from the Law Society and which leads me, and Capstone Trust, to feel that the multiplier is not right.

135.

The multiplier suggested in the original legislation was 12. That was closer to the mark because, to be fair to the rent owner, it is better that it should be a bit over than a bit less, since there is an element of compulsion in it. There may well be an element of tax which has to be paid by the rent receiver, but this is not necessarily so because the element of compulsion may mean that they can roll it over. However, that is another story. That may be a surveyor's answer to a direct question from lawyers.

136.

Mr Frazer: May I say that I would endorse one thing that the Law Society said - if the money comes to the ground landlord it should be free of any costs. The costs arising from this is another issue to be addressed, especially where you have apportionments and endorsement of title deeds. Somebody will have to pay for it.

137.

Mr Smyth: Relevant to that is the question of what is a typical ground rent; not of how one defines a ground rent but of the amount. There has been a thought that most ground rents are a fiver per year and a bit of a nuisance. In fact we think that the average is significantly more, but we have not heard anyone expressing any views as to what they are. Our own office has 9,000 and they happen to average £22. Capstones averages £23. That surprised us when we looked at it, but most offices such as ours have no reason to look at that because we act for hundreds of clients in the collection of the rents and never have any reason to aggregate them until we come to a piece of legislation such as this. Whenever we suggest this to any of our fellow agents they are surprised by the figure but then look at the figures and suspect that it is correct. The reason that it is higher than it was when this piece of legislation was thought of 20 years ago is mainly because of the redevelopment of Belfast. The population of Belfast - as members will know - is 350,000 whereas it was 500,000. Substantial redevelopment has taken place over the past 30 years primarily of the cheapest houses; the ones that had rents of £3 or £4 per annum. After 26 years I am - and John is certainly - old enough to have created them. So many of those houses have been knocked down that the main problem in the Province is not to get rid of rents of £3 or £5 per annum but of major rents of £40 per annum for houses built in the 70s.

138.

In the Province now we are left with few rents of £5 a year and £3 a year and we are getting rid of the major rents of £40 a year for houses built in the 1970s. Our major problem is that the Bill is very silent on rules for how the money is then dispersed but it is quite clear what the rent payer does. We act for both rent payers and rent receivers, but today we are more interested in the rent receiver because we will have to deal with the collections and the paperwork.

139.

The money could be substantial because if 300,000 rents are to be redeemed at an average of £22 or £23, over say 40 years, it will be based on a multiplier plus costs. For argument's sake if that total cost is £350 per rent times 300,000 that is £105 million going in to the Land Registry. This Bill has not addressed how the rent receivers are going to get that back.

140.

We were surprised by the reading in the House at the beginning of June and there has been very limited consultation since and none whatsoever with any of the agents who collect the rents. We would like to help but we need some consultation with Land Registry. We had discussions with them before the 1997 Bill but, as far as the agents were concerned, it disappeared off the horizon and we have had no consultation with them since. Suddenly this summer we were faced with a new proposal which was totally silent on costs and also on how it will work. The difficulty with the last system was how the rents were going to be redeemed through the rent owner because a lot of the rent owners would not reply. So we agree that it should go through the Land Registry so long as we can consult with them first.

141.

Mr Frazer: The system would also have to be user-friendly with a relatively simple application which would work without a lot of rules.

142.

Mr Smyth: I went to the notes on the Bill and there are four points on how it complies with convention rights which you are familiar with. It complies with the convention rights because there will be adequate compensation paid to the rent owner, but the Bill is totally silent on what that ought to be. Turkeys voting for Christmas, without knowing about the dinner, springs to mind if you are a rent receiver.

143.

The important social policy of cleaning up the title of a residential property justifies the interference. It is with the title of the initial rent payer but that is only one piece of title which refers to that residential property. It may clean that up for the person buying and selling his house but it does not clean the title up for people who have another interest, unless the rules are very clear. We have established cumulatively across the country that title is worth millions of pounds. It is going to be very difficult to deal with as you move away from year one to year five to year 15 where, increasingly, rents are redeemed but a person or a company still has an interest in a block of 15, some of which are redeemed. If he has 10 rents and 9 are redeemed, it is very difficult to get a successor in title when that person dies and this has not been addressed. We as a profession would have to advise on valuation, for probate purposes, when someone dies. In B it states "it cleans up the title to residential property" and that made me bristle just a bit.

144.

Mr Frazer: Many of these head rents will never be redeemed in totality because the head rent originally covered 40 acres. Today not all of it will be residential, some of it will be commercial and some will be in public ownership. You will finish up with a partial redemption, with the client not only having the possible covenant interest in the land, but also having a reduced income because some of it will have been redeemed.

145.

It is unlikely it will ever be redeemed in totality. It might be politically necessary to say "Let us redeem all of that rather then leave these piecemeal bits about." I throw that out as a suggestion. I do not think that is being addressed; the problem has not been thought of. One could take the view that where, shall we say, a party is left with a head rent of less than £30 a year, it should be redeemed, purely as a mechanical convenience. It is probably desirable to do so.

146.

Mr Smyth: It leads on to the question of rents that are under £1, and in our trade or profession, we have mixed feelings about this. I would prefer the system where rents under £1 are regarded as being £1 and are redeemed with the mechanism. Rents under £1 can be anything from 5p. We collect some in Portadown that are 80p. Dear knows why they are 80p - 40p a half year. The 80p ones in Portadown do not come out of particularly valuable property, so the cost of redeeming them might be a material factor, but the ones we collect in Cultra, which are one shilling or two shillings and sixpence - or whatever happened to strike the conveyancing solicitor's notion when he was having coffee that particular morning. This idea of what was nominal varied; it might have been one penny or one pound, depending on his mood. We have to get our own back a little bit; we are friends.

147.

The redemption costs in Cultra are not a material factor. Very often the rent was set at 5p because the consideration was so much that the rent was scarcely relevant, but our title is still there, and our solicitor's vaults are full of the counterparts. We want to have a system where, if all of these things are going to be redeemed, they are properly documented, otherwise we are just going to create more problems for ourselves in the future.

148.

The fourth point is to do with the fact that the cost associated with the sale and purchase of residential property will be simplified. I am not entirely sure what "simplified" means. The costs will certainly not be reduced, because that would go against all that happened in the past. I will have to be careful with my words here. I do not know what is meant by simplifing the costs. They will either go up or down. I suspect that if the freehold is redeemed, conveyancing costs will not come down. It is difficult to get costs of any description to come down.

149.

Mr Close: I do not think that the Royal Institute likes this Bill. Could you put my mind at ease and tell me what you consider are its redeeming features? I do not say that in any political way, but what we are trying to achieve is good, practical, operational legislation. The Assembly is just getting going, these committees are just up and running, and I think we are very fortunate to get the type of probing questions that you are throwing at us, rather than what we had anticipated would have been the other way around. I think this will be a very useful part of the exercise, providing we get your assistance and whatever help you can give us. If we have to make our minds up before deciding on the right legislation, it is very useful to have several points of view. That is why I asked are there any redeeming features in it, if so, I would like to hear what they are.

150.

Can you provide, by way of a note, some suggestions on the many proper queries you have pin-pointed today.

151.

Mr Frazer: We are not against the principle of the legislation; as ever, the devil is in the detail. There is, however, very little detail. It refers to rules, but I have not seen them. We have some difficulty in looking at the package, because we do not have the package, and we are a little bit dilatory about saying that the system will work, because we do not think it will. We think there are certain areas which still need to be addressed. One is the superior interests and things like that. We are not against the Bill per se; we are just concerned that ultimately, the landlord will be left in a situation where he is worse off than he is today.

152.

Mr Close: If it went through as it is currently, would it be bad legislation?

153.

Mr Frazer: Yes. There are aspects that I do not think have been considered adequately.

154.

Mr Smyth: It is pegged onto something difficult which is the registration of title. The practical thing is, whenever we are used to registered titles, the era of lost titles is presumably going to disappear. Presently, the type of queries received, apart from people who either love or hate paying their ground rent, is, "I have lost my deeds, can you put me in touch with the ground landlord until I find his counterpart and re-constitute my title"? If we do not have any title deeds it will be because we have thrown them out because all the rents have gone. One could say this will not happen because ground rents will only be redeemed once all title is registered and therefore people will not need a little pile of title deeds that they want to reconstitute from our counterparts.

155.

I am not a lawyer or a conveyancing solicitor. We work in tandem with the solicitors but we have not had enough consultation between the Land Registry, the Law Society, the Office of Law Reform and ourselves. We support the Bill, and the principle of it. We do not want to obstruct and do not want you to get that impression, but neither do we want something to go through which will mean that we are going to sink under the weight of paper. Many of our Colleagues do not even know that this is imminent. Because where there is not a lot of money in the capital value of ground rents, a lot of offices deal with it as a side issue, as it is not very lucrative.

156.

Mr Smyth: It is lucrative as long as it is alone in bulk. There are many people who do not know what is going to happen and therefore we need more consultation. One of the document states you do need consultation with the Office of Law Reform and the Consumer Council. If we put together a list of 15 or 20 agents, we could probably find 100,000 ground rents between them, which is not a very large amount of people. More consultation with our assembled group will assist, so that we are not stuck with something where a lot of offices say "we cannot co-operate with this, we are only the agent, we will have to surrender."

157.

Mr Kane: The institution has enquired about the lack of information on a number of points, including the likely redemption figure in Land Registry and the landlords solicitor and agents costs. Are there likely to be circumstances where rents are not payable under a building lease?

158.

Mr Frazer: It seemed to imply from the reading of the legislation that all ground rents were reserved under a building lease. It was not every residential property with a rent that was reserved under a building lease, or that there was a covenant to build. I was concerned that the definition did not include all ground rents paid out of residential property. It seemed to be illogical that if there was a lease securing a rent to which there was no covenant to build per se, such as a building lease, why exclude them? If it is residential, why were you proposing to exclude those where the rent was not reserved under a building lease?

159.

Mr Gibson: I am delighted you spotted the rural simplicity. Could you try to tidy up something that is disturbing me, you talk about the simple things like ground rent and the fee-farm, but in Belfast you seem to have a complicated world where a deed does not exist. Is somebody not simply creating a new one.

160.

Mr Frazer: What happens is that you get a lease of 100 acres and from that, farmed various sub-leases of 20 or 30 acres. That is farmed out again until you get down to the party who pays the individual rent. To get from the tenant who pays the individual rent and house back to the freeholder, you probably have four or five leasehold interests in that bit of property. In order for the tenant to get his freehold, he has to work through all those interests to get to the freeholder. That problem has to be addressed.

161.

If there are no head rents payable it is relatively simple. But in the majority of cases in and around Belfast they all have to be notified and all of them will have to be dealt with. In the majority of cases there will be have to be some form of apportionment to say that, for example, head rent has been reduced from £220 to £219 and there will have to be an endorsement on the lease. To illustrate this, if I die and I have had my rent reduced and my title deed says £220 and Mr Smyth is only collecting £219, my successor in title might want to know whether Mr Smyth is putting £1 in his pocket. There will be a difference between the document of title which states £220 and the rent that is being collected on the ground. There will have to be some explanation for the discrepancy between those two.

162.

Mr Smyth: There was also the question of whether there should be differential multipliers. Our profession has a variation of opinion on this. It is obvious that a £3 per year rent is worth a lesser multiple than a head rent of £1000 per year reserved on 20 acres. I do not see any way of working a differential because a ground rent is a ground rent. There are sub-rents, head rents and other types of rent but they are all ground rents. A ground rent of £1000 per year on 30 acres could be covered by a number of sub rents which produce £1,050. However, there is also the case of a builder paying £1000 per year and he could sell off his houses subject to £3000 per year. It depended on when he was selling the houses, what the market was going to bear and what he thought of building on the land.

163.

Therefore I do not see how it would work if you have a differential. One of the members of the Law Society of Northern Ireland deputation expressed the view that he did not see any benefit in the variation of a multiplier. So there needs to be some discussion on that matter. Unless it is going to be through one multiplier I can foresee difficulties. However, I am open to being convinced by another party that there is another workable way of doing it.

164.

Mr Frazer: For the purpose of simplicity, one year's purchase throughout the whole of it is the only workable alternative.

165.

Mr Smyth: We cannot see any other way of doing it.

166.

Mr Frazer: If you want the system to work and to be readily understood you have to have the same year's purchase throughout the whole of the scheme - be it the party who is paying the £2 per year or the party who is in receipt of a head rent of £10,000 per year. The only way that the system will work is to have the one multiplier that covers the whole spectrum.

167.

Mr Hussey: My sympathy lies with the payer of ground rent and not with the person receiving it. I have no sympathy for those who are in between. The more that I hear the more I wonder why this Bill did not say, "We abolish ground rents as of 5 April 2001".

168.

You suggested that the twelve multiplier would be the favoured one. Is it true to say that the person who is eventually receiving the end ground rent loses out due to the £32 collecting fee, is the rationale for that?

169.

Mr Smyth: Every investor looks at his net return, not just at his gross take. If one buys a shop one only looks at the rent one receives after one has paid the insurance and done the repairs. Buying a ground rent is no different. from any other investment: one must look at one's net return.

170.

Mr Hussey: If one is simply selling out or, taking the ground rent factor into account, buying in, the agents' fees will have disappeared over the nine years. What is the problem with a nine times' multiplier?

171.

Mr Smyth: I would need a piece of paper to work that out.

172.

Mr Frazer: Take the example of elderly people who have to live on an income of £500 per annum. We cannot say to them "you are going to get nine years' purchase; you are going to get £x and you must reinvest it." Where can they find an investment which allows them to reinvest and get the same income that they presently get?

173.

I am not trying to be clever. I am merely saying that there has to be equity; that these folk must have some ability to reinvest that money and touch base with more or less the same income they got before.

174.

Mr Hussey: I am of the opinion that when one sells something, it is sold - end of story.

175.

Mr Frazer: There is an element of compulsion. The ground landlord does not have the choice to sell or not to sell.

176.

Mr Hussey: I am going back to the initiation of the ground rent, not all the bits and pieces that have been added on.

177.

Mr Frazer: Blame the legal profession for that. Certain people rely on this income to live, and there must be some equity to enable them to reinvest and to get the same income again.

178.

The Chairman: In your submission you mentioned 'dwelling', 'land' and 'town park leases.'

179.

Mr Frazer: I have no experience of them, but one firm did. In some towns in Northern Ireland - Ballynahinch, for example - the local butcher took the lease of a shop and, because he was a butcher, got five acres of land two miles down the road to run his cattle; that was considered part of the shop. Should the town park tenant be given the freehold of the shop including the five acres of land on the outskirts of the town?

180.

It is not an earth-shattering problem, but what is the legal position? I am not aware of its ever having been raised.

181.

Mr Smyth: One of our colleagues on a subcommittee is working for a firm which has four or five estates containing hundreds of rents. He would appreciate information to make his task easier.

182.

The Chairman: Thank you very much gentlemen. Do you want to make written submissions?

183.

Mr Frazer: We will make a written submission on head rent, and the apportioning of its costs, as it is a problem which must be addressed, especially in Belfast.

184.

Mr Smyth: Will the rules be published soon?

185.

Mr Gibson: That is for the Minister to decide.

186.

The Chairman: What about the question of the six years?

187.

Mr Smyth: Discussions in the last order tended towards the rent being redeemed through the rent agent or the rent owner. If he could not be found, it was to be redeemed through the Land Registry. Some people do not wish to pay their ground rent, and some to whom we write ignore us. Some of them would go to the Land Registry or to their solicitor to say "I have not been billed for ground rent." The solicitor, believing his client, would redeem through the Land Registry.

188.

If you cannot find your ground landlord, the Land Registry will take the redemption figure, plus six years of arrears because you do not know who your ground landlord is. That would have two effects. Either the person is genuine and has not paid his ground rent, in which case he would not mind paying the six years that he could be sued for. The other situation is that they could have a sudden memory attack and remember that they had received a bill for ground rent and owed two years arrears, rapidly paying them. What we do not want to do is to have a legislation published and have everyone who pays their ground rent totally ignore our demands for a period of years and then when there is a sufficient number of arrears, just redeem it on the multiplier.

189.

Mr Frazer: I am unsure that six years' arrears are all you can sue for. Although that is a separate discussion than today, I take the view that you can sue for six years as a civil debt and you are probably statute barred by way of debt. The solution from the ground landlord's point of view would be to sue for ejectment for non-payment of rent. Again it may be that the legislation, once you have sorted the redemption system, prevents you from suing by way of ejectment for non-payment of rent. That is something that requires attention. We do not want the legislation used as a vehicle for people to stop paying their rent knowing they can use this as a means of evading or avoiding their liability to pay their ground rent.

190.

The Chairman: No such thing.

191.

Mr Frazer: Of course not.

192.

The Chairman: Thank you very much for your presentation and if there is documentation -

193.

Mr Frazer: We will write.

The Chairman: Thank you. That brings to an end our public session.

MINUTES OF EVIDENCE

Tuesday 12 September 2000

Members present:
Mr Molloy (Chairman)
Mr Leslie (Deputy Chairman)
Mr B Bell
Mr Close
Mr Gibson
Mr Kane
Mr McClelland
Mr Maskey
Mr Weir

Witnesses:
Mr J Goldring ) Office of
Mr N Lambe ) Law Reform

Adviser to Committee:

Mr Widdis ) Research and Library Services, NI Assembly

194.

The Chairman: Hugh Widdis, who is a barrister, works for the Assembly as a researcher. He will brief us as adviser to the Committee on the Ground Rents Bill. Everybody has the two documents on the Law Society's comments and general concerns.

195.

Mr Widdis: There are two comments on the Law Society submissions. One should be fee farm grants; the other should be an amendment on the article 35 procedure. [Interruption] You should have the document which is stapled together, comprising three pages. On the front page you will see a comment on the Law Society submission: the inclusion of fee farm grants. On the second page you will find a comment on the Law Society submission on the amendment of the article 35 procedure. I am aware that the Committee has run over, so I will be as brief as I can.

196.

The first document you have in front of you, which outlines general concerns, is derived from various sources. It comes from the evidence that the Committee has heard already, in particular from the Law Society and from the Royal Institution of Chartered Surveyors (RICS). The base of the document was drafted by my colleague on the staff, Mr Peter Hughes. I have looked over it as a barrister, with particular reference to the effect of the legislation and how we can outline concerns that the Committee might like to look at, and later on pose questions for other witnesses. You will, on a previous date, have been provided with an explanatory and financial memorandum on the Bill. This document is of great assistance concerning what has been brought up here: paragraphs 22 and 23. These in general deal with the Human Rights Act and the legislative competence of the Assembly to pass legislation.

197.

The Royal Institution and a body called the Grent Trust, which is a private charity that collects ground rents, in order to dispose of money between itself and other charities, queried the human rights implications of the Bill. This issue will come up on several occasions throughout my submissions to you. There are two extra primary questions which the Committee may like to consider while we are speaking to the Office of Law Reform representatives. The Bill begins with another statement about legislative competence, which is tied to human rights issues. The Committee should be considering that.

198.

Clause 1, in effect, lays out the basic power which is granted on it, that those who owe or are expected to pay ground rents in accordance with their lease or other holdings of land will under certain circumstances be entitled to redeem them. There are no particular legal concerns or other concerns that have been raised by other parties regarding it. The same applies for section 2, which sets out a compulsory regime that allows the redemption process to occur on a compulsory basis when certain events occur on the transfer of property. Clause 3 raises one fairly minor problem. It is to do in particular with subsection 7, which you will find at line 15 on page 3. It is to do with the application or otherwise of the legislation to a flat. If you refer to the general provisions concerning the right to redeem a rent you will see that subsection (7) provides that sections 1 and 2 do not apply to a flat. An issue raised by the Law Society that should be considered by the Committee is the definition of a flat. You will see that the definition substantially comprises three paragraphs - (a), (b) and (c). (a) and (b) are normal with regard to describing a flat. Paragraph (c) may require a closer look. It suggests that for a property to be defined as flats, the owners or occupiers of the units, or any of them, must share in the enjoyment of common parts. The Law Society has raised the question: what if accommodation which would in the general sense be regarded by members of the public and by others as a flat does not share common parts with other flats? In particular, the Law Society raised a good point that should be considered, which is the possibility of an accommodation complex or an apartment complex which comprises some apartments which share common areas, such as a hall or stairs, and some apartments which do not, but are otherwise identical and may, for example, have their own doorway onto a street. I would suggest that the Committee look at that and there are also a couple of draft questions there which the Committee might like to consider and possibly put to the representatives from the Office. Subsection (8) is also mentioned there. Subsection (8) provides three ancillary definitions, one of which is the definition of common parts. If subsection (7) is to be reconsidered, so must subsection (8).

199.

Mr Gibson: May I ask a question at this point?

200.

Mr Widdis: Yes, of course.

201.

Mr Gibson: Does the ground rent apply to each layer of premises?

202.

Mr Widdis: Being an apartment complex with more than one floor of premises?

203.

Mr Gibson: One floor or several floors, in other words, multi-storey. Ground rent is a form of income. But what if we started to define the sub-divided property on it? Is the ground rent a collective imposition on all units of a complex or is it a collective imposition on the land the complex is sitting on?

204.

Mr Widdis: The legal possibility exists that both situations could arise. It is conceivable, for example, that a management committee might take on the payment of the ground rent and charge it to the occupants as fees. It is equally possible that when the individual units in the development are sold off, a certain amount of ground rent is attached to each of them.

205.

Mr Gibson: Therefore, the ground rent is attached to the deed of whatever the property is. I am trying to focus on the deed.

206.

Mr Widdis: What I am trying to get across is that it could be either way. Legally, a mechanism exists for it to be attached either way.

207.

Mr Gibson: Then legally when you come to "deground" rent it, you are removing an article from a title deed. You are removing the imposition to pay ground rent, however it is administered.

208.

The Chairman: We will move through this in an advisory way. Then we will come back to the Office of Law Reform with regard to Acts of Parliament.

209.

Mr Widdis: If it is administered, then the definition of ground rent in the Bill can be examined to see if it covers a charge made by a management committee. This represents part of a ground rent that it, or the developer, is paying. My initial reaction is that it does not cover such a charge.

210.

Mr Gibson: We can come back to that.

211.

Mr Widdis: Clause 4 provides a system of redemption. Redemption, in general, will be handled by the Land Registry. At subsection 2(b) line 4, page 4, the RICS raised concerns with regard to suing for arrears of ground rent which have not been paid in a period before a rent payer decides to redeem it. The RICS's suggestion is to pay the redemption money, which is calculated on the basis of the ground rent and a multiplier, and to pay the Land Registry fees.

212.

The RICS also suggests paying other charges that the rent payer, who is redeeming the rent, is asked to pay. This charge is an amount which is equal to 6 years' ground rent. A rent payer could fraudulently suggest that he could not find the rent owner and, therefore, could avoid paying ground rent for a time before redeeming. The suggested mechanism of the RICS would be to allow the amount that could legitimately be claimed in court for ground rent arrears. That is said to be six years. That money is then lodged in the Land Registry and is available for the rent payer, if he later comes forward. There is a question drafted against the Office of Law Reform as to whether this has already been considered and whether or not there is a satisfactory mechanism to deal with the issue.

213.

The RICS also queried subsection 2(e) with regard to a sum of money to be lodged with the Land Registry to cover expenses. The Institution was concerned about the amount of money and exactly what it would cover. That is also subject to a draft question.

214.

A further question which the RICS raised is with regard to endorsement of deeds. The RICS is concerned that there is no strong system for registering the effect of redemption on the rent owner's deeds which are the higher ownership of the property. The RICS is particularly concerned about this for its own reasons. It operates not only on behalf of rent payers, but frequently on behalf of rent owners. A couple of questions have been included for your benefit. Clause 5 is to do with setting the redemption money. It operates by referring the matter to the first schedule. The first schedule operates by providing that the redemption money is equal to an amount calculated by multiplying the ground rent by a set multiplier. That multiplier is to be set by Ministerial Order and is to be reviewed, as appropriate. This again is causing great concern to many parties who feel that the tentatively suggested figure of nine is not suitable. There is no legal advice to provide to the Committee. As the Bill is drafted at the moment it is not a matter within the competency of the Committee.

215.

Once the Order is made, the Committee will be involved in doing it, but at the moment it is not an issue. The Committee might wish to consider, especially with the officers from the Office of Law Reform, a possible alternative of setting some sort of standard for the multiplier - for example, the base lending rate has been suggested.

216.

Clause 6 covers the disposal of the redemption money. This did not cause any concern to the Law Society but, given its line of work, the RICS was disturbed by it, and it has quite a few concerns. The first concern on the list came up in discussion in our office and was not raised by the RICS. It relates to the amount of money that is being collected; this will be a considerable sum if all redemptions are taken up in Northern Ireland. The system that has been devised, and which is contained in the Bill, for disposing of the money relies, as a first step, on a party claiming to be entitled to the money coming to the Land Registry and asking for it.

217.

This may not wholly be in line with human rights thinking and the Human Right Act in that it is no longer a matter of somebody having property taken from him - his interest in a ground rent. He is entitled to receive a ground rent, and he is able to receive compensation for this. However, it is system whereby entitlement is taken from him, and he needs to approach the Government body or public authority to ask for compensation.

218.

The RICS has some concerns, which are fairly clearly laid out. They are to do with particular phrases that appear in certain subsections of that clause. I have provided sample questions.

219.

Clause 7 provides for the Land Registry, on completion of the process, to issue a certificate of redemption. It has various legal effects, and it effectively closes down the redemption process. There seems to be no provision in the Bill for the issue of any notice to the rent owner advising that the process has been completed. The Committee might consider the question included on that.

220.

No queries have arisen on clauses 8, 9 or 10.

221.

Clause 11 -

222.

The Chairman: Perhaps we should stall there and bring in the witnesses from the Office of Law Reform to take us through the early stages, because we have probably covered as much ground as we can today.

223.

I welcome Ms Judena Goldring and Mr Neil Lambe, and I invite them to make general comments on the thrust of the Bill before helping us to go through it in a clause-by-clause examination.

224.

Ms Goldring: I will remind the Committee of the genesis of the Bill. The Property (Northern Ireland) Order 1997 was on the statute book, and, as a result of representations made to the Office of Law Reform by the Law Society, which had concerns about the redemption procedure and complications involved in it, we reassessed the redemption process and various other aspects of the Property Order.

225.

This is a Bill that has been revised as a result of close consultation with the Law Society and, I may add, with the RICS. I am aware that there has been some indication from the RICS that there was a lack of consultation on this Bill. As far as the Office of Law Reform is concerned, I can categorically tell the Committee that we made every effort to seek out the views of the RICS, and we sent it comprehensive papers. We specifically asked it to comment on the multiplier - I will come to that later when dealing with that particular clause. We also sent it a draft of the Bill. Three months later we received a reply to say that it had no comment to make on it. I want to satisfy the Committee that, as far as we are concerned, efforts were made to give it a full and comprehensive opportunity to look at the legislation.

226.

I am quite happy to move on, using the chronology set out in the paper. The first general concern was about the human rights implications of the Bill. We have carried out an audit of this Bill as part of a general audit of the work carried out in the office. The particular convention rights referred to here are found in Article 1 of the European Convention on Human Rights, which provides for the free enjoyment of property rights. Having looked at this, and having looked at the jurisprudence, we are satisfied, from our human rights expertise within the office, that the interference here in property rights is justified in terms of the public policy which lies behind it. We are also satisfied that the compensation levels being offered are sufficient to comply with human rights standards. The actual requirement of the jurisprudence is not that exact market value is offered to compensate for these rights, but that a reasonable level of compensation is offered, and we are satisfied that the legislation does that. That is our understanding on the human rights issue.

227.

The Chairman: Are Committee members happy with that?

228.

Mr Gibson: Can you confirm that paragraphs 22 and 23 have been the subject of a human rights audit and that the words "reasonable compensation" are the standard normal at which this compensation is judged?

229.

Ms Goldring: Yes, we are content.

230.

Mr Gibson: So paragraphs 22 and 23 should run?

231.

Mr Leslie: But that depends upon a definition of "reasonable compensation".

232.

Ms Goldring: It does. The jurisprudence will change, and there is no exact formula. It is certainly not market value that is expected under the jurisprudence. It is an adequate level of compensation that is expected.

233.

Mr Gibson: Whose duty is it? Is it the right of the landlord, or whoever receives the compensation, to challenge it and say that it is not reasonable, or is it up to the purchaser to determine that it is reasonable?

234.

Ms Goldring: If the landlord feels that it is not an adequate compensation level, it is open to him to challenge it.

235.

The Chairman: OK. Is everybody happy that we have dealt with that and that we move on?

236.

Mr Leslie: I am not necessarily happy, but we will come back to the point later.

237.

The Chairman: If everyone is content with clause 1, we shall move to clause 2.

238.

Ms Goldring: No issue has been raised on clause 2. Would you like a detailed explanation?

239.

The Chairman: Yes, please.

240.

Ms Goldring: Clause 2 applies when a dwelling house, held subject to a ground rent, is to be conveyed or transferred. Before the Registrar of Titles can accept the conveyance or transfer he must be satisfied that the ground rent in the dwelling house has been redeemed by the purchase of the property. The purchaser of the property must redeem the ground rent in accordance with clause 4 of the Bill.

241.

Clause 2 makes separate provision for the compulsory redemption of a ground rent on unregistered land under subsection 1, and on registered land under subsection 2. The clause is likely to be brought into operation at a date later than the redemption of ground rents under clause 1.

242.

The compulsory redemption of ground rents will be phased in with the extension of compulsory first registration of title to all of Northern Ireland. Subsections 4 and 5 will ensure that the introduction of compulsory redemption of ground rents will not apply to conveyances or transfers made in pursuance of pre-existing obligations to convey or transfer the dwelling house. Would you like me to continue on through the subsections?

243.

The Chairman: Yes.

244.

Ms Goldring: Subsection 1 applies to the compulsory redemption of ground rents on unregistered property subject to a ground rent in a compulsory registering area, designated as such under the Land Registration Act (Northern Ireland) 1971.

245.

Mr Leslie: In what circumstances would clause 2 subsection 1(b) apply? Would it apply to most houses?

246.

Mr Lambe: No. It would not apply to most houses at present. Areas in north Down are already designed as areas of compulsory first registration. However, it is intended that the whole of Northern Ireland will be designated as an area of compulsory first registration within the next two years.

247.

Mr Leslie: So, the clause only covers a dwelling house in a leasehold estate within a compulsory registration area. The dwelling house has got to satisfy both criteria. Is that right?

248.

Mr Lambe: Yes. That is because the introduction of compulsory redemption of a ground rent is going to be tied to the extension of compulsory first registration throughout Northern Ireland.

249.

Mr Leslie: By the time it comes into effect, is it likely that the subsection will refer to all houses?

250.

Mr Lambe: It will, over a period of time.

251.

Ms Goldring: As a dwelling becomes compulsorily registered, there will be a need to redeem the ground rent.

252.

Mr Close: How will this be introduced? At the moment, we hear that north Down is an area of compulsory first registration. What are the timescales envisaged for the whole of Northern Ireland?

253.

Mr Lambe: Essentially, the Land Registry is developing the appropriate computer systems whereby it will be able to process applications for first registration and those for existing unregistered domestic dwelling houses.

254.

Ms Goldring: Perhaps our colleagues in Land Registry can answer detailed questions on how the system is going to work in practice.

255.

Mr Leslie: What sort of timescale do we envisage here?

256.

Mr Lambe: We imagine that the compulsory redemption in relation to existing unregistered property would be brought in within the next two years. Perhaps in five years' time it will be extended to all registered properties. The basic aim is to get as many of the existing unregistered properties registered under compulsory first registration, though the person purchasing a house will be making parallel applications, redeeming the ground rent and having the title registered for the first time with the Land Registry.

257.

Mr Weir: By way of clarification - although I do not know whether it is relevant - would compulsory registration follow a conveyance of any nature?

258.

Mr Lambe: Yes. If the area is designated as an area of compulsory first registration, one must register the title.

259.

Mr Weir: Why does north Down seem to be the only area where that is happening at present?

260.

Mr Lambe: I do not have an explanation for that.

261.

Mr Gibson: That is where all the lawyers live.

262.

Mr Bell: I am not sure of the answer to Mr Close's question about the timescale. Perhaps it could be repeated.

263.

Ms Goldring: Within the next two years there will be a major phase of compulsory registration, and this will extend over the next five years.

264.

Mr Gibson: What is the point of compulsory registration? The only thing that proves you own a property is the title deed. There is no compulsion anywhere in Irish law, North or South, to register that with anyone unless it is to be used for some other purpose. Why set up a whole compendium of legislation to deal with something which, without it, is very simply dealt with?

265.

Ms Goldring: The simple answer, and again I am answering for Land Registry colleagues, is that it is part of a modernisation of the conveyancing and land- holding system.

266.

Mr Gibson: It is not a modernisation of it. Conveyancing is simply done by putting on sale a property which has a deed. When the sale is completed, you dispose of the deed to somebody else - that is conveyancing. Land Registry has nothing whatsoever to do with that; it is not helping or assisting it.

267.

The Chairman: Perhaps we will speak to Land Registry on that point.

268.

Mr Leslie: I would like to clarify some points about structure. Under the voluntary procedure in section 1 there are essentially two parties - the ground rent owner and ground rent payer. There may be more than one payer and there may be a hierarchy of owners, but essentially there are two parties.

269.

In the compulsory scheme there are the three parties - the person selling the property, the person buying the property and the ground rent owner. The ground rent owner is, in a sense, a detached party since he has no say in what is going on, other than to be alert to any fraud being perpetrated by the contract between the other two to redeem the ground rent. Is my analysis of those three parties correct?

270.

Mr Lambe: I would not say that the existing ground rent payer becomes party to this redemption process.

271.

Mr Leslie: No, but it definitely has an effect on him. Perhaps that is the correct way of putting it.

272.

Mr Lambe: No, there is no effect on the rent payer; the existing rent payer is someone who is selling the property. The person buying the property will, during the process, require evidence of the identity of the ground rent owner before making application to Land Registry and lodging the redemption money, which would then become payable to the rent owner.

273.

The existing occupier of a house is not involved in the redemption process at all; he simply provides details to the purchaser's solicitor of the identity of the ground rent owner, the cost per annum and when the last amount was paid.

274.

Mr Leslie: What I am trying to get at is the question of costs. The person who is selling the property and the person who is buying the property both have costs in the transaction. The ground rent owner had nothing to do with the instigation of the sale of property, but he will wish to receive adequate compensation for the value of his ground rent. He should have no costs, but I am not clear that this is the case, particularly if he has to take any action in order to attain his compensation.

275.

Mr Lambe: The fine details of cost have not yet been worked out, but the person redeeming the ground rent will be required to lodge a sum of money with Land Registry. This money is intended to help defray the expenses of the rent owner who is claiming the redemption money, but the actual amount has not been set.

276.

Mr Leslie: That is not dealt with under clause 2 but it is an important issue that must be clarified. The ground rent payer who neither desired nor instigated the transaction - although he might desire it in the end - should not have to pay for any aspect of it. As we work through the Bill I will keep that point in mind.

277.

The Chairman: The only issue that I did raise in the introduction was that it only covers dwellings. However, ground rents on other property or land - and I cited the bed of Lough Neagh as an example - have to be paid to an estate. Can the Bill be amended in any way to include that type of ground rent.

278.

Ms Goldring: No, separate policy considerations would be involved in commercial or agricultural property. This Bill is specifically aimed at domestic dwellings. Commercial and other ground rents would be the subject of a separate exercise.

279.

The Chairman: The title of the Bill is misleading. It mentions ground rent but on reading the introduction one learns that it deals only with domestic dwellings. However, there will be people writing to us with queries regarding ground rents for land, et cetera.

280.

Mr Weir: The RICS suggested that there are some places in Northern Ireland such as Ballynahinch where there are "odd conveyances" - instances where land had been granted for a shop or a dwelling place, but to which was attached another form of land as part of the condition of sale. The institution feared that a situation would arise where there was a conveyance on something which tied up two pieces of land and the redemption could apply to one bit but not the other.

281.

Mr Hussey: Yes, the RICS cited an example of a butcher who had a field to keep cattle on.

282.

The Chairman: They are called town park rents.

283.

Mr Gibson: In other words, land for common rights and turbary in rural areas.

284.

Ms Goldring: Separate rights apply to turbary.

285.

Mr Gibson: There is ground rent on the property that is occupied as a normal dwelling but attached to that dwelling are sections of land, and some of which is divorced from the main property. On the title deed would also apply the words "ground rent".

286.

Ms Goldring: It does not fall within the definition contained in the legislation and it may be that part of the land will remain under commercial ground rent if it was originally one piece. Then part of it will be in domestic use and part of it in commercial use, and the rent on the domestic area will be redeemed and the rent on the commercial will not. We are going to be left with instances of that nature.

287.

Mr Weir: If the overall package were part- commercial and part-domestic, would it be proportioned so that a portion of the ground rent would be redeemed?

288.

Mr Lambe: I do not have an absolutely clear answer for you on that.

289.

Ms Goldring: We will be referring to the definition under which the land is used for business purposes. That would be applied to any assessment.

290.

The Chairman: Do you consider, given the issues that have been raised in the title of the Bill, that it does refer to dwellings, and not just ground rents?

291.

Ms Goldring: We can discuss the title with legislative counsel, if you feel that it is misleading.

292.

The Chairman: The Committee thinks that it should cover all. We could either change the Bill's title or extend the agreement, which would be a better way to cover land attached to dwellings, a matter which we discussed, or ground rents in general.

293.

Mr Gibson: In rural areas, it is common practice for the interested parties to negotiate buying out ground rent at the time of a sale or disposal. Often the property has been sectioned, and there might be two or three vendors, all enjoying a ground rent. Somebody has to negotiate the ground rent redemption attaching to the various sections of property, some of which can be very remote - on a mountain, say, because turbary rights are involved. Everything is governed by the ground rent, even though what started out as a single dwelling might have been frequently extended. The Bill must, for example, define what farmland is. Is it commercial or is it a private dwelling?

294.

Ground rent seems to have two or three different meanings. Does it apply to the dwelling or to everything in the deed?

295.

Ms Goldring: Property and land used for commercial purposes are outside the remit of this legislation and cannot be brought in at this stage, because that would be ultra vires. We can take up the question of land that is not commercial, but which is not a dwelling, with legislative counsel and explore it further.

296.

Mr Hussey: Usually, when somebody has a dwelling, the ground rent is established. It is often a nominal ground rent. Perhaps the front room has been turned into a hairdressing salon, but, although there has been a change of use, it is still part of the premises. Similarly, someone could decide to use a back room as an office. Does this change of part of the dwelling for commercial use - even though the initial ground rent was on a dwelling - mean that the dwelling is ineligible under this Bill?

297.

Ms Goldring: Clause 1 subjection 2(a) refers to land used wholly for business purposes. What you describe may call for apportionment. If the commercial use is incidental to the rest of the use of the land - and apportionment is an issue which comes up in rating and valuation - it will fall within the legislation.

298.

It is really the interpretation of whether the land is used wholly for business purposes.

299.

Mr Widdis: It is up to the Committee to decide whether it wants to extend the powers contained in the legislation.

300.

Mr Gibson: The question being raised here is that ground rent, as this envisages it, was to deal with urban residential property. In cases where somebody developed a piece of land, the original landowner imposed ground rent for a number of years as a form of continuing income. This legislation, I think, was intended to encapsulate that, but we are pointing out that there is a raft of other areas which are not included in this. It may be unwise of the Committee to consider extending it until it has received full legal guidance. I can see that we could be walking into a quagmire of various legal rents, ground rents, head rents and all sorts of things that have been imposed over centuries.

301.

If we stick to the simple stuff, it will cover a multitude of the population.

302.

Mr Weir: Will you look at the issue of incidental land? Presumably existing legislation already covers commercial premises and business tenancies. Surely introducing more legislation would complicate matters. Perhaps it would also be better to leave the title as it is?

303.

Ms Goldring: We would be going back to the drawing board if commercial businesses' interests were included. When the Land Law Working Group first began its deliberations there was a suggestion that commercial interests might be considered. However, there is a separate body of legislation relating to commercial interest; there are separate policies involved in dealing with it, and it simply just does not sit with this type of property legislation.

304.

The Chairman: Are there any proposals in the future to come up with another Bill which would cover commercial or agricultural ground in that way? Is it envisaged at all?

305.

Mr Lambe: This Bill should be seen as simply the first stage in a rolling programme of property law reform in Northern Ireland, ultimately implementing the recommendations of the Land Law Working Group.

306.

Ms Goldring: As far as commercial property is concerned, Mr Weir quite rightly points out that it maybe necessary for the Government to revisit the business tenancies legislation, which was subject to a review some six or seven years ago.

307.

Mr B Bell: It would be unwise to extend this Bill at this stage, but it is certainly necessary to have its title amended. It is misleading. It should have a title that indicates that it is for domestic property only.

308.

Ms Goldring: I would like to discuss this with legislative counsel. The Bill's title obviously has to be wide enough to cover everything in it.

309.

Mr B Bell: I understand that, but I am saying that we ought to be recommending that it be dealt with in the manner that you are suggesting.

310.

The Chairman: So, we should look at this again.

311.

Mr Widdis: I have two comments on that. It probably would require an extensive look at its legality, and that would take a long time. The other point relates to town park rents . I tend to think that that is less of a problem than perhaps it is perceived to be.

312.

As I read the definition of "ground rents" and the definition of "land" later on in the Bill, it relates to properties which are used wholly for business purposes, and property which is composed of one lot in a town such as a shop possibly with an apartment and one lot possibly some acres outside town -

313.

Mr B Bell: Are you saying that in order to change the title of this, it would have to be re-written?

314.

Mr Widdis: No, I am suggesting that to extend the scope of the Bill -

315.

Mr B Bell: Extending - yes, that is fine, but -

316.

Mr Widdis: It probably would require a good deal of time and thought in terms of -

317.

Mr B Bell: Yes, I agree with that.

318.

Mr Widdis: It is not a thing that could be done by inserting a few extra clauses. Amending the title -

319.

Ms Goldring: But it is not just about re-drafting - you are talking about a complete new consultation exercise and consulting the public again. You could not just re-draft this and include commercial properties. It would be a complete new exercise.

320.

Mr Close: Getting back to the function of this Committee and what we want to do or see done under a devolved regime, there is a policy decision here - a "cost policy" for want of another word - and this is something that I, as a layman need advice on.

321.

Is it desirable that all ground rents in Northern Ireland be visited in this respect? If the answer is "yes", then that is the road that we should be going down. And the next question is this: is it better to do it in stages, or is it better to do it under this new "policy", if the devolved legislator looks at and decides that that is a better way to go?

322.

We should not be hampered or allow ourselves to be hamstrung by an idea that was thought up before devolution and before we had the legislative powers. If we are starting afresh, should we not be looking at Northern Ireland as a whole?

323.

Mr Leslie: We are here today to do the Committee stage of a Bill that has had a Second Reading, and that is what the Assembly required us to do. If we want to have a discussion about apportioning ground rent, that is a matter for another meeting, but we are here today to take the Committee stage of this Bill that has had its Second Reading in the Assembly. We cannot start on another Bill.

324.

Mr Gibson: Mr Close has stated the burning issue. It raises the question: what is the purpose of this Committee if at the Second Reading of this Bill we discover that this Bill is not adequate to deal with the business of ground rents on properties? If that is so then, as Mr Close has pointed out, we need to make a policy decision, and we should have the ability and the right to do so.

325.

I have came to the conclusion that a massive policy decision is needed here. Somebody talked about a rolling programme to deal with it, but we are dealing now with one section. Either we accept that or we go back to the scriptwriters and say that we recommend that they go back and do the whole job over again.

326.

Mr B Bell: We do not necessarily have to do that because, as Mr Leslie has said, this has already had its First Reading. Surely we are still within our rights to change the name of it. What difference will the changing of the name make? I am only asking for the name to be changed, not that we start this whole rolling process again.

327.

The Committee ought to change this title so that it is more representative.

328.

The Chairman: I refer to two things. First, the name change makes the Bill recognisable where it deals only with residential or domestic properties. If the title covers what the Bill covers, that is fair enough.

329.

Mr B Bell: The other point is another day's work.

330.

The Chairman: That is another day's work in one sense, however. If it is necessary to wipe out grounds rents entirely, why not do it in one operation? Why do it in stages? At a later stage, the Bill may be criticised as incompetent in that it fails to cover what it should. Otherwise, this will be discussed at a later stage.

331.

Mr B Bell: But it already has been sent back to us.

332.

The Chairman: Yes, it has. There is no reason in sending it to us if we cannot make changes or recommendations. That is the purpose of it. If we are simply here to rubber stamp it, we could do that this evening.

333.

Mr B Bell: Mr Chairman, we are not going to rubber stamp it, but we cannot scrap it completely.

334.

The Chairman: But we could add to it.

335.

Mr Weir: Perhaps there is a difference between theory and practice. In theory, if we feel this Bill is so flawed that it should be scrapped, we should not shy away from recommending that. Furthermore, if it is considered best that this be dealt with as one Bill, in theory we should not shy away from that either. In practice, it makes legislative sense to have something dealing effectively with the dwelling side of things as one entity. Then, whatever else happens at a later stage, it would be more effective to make some changes to the Bill, and perhaps even to the title of it, rather than to its entirety. On a practical, legal basis it does not make sense to alter a great deal of the scope of it. At some stage, we may consider that when we come across a Bill where we feel the scope is not wide enough, we should not deny ourselves the ability to say that in the Committee. That is an important role.

336.

Mr B Bell: I know that we should not deny ourselves any role. There are other people denying us. [Laughter] I do not think it makes sense to say "Right, the whole thing must be scrapped."

337.

The Chairman: No one is saying that.

338.

Mr B Bell: Some people are, Mr Chairman.

339.

The Clerk: Mr Chairman, I think that Mr Leslie has explained this very accurately. The Assembly guidance indicates that when considering the clauses of a Bill, amendments cannot be made that are irrelevant to the subject matter or beyond the scope of the Bill. The scope of this Bill is clearly residential properties. It would be inappropriate to suggest amendments that would alter its overall nature.

340.

Mr Weir: It depends upon what is considered the scope of the Bill. The Bill in question is called the 'Ground Rents Bill'. It is argued this is not an entirely accurate description. Even from the long title - 'A Bill to make provision for the redemption of certain ground rents and other periodic payments.' - the question is what we see as the overall scope. To some extent, this is more dancing around the theory of our role rather than addressing the more important practicalities. We should focus on the idea of ground rents as they affect dwelling houses and other ancillary situations. It strikes me that that would be considered practical.

341.

Mr Hussey: I think the discussion is at the point where I left it.

342.

Mr B Bell: Mr Chairman, we were not even going to discuss that clause at all.

343.

The Chairman: That is right.

344.

Mr Hussey: Is it the suggestion, and I am looking at it in layman's terms, that the Committee go ahead with this as a sort of foundation? Perhaps other relevant matters that have been referred to may well return as future amendments to this Bill.

345.

The Chairman: We should be sending out a very clear message that the Ground Rents Bill does not cover all the issues. We should deal with this Bill as relating to domestic or residential dwellings and expect that there will be another Bill at some other time. That would be a satisfactory line to take.

346.

Mr B Bell: There should be another Bill?

347.

The Chairman: Yes. Can everybody make sure that their mobiles are off, because they will interfere with the system? Ms Goldring will go back to the point we were discussing. I think we finished off with the section about the dwelling house and compulsory registration. That is as far as we got when Mr Leslie threw it off track.

348.

Mr Weir: That is all you fault.

349.

The Chairman: We will take it from the next subsection.

350.

The Clerk: Mr Chairman, we are probably starting with clause 2., subsection (2).

351.

Ms Goldring: We are starting with subsection (3) where the Registrar shall refuse to accept the conveyance or transfer of the dwelling house unless the ground rent on the property has been redeemed by the purchaser of the dwelling house.

352.

Subsections (4) and (5) provide that the provisions of compulsory redemption of ground rents do not apply to the sale of dwelling houses that are made as a result of a pre-existing obligation.

353.

Subsection (6) provides that a recital in a conveyance, or transfer of a dwelling house, stating the date on which the obligation to convey or transfer the land was assumed is conclusive evidence of that fact.

354.

Subsection (7) makes express provision for the conveyance or transfer of an undervalued share of the dwelling house held as a tenancy in common. This would be regarded as a conveyance of the dwelling house. This is likely to be rare, but an undervalued share is capable of being conveyed, and this deals with that possibility. The purchaser of any such share will be required to redeem the ground rent on the dwelling house.

355.

Finally, subsection (8) is an interpretation provision for clause 2. That defines conveyance as a conveyance of unregistered land, for money or moneys worth, and includes an assignment of a lease, but does not include a grant or surrender of a lease and does not include a grant of a mortgage. Provision is also made to apply this definition to the transfer of registered land.

356.

The Chairman: Are there any questions regarding these subsections?

357.

Mr Weir: On a wider level, we mentioned that we found the title confusing. Will there be a technical problem with any change to title? A Bill, having already had two readings, would - by changing the title - officially become a different piece of legislation. If we wanted to change the title to 'Domestic Ground Rents Bill', would there be a technical problem with that?

358.

Ms Goldring: This is something I would like to bring back to the legislative counsel.

359.

Mr Weir: If a change in title would nullify the entire legislation, it strikes me that we may be better keeping the title, even if it is slightly innacurate.

360.

The Clerk: Ms Goldring could take advice on that.

361.

Ms Goldring: I have not come across a change in title before, but I will take advice.

362.

Mr Weir: The other thing is whether it is appropriate, on the basis of the long title, rather than the short title. Both those points can be made.

363.

Mr Gibson: Let us keep the title 'Ground Rents Bill', and, as there may be further legislation pending it may be possible to have the phrase "(domestic dwellings)" underneath the title. That may get round the legal requirements without changing the title.

364.

Mr Weir: It may be a legislative thing. If the title changes at all, it technically makes it a different piece of legislation.

365.

The Chairman: I think on that, Ms Goldring, it goes back.

366.

The Clerk: One of the things that happens in the Chamber, as you may recall from the earlier piece of legislation - and I think it is the final act of the main plenary session in passing a Bill - is approval of the long and short titles. The Assembly goes through a Bill clause by clause and at the very end agrees the long and short titles. There is obviously an opportunity to agree those titles. What we need is advice on whether or not -

367.

Mr Weir: We will end up with egg on our faces if we change the thing and suddenly find out that the whole Bill falls.

368.

The Clerk: There are unforeseen implications.

369.

Mr Weir: This is desirable but not exactly necessary.

370.

The Chairman: Maybe Mr Widdis could do some work on that for us. So, are we agreed on clause two and all the sections?

371.

Mr Leslie: I have a couple of questions about clauses four and five. If we have agreed a sale before this comes into operation, this clause does not apply. I am just going through in my mind what happens if both parties prefer that it did apply. I suppose they could use section one as a voluntary redemption. I wonder if there is untidiness there. Would it not be sensible to be able to opt for the provisions of this section to apply?

372.

Mr Lambe: There is nothing in this legislation to prevent two individuals entering into a private contract to redeem the ground rent.

373.

Mr Leslie: I know there is not, but this is supposed to make it easier for them. I am not sure if my logic is right. This clause is perfectly sensible. It is making it clear when this starts, but I wonder whether there might be circumstances in which it would be in the interests of the parties to use clause 2, even though the date of the agreed sale predated this clause's coming into effect. In fact, they would just use clause 1 procedure. Would this be the simple solution?

374.

Ms Goldring: They could use the voluntary procedure and enter into an agreement.

375.

Mr Leslie: Enter into a private contract.

376.

Mr Gibson: You can already do this. If both parties agreed, you see, you would not need this Bill.

377.

Mr Leslie: Now I have another question. Subsection (7) refers to undivided shares. What about a company that enters into residential property? People sometimes do this for tax reasons, where rather than owning it in their own name, they use a company name. The only asset of that company is that property. Rather than conveying the house, you sell the company. Is subsection (7) designed to trigger these provisions in the event of that transaction? I was wondering what the purpose of subsection (7) is. Secondly, I am wondering whether if has effect in the circumstances that I outlined.

378.

Mr Lambe: It is there to cater for the possibility that someone would sell an undivided share of a piece of property and that someone would be willing to purchase it, which is unlikely because you would not own that property. You would rarely find a purchaser because that person would not have sole occupation or possession of the property. That would have to be shared with another person.

379.

Mr Leslie: I will ask a different question. This is a thought triggered by looking at that subsection. Take the situation where a property is owned by a company. One of the reasons for this is to avoid stamp duty. It is going to evade the provisions of this Bill.

380.

Ms Goldring: In such a situation, where a property is used as a domestic dwelling and not as an investment?

381.

Mr Leslie: Well, it does not really make a difference. It is the fact of its being owned by a company rather than a person. Say I have a company that I own every share in. I own 100% of this company. It has one asset - it owns no. 1 Stormont Gardens. I sell no. 1 Stormont Gardens to Mr Weir and Mr Weir and I agree that he is going to acquire no.1 Stormont Gardens from me. The actual process is not that we convey no. 1 Stormont Gardens, if I sell him this company.

382.

Mr Gibson: What you are selling is the ground rent.

383.

Mr Leslie: What I am saying is that if we choose to do that, that is a perfectly legitimate transaction between us. Would that transaction trigger a compulsory redemption under the terms of this Bill?

384.

Mr Lambe: No. It is not a transfer of a particular building,

385.

Mr Leslie: No, it is not.

386.

Mr Lambe: It is a contractual arrangement.

387.

Mr Gibson: What you are transferring is an asset.

388.

Mr Widdis: In relation to a point Mr. Leslie made earlier that under clause 2, subsection (7), a dwelling house owned by a company is not, in fact, held in undivided shares. It is wholly owned by the company. The company itself is a legal entity. It may have 50 employees, it may have 100 legs and 100 hands, but it is one legal entity and, therefore, it owns the house in undivided shares. The subsection is not designed to cope with the situation Mr Leslie raised, in which the house is or may be held in divided shares. Subsection (7) does not apply in that situation.

389.

Regarding your second point about whether a transaction by way of selling a company which owns a residential dwelling is covered by the Bill, I would need to do further work on that.

390.

Mr Leslie: I suspect that it is not and, in a sense, I do not really mind, but I do not think that is relevant now.

391.

Ms Goldring: We agree that it is not covered by the proposed legislation.

392.

The Chairman: Are you happy with that, Mr Leslie? Can we sign off this clause?

393.

Mr Leslie: Yes.

394.

Mr Hussey: At what time do we intend ending this meeting?

395.

The Chairman: This is as far as we can go now, because the next section is likely to be long, and it is unlikely that we would complete it today. I suggest we finish discussing this part of the Bill and deal with the remaining Committee business before we leave. Is everyone content with how we have covered clause 2?

396.

Mr B Bell: Are we recommending that the title be changed?

397.

Mr Weir: Yes, subject to other issues. There may be complications, but that is something which will be investigated.

398.

The Chairman: Thank you for coming along. We can go through another two sections next week. The next section will be more difficult to deal with.

MINUTES OF EVIDENCE

Tuesday 19 September 2000

Members present:
Mr Molloy (Chairman)
Mr Leslie (Deputy Chairman)
Mr B Bell
Mr S Close
Mr O Gibson
Mr D Hussey
Mr G Kane
Mr A Maskey
Mr P Weir

Witnesses:
Ms J Goldring ) Office of Law Reform
Mr N Lambe ) Office of Law Reform
Mr A Moir ) Land Registers of Northern Ireland
Mr J Gibson ) Land Registers of Northern Ireland

Adviser to Committee:
Mr H Widdis ) Research and Library Services, NI Assembly

399.

The Chairman: As we have just heard from the Clerk, the two outstanding matters that the Committee needs to consider are the long and short title of the Bill and what the considered views of the Office of Law Reform are. It may help to speed up the process if Ms Goldring or one of her colleagues were to give us an explanation of the effect of each of the clause subsections.

400.

Ms Goldring: I have had a discussion with George Gray, First Legislative Counsel on the question of the title, and he is looking at a form of words I relayed to him the concerns of the Committee that we should try to ensure that the title expresses the fact that the legislation is confined to domestic purposes. On the subject of whether we use the term "domestic", he is going to have a look at that and see the knock-on effects. He did express the view that the short title should be as short as possible, but he is taking on board the Committee's views. I will come back to you later if we have a definitive form of words.

401.

The Chairman: So you may have a response before next week's meeting?

402.

We dealt with clauses 1 and 2 last week, so we will move on to clause 3.

403.

Ms Goldring: For members' information, I intend to go through the explanatory memorandum, which is a shortened version of the Notes on Clauses of the Bill. You already have the detailed Notes on the Clauses. Clause 3 refers to exceptions to our restrictions on clause 1 and 2. Subsections 1 to 6 exclude particular types of estate and land from both the voluntary and compulsory redemption schemes. It also makes special provision in relation to leases of agricultural land and in cases where the rent owner, or superior rent owner, is the National Trust. Subsections 7 and 8 provide for the exclusions of flats from both the voluntary and compulsory redemption procedures, because in flat developments there are complex considerations relating to the ownership of common parts, such as sterilised utility rooms and gardens.

404.

The Chairman: There were some queries on that issue . Perhaps Mr Widdis would like to comment.

405.

Mr Widdis: There are no real queries until subsections 7 and 8. The concern relates to the definition of a flat. This issue was raised by the Law Society of Northern Ireland, which expressed some concern that flats are treated differently depending on whether they have common parts. The Law Society has since provided a specimen definition which may be looked at, but the Committee might like to consider in the first instance, whether or not they wish to make a distinction between two separate types of flats and secondly, how they intend to ask the Office of Law Reform to go about this.

406.

The Chairman: Do members have any questions on that part?

407.

Mr Leslie: Do you mean subsections 7 and 8?

408.

The Chairman: I mean on any part of the clause, but particularly subsection 7.

409.

Mr Leslie: I am concerned about what the status of a maisonette is meant to be. I think a maisonette is a flat, and, therefore, it is intended to be included under subsection 7. The way the Bill is drafted might make it possible for a maisonette to be excluded from subsection 7.

410.

Mr Lambe: My understanding is that maisonettes do have common parts such as stairways. That is its definition.

411.

Mr Leslie: I lived in a maisonette, but it did not have any common parts, it had a separate entrance. According to the estate agent that is what made it a maisonette. That is a live example. We want to include maisonettes, and, therefore, we must be certain that we do.

412.

Mr Lambe: Do you mean within the definition of a flat?

413.

Mr Leslie: Yes.

414.

Mr Lambe: That relates to the Law Society's point about self-contained units with their own entrances and which do not share any common parts with other occupants of the property. If we take on board the amendment that the Law Society is suggesting, then I think that will include maisonettes.

415.

Ms Goldring: It may. I do not think that we can commit to this particular form of words. All we have seen is what the Law Society is proposing. I would like to go back to Legislative Counsel and discuss this form of words with him. We are aware of the problem raised by the Law Society, and we are trying to find a solution.

416.

Mr Weir: You said that you would go back to Legislative Counsel about the form of words. If you and Legislative Counsel felt that the form of words suggested by the Law Society were adequate to cover the matter, there would be no problem, but presumably, if Legislative Counsel and yourself thought that there were a better form of words, you would consult with the Law Society. It strikes me that there is not much point in your coming back, having spoken to Legislative Counsel and saying "We feel that this is the form of words that would satisfy us." -only for the Law Society to return to us and say "No, we are not happy with this new draft either". We want to ensure that, whatever the form of words, the issue is covered and the problem is solved to the satisfaction of as many people as possible.

417.

Ms Goldring: We will certainly take the matter up with the Law Society again. I am confident that once this issue has been discussed with Legislative Counsel, he will come up with a form of words, but we will also check that the Law Society is content.

418.

Mr Close: You are seeking a definition to enable flats to be excluded. If they were to be included, would the same difficulties pertain?

419.

Ms Goldring: The policy is to exclude.

420.

Mr Close: I accept that.

421.

Ms Goldring: I am sorry, but I am not sure what you are trying to say.

422.

Mr Close: Your are saying that the policy is to exclude, but why do we have this change? What are the difficulties with inclusion, and why is the policy to exclude?

423.

Ms Goldring The policy is to exclude because flats have a different legislative framework, which relates to commonholds. There are complex arrangements with flats and commonholds that do not apply to houses, and so, for that reason, they are excluded from the ground rent framework. Flats will be dealt with in the legislation relating to commonholds.

424.

Mr O Gibson: This means that there needs to be separate ground rent regulations to cover flats and commonholds.

425.

Mr Lambe: The legislation would not relate specifically to ground rent; it would be included in legislation relating to the occupiers of different flats within a single block. Normally a management company is set up to manage the common parts of the flats. Draft legislation on commonhold has recently been produced by the Lord Chancellor's Department, and we will be looking at it.

426.

The Chairman: It is those difficulties that we would like to cover. If the definition of flats or units of accommodation, is to be amended what would you suggest?

427.

Ms Goldring: This is something that we would need to follow up with Legislative Counsel. We would have to check that any necessary ancillary technical amendment was also made, but that would depend on the form of words that has been decided upon.

428.

The Chairman: Are there any further questions on that subject?

429.

Mr Leslie: In clause 3, subsection (1), paragraph (a), it says, on the second line

"notice of a proposal to acquire the fee simple, or to obtain an extension".

430.

I am not clear what it is an extention of. Is it an extension of the lease, the fee simple, or an extension under section 2 of the Leasehold (Enlargement and Extension) Act (Northern Ireland) 1971?

431.

Mr Lambe: It is an extension of the lease.

432.

Mr Leslie: The draft is unclear. I would be inclined to change it to read "ought to obtain an extension of the lease". It is a moot point, but it is not as clear as it might be.

433.

Ms Goldring: We will take that up with Legislative Counsel.

434.

Mr Widdis: Because that subsection refers back to the Leasehold (Enlargement and Extension) Act (Northern Ireland) 1971, it refers back to procedures that operated according to that Act. I have not checked it in detail, but I imagine that there are a limited number of procedures in that Act with which one can extend one's leasehold and with which one can acquire the fee simple. I also understand that that Act applies in comparatively few cases, and so, because that subsection refers back to it, it refers to a notice of a proposal to acquire the fee simple or a notice of a proposal to obtain an extension. Because it refers to a notice of a proposal, it must refer to a procedure in that Act. So, in practice, there is unlikely to be any confusion.

435.

The Chairman: It does refer back. Is everybody agreed on section 1, 2, 3, 4, 5 and 6? Section 7 and 8 will be dealt with next week.

436.

Let us move on the Clause 4.

437.

Ms Goldring: Clause 4 deals with the procedures for redeeming the ground rent on residential property in Northern Ireland. It is a procedure which applies equally to the voluntary and compulsory redemption processes. Redemption procedure will commence with an application to the Land Registry, accompanied by various payments and other documents. Immediately after the rent payer has made his application to the Land Registry, he shall serve notice on the rent owner, if known, that he has done so.

438.

Mr Widdis: There are some concerns that have been raised here by the Royal Institution of Chartered Surveyors (RICS) in Northern Ireland. In particular, in subsection (2)(b), line 4, on page four, it indicates that in addition to paying the redemption money to the Land Registry, the receipt for the last payment of the ground rent should be lodged, and (c) states that such a sum of money, if any, necessary to discharge any apportionment of the ground rent for the period from the last day for payment of ground rent before the date of lodgement to the date of lodgement. In the view of the Royal Institution of Chartered Surveyors this appeared to be providing moneys that are paid into the Land Registry which will cover the period from the last payment of ground rent until the certificate is made. In cases where the ground rent was already in arrears - the RICS felt that a sum of money, equivalent to six years' rent should be lodged in the Land Registry - the maximum amount of arrears that could be claimed - and made available. This would cope with the possibility that a rent payer, who has deliberately been avoiding paying rent over a number of years, cannot escape by redeeming, particularly if the figure of six years could be included in the Bill.

439.

Ms Goldring: Subsection (2)(b) covers payment of arrears, and it goes on to say that to discharge any arrears of the ground rent owing, any arrears due are covered and recoverable by law at the date of lodgement. "Recoverable by law" under the Limitation (Northern Ireland) Order 1989, means arrears of six years. The arrears may or may not amount to six years. By law, the date of lodgement covers what an individual can sue for. To my mind that clause covers any arrears.

440.

The Chairman: Although six years is in it, could it be three years, four years, or whatever?

441.

Ms Goldring: Yes, and an individual is entitled to sue for an amount of up to six years. I do not see the point of putting that in when it states that it will be recoverable by law at the date of lodgement.

442.

Mr Hussey: Is it in law or in practice that one is able to claim for up to six years?

443.

Ms Goldring: It is in law, under the Limitation (Northern Ireland) Order 1989.

444.

Mr Leslie: I am not persuaded of the view of the RICS, and I think that these positions are adequate.

445.

Mr Widdis: Subsection (2)(e) is another matter which concerns the RICS . It asked what amount needed to be lodged with the Land Registry under subsection (2)(e) in order to cover the cost of applying for a certificate.

446.

The Chairman: Will the sum to be lodged to defray expenses incurred in obtaining a certificate cover only the Land Registry costs?

447.

Mr Moir: That is my current understanding. The costs involved in obtaining the purchase of rents through this scheme could be different for individuals. One individual might redeem the ground rent on his own; one might go through a firm of solicitors; and one might go through a firm of estate agents. Therefore, the costs that could be incurred can be quite different.

448.

The one element of costs that would be the same is the fee to Land Registry in respect of each transaction. It is our intention to allow this scheme to work to its full advantage and that the amount payable to the Land Registry should be modest. At this stage we are considering an application fee to the Land Registry of approximately £25.

449.

Mr Kane: How does the Office of Law Reform envisage the redemption's being recorded? Also, should the Bill make provision for the endorsement of deeds?

450.

Mr Moir: Once the certificate of redemption has been issued to the rent payer, depending on whether the title is at present registered or unregistered, he would register that certificate either in the Land Registry or in the Registry of Deeds, and the certificate of redemption would then form part of the title deeds to the property. The purchase of the ground rent would be recorded in two ways: it would be recorded in the index of redemption moneys, and it must be recorded by registration in either the Land Registry or the Registry of Deeds.

451.

Mr O Gibson: I have been guilty of saying all sorts of unkind things, about the Land Registry, and I want to clear up one point. Is the certificate one from the Land Registry, or does it come from the landlord declaring that it has been cleared free of rent? Exactly who will be issueing this? The deed carries the altered title. What is the mechanism? I am not a legal person, and I like to follow very simple lines.

452.

Mr Moir: Upon payment of the redemption money and the other amounts into the Land Registry, the Land Registry will seal a certificate of redemption. It will be sent to the person who has paid that money and will then become a part of that person's title deeds.

453.

Mr O Gibson: Only the Land Registry can issue that certificate of redemption?

454.

Mr Moir: That is right.

455.

The Chairman: We will go back over that clause. It would be helpful if members would indicate their agreement.

456.

Can we accept that subsections 1 to 6 are agreed? Agreed.

457.

Mr Leslie: Sorry, to go back to clause 4 (4)(a), I presume that this means that the rent payer just asserts that he does not know the name and address of the rent owner or his agent. If your arrears are eight years, you might be inclined to assert that you do not know the name and address of the rent owner or his agent. What process would the Land Registry have, or what evidence would they retain of this assertion?

458.

Mr Moir: The rules to be prepared for the administration of the ground rent scheme would require an affidavit in which the person applying would identify the rent owner or state that they do not know the identity of the rent owner. The rent owner would have a degree of protection in that if he or she is not identified, an amount equal to six years arrears would be lodged as part of the application. That would be held by the Department on behalf of that person until the claim for redemption money is actually made.

459.

Mr Leslie: The six years' arrears interest me. Is that what you think your practice would be?

460.

Mr Moir: Yes. We were aware that it would be quite easy for someone to say "I do not know to whom I pay my ground rent." We felt that if they were obliged to pay six years' arrears in a situation where they did not know the rent owner, it would, perhaps, stop their being inclined to do that.

461.

Mr Leslie: I do not have any objection to that, but how are you empowered to do it? It is not on the face of this Bill. Is it going to be in the Rules?

462.

Mr Moir: This would really be as a result of clause 4 (2)(b), which states that the amount to be paid into the Land Registry should be accompanied by either the last receipt for ground rent, or an amount equal to any arrears which are recoverable by law.

463.

The Chairman: If somebody has paid their rent in a shorter time, it is to their advantage to declare the owner. If not, then they have to pay six years.

464.

Mr Moir: That is right.

465.

Mr Leslie: I wonder whether it should state that it is the lesser of those two periods.

466.

Mr Weir: Presumably, a person's agent would be able to produce a receipt for the last six years, so it would be in their interests to minimise the period.

467.

The Chairman: Section 4 is agreed. We have agreed section 5. Is section 6 agreed? Yes. We are finished with clause 4.

468.

Let us move on the clause 5.

469.

Ms Goldring: Clause 5 deals with redemption money. It provides for the calculation of the redemption money payable by the rent payer to the Land Registry and for the keeping of a register of redemption moneys by the Land Registry. The redemption money is a sum produced by multiplying the annual ground rent by a fixed number of years, and other payments that are necessary before the redemption of the ground rent can take place are also specified.

470.

The Minister has proposed a multiplier of nine times the yearly rent.

471.

Mr O Gibson: Could this preclude the possibility of direct negotiation between a landlord and a tenant to buy out the ground rent? Is this a concern once the multiplier and the valuation are agreed, and all that the tenant wants is a clean deed?

472.

Mr Lambe: This legislation does not preclude that type of private negotiation. It is simply a matter of contract.

473.

Mr O Gibson: So that provision could remain as heretofore, but I would simply end up going out of my solicitor's office with the deed in my pocket, but not necessarily with the Land Registry Office Stamp at the top.

474.

Mr Widdis: There is only one concern about this, and that is the level at which the multiplier will be set. That point was raised by many who have come before you.

475.

The Chairman: There ought to be some mechanism to base it on. It should not just be plucked out of a hat.

476.

Mr Leslie: Are we going to put that in the Schedule rather than in this section?

477.

Mr Widdis: It would be logical to put it in the Schedule, but I put the concern in here to draw it to the Committee's attention and to outline that the real problem is how the multiplier is calculated.

478.

The Chairman: Some people that came before the Committee were saying that it was not going to be a sizeable amount of money. The question is how will the Minister decide on a multiplier, now or in the future, and what will he base it on?

479.

Mr Hussey: There was a suggestion of there being some direct connection with the base lending rate, for example. If that were the case, and it was a set formula, would it sit within the Bill rather than in the Schedule?

480.

Mr Widdis: No, for practical reasons, I think the rest of the mechanism for calculating the redemption money should be set into the Schedule.

481.

Mr Hussey: Even though it were a fixed formula, as opposed to a multiplier?

482.

Mr Widdis: The multiplier is, of itself, a formula. It is just not one that has been quoted. If what you want is a mechanism that would calculate a range within which the Minister might set the multiplier, then I suggest that the logical place for that is in the Schedule along with the system for the calculations.

483.

The Chairman: Are there any other questions or comments at this stage? Subsection (1) is agreed, as are subsections (2) and (3).

484.

Let us move on to clause 6.

485.

Ms Goldring: Clause 6 sets out the basis for dealing with claims in respect of redemption and other moneys lodged with the Registrar of Titles under clause 4 of the Bill. The Registrar shall pay out the redemption moneys only if satisfied that the person who has made claim to them is entitled to them. In the vast majority of cases, the person claiming the redemption moneys would be the immediate rent owner.

486.

However, in certain prescribed cases a superior rent owner may be entitled to claim them. The person to whom the redemption moneys are paid out would not always be entitled to everything. Where this is the case, the person to whom the money is paid shall agree to pay other rent owners their respective shares of the money lodged with the Land Registry as part of the redemption process.

487.

Provision is made in clause 23 for appeals to the Lands Tribunal against any decision of the Registrar in respect of entitlement to claim redemption money. This clause deals with straightforward cases where the money is owed to the superior rent owner, but also with cases where there is a pyramid of titles with a number of people being able to claim a proportion of the moneys.

488.

Mr Widdis: Two sets of concerns arose with this, the first being that clause 6 generally - and particularly subsection (6)(2) - creates a system of paying out redemption moneys only when they are claimed by a rent owner. The RICS gave a rough estimate of £100 million for the total value of redemption moneys. One might imagine that these moneys could be paid out automatically, rather than only when claimed by a rent owner. There are two sample questions for the Committee.

489.

Mr Leslie: I have a number of comments relating to that - these are issues for the Land Registry. I am concerned that the burden falls on the rent owner who does not instigate this process. It seems to me that his burden should be as near to zero as possible, both in effort and certainly in fees.

490.

In subsection (4)(3), if the rent owner acknowledges receipt of the notice once it is served, should there not be a mechanism whereby he is automatically paid redemption moneys by the Land Registry? There should be some device to simplify that process. In other words, where the procedure progresses in an orderly manner, the rent payer has no difficulty identifying the rent owner, and everything else is in order, we need the simplest possible procedure for redemption moneys to be paid to the rent owner. I can see there is a difference where there is no knowledge of the notice, and one cannot identify the rent owner. However, where the matter is orderly, it seems to me that clause 6 imposes a good deal of rigmarole, something we should seek to minimise. I cannot see any justification for burdening the rent owner.

491.

The Chairman: Where one would have an automatic pay-out -

492.

Mr O Gibson: Is clause 6 a necessary part of this Bill? Surely the purchase of ground rent - the very title - assumes that there is both a vendor and a purchaser. I cannot for the life of me imagine how the transaction could be completed unless that action had taken place. Who is involved? One cannot complete this transaction until both parties, whoever they may be, sign up to it. Where does the difficulty lie?

493.

Mr Lambe: There is no requirement for the rent owner to agree to this process, for it is statutory. Once the redemption process is initiated, the rent owner has no power to object to the operation.

494.

Mr O Gibson: How does this force the rent owner any more than the original clause? We are now dealing with the act of vending and purchasing.

495.

Mr Lambe: The issue of the certificate of redemption acts as a statutory conveyance, as if it were a private contractual matter. It is done by the operation of the law under the new clauses. The obligation on the rent owner to claim the redemption moneys is simply a further way for the rent owner to prove title to the property and, therefore, for his entitlement to the redemption moneys lodged with the Land Registry.

496.

Mr O Gibson: That is putting the cart before the horse. Surely he is right. The ground rent is already an established principle. In other words, he could not sell something he did not have.

497.

The Chairman: I think it depends on the line we -

498.

Mr Lambe: It would make sure that the money ended up in the right hands.

499.

Mr Weir: There has to be a catch-all situation to ensure that where a rent payer is getting the redemption but may not know who the rent owner is, a provision is available to enable the latter, who, maybe, has not been identified, to come back and say "Money has been lodged, and I want to get hold of it.". It strikes me that that places a burden on the rent payer in cases where the situation is fairly clear. Did I get Mr Leslie's point? Is there a more straightforward process whereby you would know precisely who the original rent owner was when the redemption was taking place. In addition, if that is known, will that person actually claim it? In my mind, there is a question mark over whether clause 6 should be the only provision operating in cases not covered when the person is already known in the first place.

500.

There are another couple of questions in relation to that. First, to separate the two issues of the inconvenience and the financial aspects, presumably somebody simply makes the claim. Do you envisage there being any financial implications for the person making a claim, for example, a charge. Clearly that would be grossly unfair.

501.

Mr Moir: I will take the last point first. We envisage that the bearer claiming payment of the redemption moneys would make an application to the Land Registry to prove that he is the person entitled to them, and he would pay a fee on that application. We expect that to be the fee that is referred to in the previous article as part of the redemption moneys. While he would be obliged to pay that £25 back to the rent payer as part of the amount which has been lodged by him as a part of the original redemption moneys, its purpose is to ensure that the rent owner will not be out of pocket.

502.

Mr Leslie: Let us suppose that the ground rent is £3, therefore the redemption money is £27. Are you saying he will end up having to pay £2 after having paid £25? Or that the ground rent payer pays £25 and £27? I may have misheard you, but my understanding is that the ground rent payer pays £25 to you as your fee, he pays £27 as the redemption money, and that the ground rent owner should end up with £27.

503.

Mr Moir: Yes.

504.

Mr Leslie: The Land Registry, therefore, gets £25. The cost to the ground rent payer is £52 for getting rid of sorting out the ground rent.

505.

Mr Moir: The ground rent payer pays an application fee of his own, which we anticipate will be £25. He will also pay to the Land Registry redemption money, which would include the £25 that goes back to the rent owner when he makes his claim.

506.

Mr Leslie: Sorry, I did not understand that. The owner is also going to have to pay £25 to claim his money. However, that will be refunded. So the ground rent payer will pay two lots of £25 - his own and the ground rent owners, - and, based on my example, he will also pay £27 redemption money?

507.

Mr Moir: Those are the present proposals.

508.

Mr Leslie: That is fine. I was not clear about that.

509.

Mr O Gibson: I am sorry, but it is an act of unkindness to the purchaser that he is paying £25 to the seller.

510.

Ms Goldring: He does get the benefit of the free legal title.

511.

Mr O Gibson: It is a benefit he has earned.

512.

Mr Weir: It strikes me - as Mr Gibson says - that the people who seem to benefit are the Land Registry - and on two fronts. Instead of a fee of £25, an amount of £50 will go into the Land Registry. As it is a relatively small amount and the rent owner may not claim it, presumably the Land Registry will then keep it.

513.

Mr Moir: The idea is that the entire sum lodged as redemption money would be paid to the Department of Finance and Personnel to then be paid into the Consolidated Fund. Once the rent owner claims his redemption money, it would be claimed with interest at the statutory rate.

514.

Mr Weir: If it were never claimed, the Consolidated Fund would benefit from it. It may not necessarily go into Land Registry, but it would go to the Government.

515.

Mr Moir: That is my understanding.

516.

Mr Weir: I am suspicious of legislation that requires money to be lodged and people having to go to the bother of directly claiming it, even in cases when it is known that it is owed to them.

517.

It is the same as the benefit system. There will always be a certain number of people who will not bother claiming, or feel that it is not worth their while chasing up the money. A certain amount will accrue in the Consolidated Fund.

518.

Mr Moir: In principle, I do not have a problem with a scheme for payments if the ground rent owner has been identified. However, the purpose of the clause is to prevent anybody claiming fraudulently. If they are obliged to prove title to the Land Registry before payment is made, that will, it is hoped, minimise the risk of fraud.

519.

Mr Weir: Apart from the risk of a criminal offence's occurring, the fact is that people will have to lodge money, and if they are not able to prove that they are the landowner, they will lose their £25. That is fair - if they are unable to prove ownership.

520.

I have one final point. It relates to clause 4 subsection 3. Presumably, in a situation where the application is made and the rent payer serves notice on the rent owner in the prescribed form, that would be a redemption condition. If that does not happen, then redemption has not actually occurred. Is that correct?

521.

Mr Lambe: Yes, as I understand it, the Land Registry will have to be satisfied that notice has been served on the rent owner.

522.

Mr Weir: This, at least, compels the rent payer to notify the rent owner. It avoids a situation where a rent payer might decide that he has done everything he wants and that he cannot be bothered serving the notice

523.

Mr Lambe: That notice will indicate to the rent owner that the money is in the Land Registry.

524.

Mr Leslie: Are we still dealing with this part of the Bill?

525.

The Chairman: Yes, unless we are satisfied with it.

526.

Mr Leslie: Regarding the process of simplifying payment, clause 4, subsection (2)(d) reads "such evidence of title and other matter as may be prescribed." Essentially, this clause is directed at the ground rent payer. Does this device allow for the collation of sufficient evidence to simplify the process of identifying the ground rent owner? This subsection could be taken to mean a number of things. What evidence would satisfy you that you had properly identified the ground rent owner, and to what extent could we include this in this Section?

527.

Mr Moir: In consultation with the Law Society and estate agents, we are exploring two alternative approaches by which we might find a satisfactory way of identifying the ground rent owner who is entitled to part of the money. A declaration could be lodged by a solicitor, confirming that he has inspected the title of the ground rent owner and that his client is entitled to that. Along with that he would produce a copy of the lease. The other option is a declaration by an estate agent confirming that he has collected the ground rent on behalf of the ground rent owner for some time. At present, we are considering fixing this period at 12 years, because this is the limitation period for land. That application would also be a counterpart to the lease. Both options should allow us to be fairly certain that the correct person has been identified. However, both measures incur a certain amount of expense on the part of the person who is claiming the ground rent payment. We have discussed this with the various professional bodies, and this is the best approach suggested so far.

528.

Mr Leslie: That pinpoints my concern. The cost to the ground rent payer of getting the certificate from his solicitor might easily outweigh the value of the ground rent, given that we fixed a minimum value of £1. It could be as little as £9 - and many are very small. Solicitors will not even get out of bed for more money than that. It is hard to get them to do anything. On a point of equity, this system might cause the ground rent owner to incur a net cost in order to give up a monetary benefit, which is an extraordinary situation to get in to. Do we need to make a further tweak of subsection (2) to ensure that the ground rent payer is made aware of the issue at the time of the conveyance?

529.

It would be easy enough. Where a conveyance is involved, there are ways of wrapping things up. It would be much more difficult under the voluntary scheme where the ground rent owner could appear completely unexpectedly. The only other thing he could do is not pay the money. If there were a net cost to him in claiming the money, he would not do so. The money backs up on the Consolidated Fund. It seems an unfair situation.

530.

Mr O Gibson: In other words, he would abandon an asset because of the cost of acquiring it.

531.

Mr Leslie: The Bill effectively confiscates the asset from him.

532.

Mr Bell: Has this issue been dealt with under Mr Weir's point about automatic payment?

533.

The Chairman: We should, perhaps, consider that question.

534.

Mr Bell: I am not sure what the answer to that was.

535.

Mr Weir: Mr Leslie is right to say there must be a way of tweaking that. It strikes me as being somewhat unfair that there could be a situation where someone loses something without being able to redeem the value because it is not worth the cost involved.

536.

Mr Bell: One might find a benevolent solicitor.

537.

Mr Weir: I should have thought that they would be thin on the ground.

538.

Mr O Gibson: Are ground rents always so minimal? In my experience, they are quite substantial. With a multiplier in mind, they could come to quite a sum, unless they are nominal or peppercorn.

539.

Mr Moir: It is probably the case that ground rents created in the early 1900s are quite small, perhaps £2 to £5. Those created by builders over the last five or 10 years are much more significant.

540.

Ms Goldring: This is, perhaps, the case even further back. We have certainly seen an increase in ground rents over the last five or 10 years. In the 1970s and 1980s, they were somewhat lower, but the increase has been gradual. We were aware of the overall equity point and felt that the Property (Northern Ireland) Order 1997 did not strike the right balance. We are trying to get the balance right between the rent payer and the rent owner, while at the same time pursuing public policy and cleaning up the land title system. We feel this system is much fairer than that originally envisaged in the Property (Northern Ireland) Order 1997. Many ground rents will be significant enough to cover the costs involved. We must face the fact that there will be winners and losers in this. It is very difficult to strike exactly the right balance in pursuing the policy while keeping things simple, which must also be an aim of this legislation.

541.

The Chairman: Would it be possible to look again at the aspect where the rent owner originally has to claim compensation?

542.

Ms Goldring: Do you mean the actual obligation, or the costs involved?

543.

The Chairman: I do not mean the costs, but the fact that moneys are not automatically paid, instead having to be claimed.

544.

Mr Close: Accepting that there are winners and losers is all very well, but one must consider at what end one pitches the losers. It seems that owners of small ground rents will be the losers, hand over fist, to such an extent that they will probably not redeem them. Given that, for a variety of reasons, the Consolidated Fund might make a pound or two from this, would it be possible to have a cut-off point?

545.

Mr O Gibson: A sort of minimum?

546.

Mr Close: It is part and parcel of our having to tweak this overall, reviewing it to get it as far as possible.

547.

The Chairman: Do you mean the cut-off point as regards amount or time?

548.

Mr Close: I mean the size of the ground rent.

549.

Mr O Gibson: Time is the winner and the loser today. This has been running since 1890 - 110 years.

550.

Ms Goldring: The multiplier tries to accommodate that. It acts as a way of achieving equity between low rents - the nineteenth century rents, which are difficult to collect - and recent, more substantial rents that are easily collected.

551.

The Chairman: The small rents have disappeared over time. We are now dealing with rents that are worth redeeming. Things will sort themselves out in time.

552.

Mr Leslie: I was trying to achieve a situation where the evidence of title produced under clause 4(2)(d) would be sufficient - you would not just need the evidence of title, you would also need to know that you are in contact with the ground rent owner. That is why I suggested that if the ground rent owner had acknowledged the notice, the circle would be completed. The Land Registry would then be in a position to automatically pay the money to the ground rent owner. That would avoid the need for the ground rent owner to get a certification from the solicitor stating that he is entitled to the ground rent.

553.

Under compulsory redemption, it would get wrapped up in the conveyancing process. The burden of cost would be fought out between the solicitors for the buyer and seller and would have nothing to do with the ground rent owner.

554.

Ms Goldring: We have tried to simplify the process as much as possible, and by doing that, we are keeping costs down. However, what Mr Leslie describes sounds more like what existed under Part II of the Property (Northern Ireland) Order 1997, which did not find favour either. We will look at this issue again to see if it is possible to further simplify or reduce costs. We have been working quite well to simplify the original scheme.

555.

Mr Leslie: This is a big issue for Land Registry, because it has got to manage the risk of paying the money to the wrong person, and that could have long-term consequences. Mr Moir has outlined a process that would satisfy Land Registry as to title. I am asking if that process could not be carried out at an earlier stage and be wrapped up in the transaction. The matter would not then have to be revisited when the Land Registry receives the redemption money.

556.

Mr Moir: I can see that if the ground rent had been created in the recent past - if the rent payer, as part of his application, lodged a copy of his lease - the rent owner could be identified. A recent lease is probably from a builder or a building company. However, if the lease had been made 50 years ago by an individual, the rent payer may not be in a position to give us any clear indication of who the person currently entitled to the lessor's interest would be.

557.

Mr Leslie: I am not so concerned about that. I think we acknowledged that problem. What I am trying to deal with is whether the whole process under the scheme is orderly. Even when it is, the ground rent owner, who is identifiable and receiving the ground rent, and if there are no arrears, nonetheless has to go through the rigmarole of the two processes you outlined, solicitor or estate agent certification, in order to claim the redemption money. Where all of this is known to the parties, is it not possible to have it already dealt with in the course of the transaction? I suggested that if we could put in a point where, if the ground rent owner acknowledges service of notice, he is thereby obviated from what he would have had to do under clause 6. There would be a way of tweaking it, provided we were confident that the process then created would be satisfactorily low-risk for the Land Registry.

558.

Mr Moir: That certainly could be feasible. One slight concern I would have is that in some transactions there is a chain of ground rents. The person to whom they are payable pays a head rent to some other person. We had anticipated that in the rent owner's application a declaration of trust would be made that any money received would be held in trust for anyone else entitled to payment of a head rent. If the legislation were to include a scheme whereby the rent owner is identified by the rent payer, payment could be automatic. The person receiving that payment would be declared by the legislation to hold it in trust for all other persons entitled to share money. That might be a way round it.

559.

Mr Hussey: The identification of rent owner, as you said, will be through a solicitor certification. That is the process we are talking about. In many cases people are not necessarily identified by solicitors, so perhaps up to a certain amount of identification from another source could be a possibility. Over that amount solicitor certification would be necessary. For example, I do not have to go to a solicitor to get a passport. I think the concern is about solicitors' fees. Why does identification have to be from within the legal profession?

560.

The Chairman: Some questions have been raised. We will leave the response to clause 6 and give you some time to think over the options. We will move on.

561.

Mr J Gibson: I think we should not forget the original reason for the Bill. What we have been discussing tends to be a voluntary act, or arrangement, on both sides to square an involuntary act on one side and a voluntary act on the other. This is the purpose of the Bill, and we sometimes lose sight of that.

562.

Mr Leslie: The solutions I propose only help with the clause 2 function, compulsory conveyance, but they leave considerable problems with a clause 1 redemption.

563.

The Chairman: We have resumed the evidence session. Mr Widdis wants to cover a few points on clause 6.

564.

Mr Widdis: There were a few residual points that could be considered together by the Committee. They were linked to concerns that the Royal Institution of Chartered Surveyors had about the lack of definition of the conditions that would apply throughout this section. Several phrases are noted - subsection (4)(b) "his appropriate share"; subsection (5)(b) "in accordance with rules"; and, in subsection (6), "A person aggrieved" and "if the Lands Tribunal is satisfied that the appellant is entitled to payment". The Royal Institution of Chartered Surveyors was concerned about the vagueness of these terms and wanted to know how they would be defined in the legislation.

565.

Mr Kane: In relation to subsection (4)(b), does the Bill need to specify how the apportionment will be calculated or will this be covered in a subsequent statutory rule?

566.

Mr Moir: It had been intended that it would be covered in a statutory rule but if it is felt that it should be referred to in the Bill -

567.

Ms Goldring: I would suggest that it would be best to keep that kind of technical detail off the face of the legislation.

568.

The Chairman: As a separate statutory Bill? Thank you. Have you any views on the Royal Institution of Chartered Surveyors' points?

569.

On the length of the rules in Section 6, sub-section 5(b) was the reference to rules a reference to statutory rules?

570.

Ms Goldring: Yes.

571.

Mr J Gibson: We are happy enough. In the statutory rules would the calculation or methodology which is spelled out be part of the technical detail?

572.

The Chairman: We are not concluding on clause 6. We can come back on that. We now move to clause 7, the certificate of redemption.

573.

Ms Goldring: This clause provides that the date on which the ground rent has been redeemed is the date on which the registrar shall seal the certificate of redemption, which he has put forward to the rent payer.

574.

Mr Widdis: The concern that was raised here was that the system provides for the Land Registry to issue a certificate to the effect that rent has been redeemed. The question occurred: has the Office of Law Reform considered drafting the Bill which will provide for a notice once the prior procedure is complete?

575.

The Chairman: So a final notification of the entire claims has been finished off?

576.

Mr Lambe: In devising this scheme we tried to minimise the impact on the administration of Land Registry as far as possible.

577.

Mr Moir: We are obliged to charge fees for all services we provide. It is felt that by keeping down the administration element in the Land Registry as much as possible it would allow us to keep our fees to a minimum. It is felt that if the whole scheme were to work it would be important that fees were kept to a minimum.

578.

Mr Weir: The point has been raised and has been already covered. Presumably there is a requirement for the rent payer to send out, if he knows who the person is, notice in the prescribed form that the application has been made. Presumably they will only send out that notice once the person has cleared all the other bits, and everything is in order. Is that correct? Under section 4(3) I presume that there would be notice indicating that the application has been made. That would not be sent out if there were some complication in terms of section 4(2). Would that be right? If there were some reason they would not be sent out - for example, if the money had not been paid in and under those circumstances where the rent owners owe - they would already effectively have been notified so there is no need for them to receive notice. If it is unknown who the person is, then there is not much point in sending out a notice anyway. With regard to the point that was raised in relation to clause 7, I do not see what purpose a final notice of redemption would serve under those circumstances.

579.

Mr Lambe: Ultimately the greatest number of grounds rents is going to be redeemed within the compulsory scheme and the redemption will be simply one more part of the transaction that a solicitor would be undertaking on behalf of a client. It would be envisaged that the solicitor would lodge the correct moneys with the correct evidence of title.

580.

In the vast majority of cases notice will be sent to the rent owner that the process has been started. There will be no complication with that.

581.

The Chairman: Under clause 7 then, are we agreed on section 1? Agreed. Section 2? Agreed. Section 3? Agreed. Section 4? Agreed. We move on to Clause 8.

582.

Ms Goldring: Clause 8 deals with the exclusion of the possession of land while redemption is pending. This clause aims to protect the occupation rights of a rent payer in the period between his or her application to the Land Registry, commencing the redemption procedure and sealing of the certificate of redemption by the registrar, which completes the redemption procedure.

583.

The need for such a provision arises if there is a delay between the lodging of the rent payer's initial application and the sealing of the certificate by the registrar. This delay could occur, for instance, if all the appropriate documents have not been lodged with the rent payer's application.

584.

Mr Widdis: No comment has been raised at this, but it has been noted that there seems to be an extra parenthesis somewhere in clause 8(b), or possibly there is one short.

585.

Mr Weir: When you have the wording "without prejudice to any other civil remedy" it is preventing the rent payer using it as a device to stall other action.

586.

The Chairman: Are the brackets where we want to locate them? Before we deal with that section, have you any suggestions?

587.

Ms Goldring: Yes. I assume there is a bracket missing before "proceedings"?

588.

The Chairman: That is what it appears to be. Section 1 agreed? Mr Weir, was your point adequately dealt with?

589.

Mr Weir: Yes. This is not going to be a clause which could be used by a rent payer to try to frustrate another purpose - for example, if there were an attempt to repossess, and he was using this as a device to stall legal proceedings. The fact that it is without prejudice means that any other civil remedy covers that point. I was just getting clarification on that.

590.

Mr Leslie: Is the redemption completed once the money has been paid to the Land Registry?

591.

Mr Lambe: Upon the sealing of the certificate of redemption by the registrar of title.

592.

Mr Leslie: If that has been done, and one of these £2 rents applies, it is not worthwhile for the ground rent owner to redeem the rent. What then is the status of the convenants? Do they continue anyway irrespective of that?

593.

Mr Lambe: They may continue insofar as they are expressed to continue by this Bill.

594.

We would not. Upon redemption, only those covenants which are expressed by this legislation to run will continue to benefit or burden the land in question.

595.

The Chairman: Are you happy with that, Mr Leslie?

596.

Mr Leslie: Perhaps, we will wait until we get to those.

597.

The Chairman: Can we agree clause 8, subsections (1) and (2)? Agreed. We move to clause 9, which provides for the application of certain provisions of Act to certain other periodic payments.

598.

Ms Goldring: This clause applies provisions of the Bill to other types of periodic payments, which are not ground rents and which are quite rare forms of rents being included for completeness.

599.

The Chairman: If there are no comments we can agree clause 9 subsections (1) and (2).

600.

Mr O Gibson: Head rents are also hidden ground rents, I presume. There are also quit rents, tithes, rent charges and other odds and sods. This enables those to be tidied. However, head rents are already dealt with under ground rents. Are there any other types of rent or imposition? I presume that this clause will clear up all encumbrances or charges that might have been imposed by ESTRI or otherwise.

601.

Mr Lambe: That would be the intention.

602.

Mr Weir: Then we seize the catch-all as well?

603.

Ms Goldring: That is as far as dwelling houses are concerned.

604.

The Chairman: It does not cover lands and all the other aspects we dealt with last week. Let us move to clause 10.

605.

Ms Goldring: This clause sets out the effect of the certificate of redemption and, in particular, allows for the cancellation of a certificate obtained fraudulently.

606.

Mr Widdis: There were no concerns raised about clause 10.

607.

The Chairman: Do Members have any questions? We can then agree subsections (1) and (2). Let us move on to clause 11.

608.

Ms Goldring: This clause deals with the pyramid of title situation. The main effect of the clause is to provide that the redemption of a ground rent under clauses 1 or 2 of this Bill has the effect of redeeming all superior rents to which the land is subject.

609.

In many instances, especially older residential property in Belfast, the ground rent being redeemed may have an immediate rent owner and several superior rent owners.

610.

Mr Widdis: The Royal Institution of Chartered Surveyors raised concern in relation to subsection (2). It suggested that, when calculating the redemption of superior rents, use of the same percentage of apportionment throughout the pyramid of title was, according to them, illogical. They feel that each case should "rise and fall on its own percentage". There are a couple of sample questions there for the Committee. I suggest that the second question be asked first.

611.

The Chairman: Could you explain how the clause will work in practice?

612.

Mr Moir: If I pay a ground of £10 to my rent owner and he receives £10 and pays £5 out of that to another person, and if the agreed purchase figure is nine years purchase, I will be paying £90 to my rent owner. He in turn will pay £45 to the person he pays head rent to. If I understand what the RICS is saying, it is that the percentage payable for the buying out of the head rent should not be the same as the percentage payable for the buying out of the ground rent. That seems awfully complicated to me.

613.

Mr Leslie: Please remind me of the procedure, which results in £90 to the ground rent owner? What forces him to pay £450 to the head rent owner? What is to stop him sitting on that £90?

614.

Mr Moir: As part of the application that he makes to get his redemption money, he signs a declaration that he will hold the money in trust and make payment to all persons entitled. Those persons would then be able to take action against him if on the next day for payment of rent he failed to give them the rent. It is a system which we are pursuing in the interests of simplicity.

615.

The Chairman: Is there not a problem if the ground rent owner does not know if there are proceedings underway?

616.

Mr Moir: He would first become aware of it when the payment of head rent failed to come in. He would then be told that the head rent had been bought out, and he would presumably want his share.

617.

Mr Leslie: Doing nothing to clauses 4 and 6 would make the ground rent owner jump through quite a few hoops to get his money. The Land Registry could pay him £90, for example, provided he gave an undertaking to pass on £45 of it. However, you are not securing your position as well with this arrangement as you would be with a simple transaction. That does not seem to make sense.

618.

The Land Registry is at pains to ensure that it does not inadvertently pay the money to the wrong person. Under this clause it will be going to slightly less trouble and may end up by paying all the money to one person without having taken sufficient care to ensure that it will be passed on to the next person. Does this not place the burden on the head rent owner to claim the money from the Land Registry? It is complicated.

619.

Mr Moir: It is. The whole scheme is designed to be as fair as possible to at least two or three competing interests. It is hard to strike the right balance. If we were to be more careful about the share of head rents, it would impose a greater burden on the one making the application, making it, perhaps, no longer financially viable for him. We are mindful that by paying out to the rent payer at the lowest level, we are at least paying out to someone who is entitled to a reasonably large percentage of the money. He is being required by the subordinate legislation to account for that.

620.

The Chairman: Are there any other questions? Can we agree subsections (1) and (2)?

621.

Mr Leslie: I am quite unready to commit myself on this clause. It seems a bit light for the complexity of what it is dealing with.

622.

Mr Lambe: The original provisions regarding the apportionment of head rents were contained in article 18 of the Property (Northern Ireland) Order 1997. However, when we came to redraft the ground rent redemption provisions we thought that it was very technical and that we should put it in the rules. We have not changed our policy as to how the apportionment formula is going to work. We are going to put it in the Land Registry rules rather than clutter up primary legislation.

623.

The Royal Institution of Chartered Surveyors was concerned that the apportionment formula was contained in the Property (Northern Ireland) Order 1997. To them it appeared as though it had simply disappeared and we were simply going to put it in another vehicle.

624.

The Chairman: We would need to look at this Bill with the rules in mind .

625.

Mr Lambe: Certainly there has been no change in policy with regard to the apportionment mechanism.

626.

The Chairman: Does that clarify the matter? Are we agreed on subsection (2)? Yes.

627.

Some members have to leave us shortly so we will call it a day. The next clause involves a number of questions and more debate. We will start off with that next week.

628.

Thank you very much for your help.

MINUTES OF EVIDENCE

Tuesday 24 October 2000

Members present:
Mr Molloy (Chairperson)
Mr Leslie (Deputy Chairperson)
Mr B Bell
Mr Close
Mr Hussey
Mr McClelland

Witnesses:
Ms J Goldring )
Mr N Lambe ) Office of Law Reform

In attendance:

Mr M Wilson (Clerk)

629.

The Chairperson: The meeting is now open to the public. I welcome back the witnesses from the Office of Law Reform to the meeting, and hope that we can move swiftly through the papers. How do we want to open?

630.

The Clerk: Chairman, Peter Hughes, Hugh Widdis and I have prepared a document entitled 'Ground Rents Bill (NIA Bill 06/99) Schedule of Clauses for Agreement'. It is essential that Members have this in front of them. Because of the complexity of the subject we are discussing, we need to work through it in this rather unfortunate, stilted way. Members have not seen this and neither has Ms Goldring. I will read it out until we reach a point where members wish to discuss the matter. I will then stop at that point.

631.

The Chairperson: OK.

632.

The Clerk: Clause 1 relates to the power of certain rent payers to redeem ground rent. Members agreed that clause 1 should stand part of the Bill on the 19 September 2000. No further action has been taken on that by the Committee.

633.

Clause 2 instructs on the compulsory redemption in the case of a dwelling house. It was also agreed that clause 2 should stand part of the Bill on 19 September 2000. Again, I await further issues regarding that decision.

Clause 3 (Exceptions to, or restrictions on, sections 1 and 2)

634.

The Clerk: Clause 3 contains substantive issues. It deals with the exceptions to and restrictions on sections 1 and 2. The Committee already agreed that this clause should stand part, but as a result of consideration of later clauses, a number of issues have been raised.

635.

In relation to clause 3(1)(a), a query was raised about the reference to "a proposal to . obtain an extension" under the Property (Northern Ireland) Order 1997. The Committee considered that the drafting of clause 3(1)(a) was unclear, in particular with regard to the reference to a notice of a proposal to acquire the fee simple or to obtain an extension under section 2 of the Act of 1971. The Committee was concerned that the meaning of the word "extension" was uncertain.

636.

The Office of Law Reform (OLR) was asked whether clause 3(1)(a) could be safely amended by the addition of the words "of that lease" after the word "extension" and, if not, whether it could provide an alternative draft amendment for clause 3(1)(a), which defined "extension", or the procedure referred to. The OLR responded that the Act of 1971 deals only with either the enlargement of a leasehold estate into a fee simple (or freehold) or with an extension of the lease.

637.

Advice has been sought from the first legislative counsel who does not believe that any amendment is necessary. The reference to

"a proposal to . obtain an extension under section 2 of the Act of 1971"

can only mean an extension of a leasehold estate, and the OLR advises against any amendment to this provision. The Committee may wish to discuss its course of action on this.

638.

Ms Goldring: From my perspective, I am content that that wording is clear, that it is normal phraseology used in legislation and that there is no scope for misunderstanding.

639.

The Chairperson: Do the Members agree?

Members indicated assent.

640.

The Chairperson: We will take the recommendation of the Office of Law Reform.

641.

The Clerk: Regarding subsections (7) and (8), the Committee had concerns about the definition of a flat, and expressions such as "common parts". In its submission, the Law Society recommended that in subsection (7), line 24, after " 'common parts' means", the words "third party boundaries or any parts of the development or facilities therein" should be inserted.

642.

The OLR was asked if it would provide a statement on the policy reasons for differentiating between flats on the basis of whether common parts are shared, whether it agreed that the draft amendment provided by the Law Society would safely have the effect of removing that distinction, and, if not, whether it would suggest an alternative draft amendment.

643.

The OLR responded "Along with legislative counsel, we have considered the Law Society's comments as regards the definition of a flat. We are not entirely clear as to how the Law Society's suggested amendment would improve matters. The current definition originated in the final report of the Land Law Working Group. Flats need to be excluded from the ground rent exemption scheme because of the nature of the development concerned and the presence of common parts in the vast majority of developments. In such cases individual occupiers of units have a leasehold interest in their own property, but the ownership of the common parts such as stairwells is vested in either the developer or a management company. It should be noted by the Committee that the reference to "common parts" need not refer to internal structures, but may include roads and footpaths. We will revert to the Committee again following further consideration."

644.

Do you think there is a possibility of an amendment to clause 3 in this area, Ms Goldring?

645.

Ms Goldring: We have been discussing this with the Law Society. I have a concern. It is describing a unit, which has no common areas.

646.

If a flat is a self-contained unit, what is the rationale for keeping it out of the ground rents framework? We are excluding flats and others because they have common areas, which leads to a complexity in establishing ownership. If there are no common areas, why exclude such flats? We need some clarification from the Law Society. I am concerned about the policy behind what is being suggested, but I am not in a position to say anything final at this stage. We are raising that issue with the Law Society.

647.

The Chairperson: If there are common areas there may be a need for exclusion.

648.

Ms Goldring: The Law Society wants to include self-contained units that have no common areas.

649.

Mr Leslie: Clause 3(7)(b) states

"the boundary, or part of the boundary, between at least two such units is horizontal".

That is fine when there is a flat on top of a flat, but what happens when there is a flat beside a flat? Each criterion has to be satisfied as the word "and" is used in the provision. Would it be helpful if there were fewer criteria?

650.

Ms Goldring: If the word "or" was used instead, terraced housing could be included because of the party walls - such housing would fall under paragraph (a). Obviously, we do not want to include terraced housing. We need to be careful to ensure that we include all the kinds of buildings and premises that we need to include.

651.

Mr Leslie: I understand the point about terraced housing. However, we could extend the definition and find a form of words specifically to exclude terraced housing.

652.

Ms Goldring: Or semi-detached.

653.

Mr Leslie: OK, but to what extent is terraced housing likely to be subject to a ground rent? A house is more likely to be held in fee simple.

654.

Ms Goldring: No, older terraced or semi- detached properties are likely to be held in fee simple. Excluding those properties would further complicate matters.

655.

Mr Leslie: No, you are trying to include them while trying to exclude them from the definition of a flat.

656.

Ms Goldring: Yes, that is what I mean. Then we would end up with much more complex drafting. If some modern developments are self-contained apartments or self-contained flats that do not have common ways, maybe we need to extend our idea of what constitutes a traditional home. If a ground rent is applicable and a property is self contained, it should not necessarily be excluded from the ground rent legislation just because it looks like an apartment. The criteria for exclusion are the common areas, which brings it into a separate area of property law.

657.

Mr Leslie: We will leave the Office of Law Reform to continue to wrestle with the Law Society.

658.

The Chairperson: Let them sort it out between themselves.

659.

The Clerk: We will seek further advice; it is not possible to finalise consideration of the clause. A further issue on clause 3 is an amendment proposed by the Office of Law Reform, which, Ms Goldring, relates to changes to clause 15 or clause 16.

660.

I will read out the amendment. Then, Mr Chairman, you can find out what the significance is.

661.

Members have a copy of the letter, containing the proposed amendment, from the Office of Law Reform.

662.

The Amendment proposed: In page 3, 42, at end insert

'( ) Section 3 does not apply to the conveyance or transfer of a dwelling house to -

(a) the Northern Ireland Co-Ownership Housing Association; or

(b) any other housing association (within the meaning of the housing (Northern Ireland) order 1992 (NI 15)) specified by an order by the department of social development subject to negative resolution.'

663.

Ms Goldring: This was raised by the Department of Social Development (DSD). It deals with equity- sharing leases, and Mr Lambe will take us through the detail of that.

664.

Mr Lambe: Clause 3 already excludes equity- sharing leases from redemption provisions. However, the way it is currently drafted means that a person who enters into a co-ownership arrangement with the Northern Ireland Co-Ownership Housing Association does not have to buy out the ground rent when the full equity has been paid off. The point of this amendment is to ensure that when the Co-Ownership Association purchases property for inclusion in its scheme it is exempt from the requirement to redeem the ground rent. It is simply a way of not inhibiting the provision of social housing in Northern Ireland.

665.

At present the Northern Ireland Co-Ownership Housing Association is the only organisation which operates the co-ownership scheme. However, in future other housing associations may begin to operate that scheme subject to the approval of the DSD. This second amendment gives the DSD power to authorise the inclusion of subsequent housing associations.

666.

The Chairperson: Are members happy to adopt that?

667.

Amendment agreed to.

668.

The Clerk: That is an amendment proposed by the Committee on the basis of advice from the Office of Law Reform. When we return to this clause we will therefore be seeking to adopt clause 3 as amended.

Clause 4 (Redemption)

669.

The Clerk: We will now move on to clause 4, which deals with redemption. The Committee agreed that Clause 4 should stand part of the Bill on 19 September. Once again, however, subsequent to that agreement further queries were raised on aspects of the clause. In relation to subsection (2)(a) there were concerns that there is a requirement for a rent payer to pay the Land Registry the redemption money and, under (2)(e), to pay such sums as might be prescribed to defray expenses to be incurred in obtaining a certificate under section 6.

670.

The Office of Law Reform was asked to clarify the composition of the sum referred to in subsection (2)(e). In its response the OLR indicated that the rent payer would pay two fees, his own application fee and the fee paid by the rent owner under clause 6. Members will note that clause 6 relates only to the fee paid by the rent owner in respect of his application for a certificate of entitlement to redemption.

671.

There is no suggestion or indication that any other cost is involved, for example, solicitors' fees. There are a couple of points in that action paragraph that members may wish to raise.

672.

The Chairperson: Any questions from members?

673.

Mr Leslie: This was all wrapped up with our desire to get the Land Registry to simplify what it was doing. I thought the Land Registry had said it was going to write to us, and it thought that to simplify the procedure suggested might require some amendment. Our suggestion was that, if under subsection 3, a rent payer showed that notice had been served on the rent owner that the application was being made, and if the rent owner acknowledged receipt of the notice, that could be deemed to be sufficient evidence for the automatic payment of redemption money to that rent owner, and the Land Registry undertook to consider that.

674.

The Clerk: I think, Mr Chairman, that there is a proposal, when we get to clause 6, that is in line with that system. It is right to say that it is clause 6 that would be introduced. There are a couple of questions which members may wish to clarify.

675.

The Chairperson: Are there any other questions regarding the payment of the £25 fee, for the application of clause 1?

676.

Ms Goldring: The question asked here is whether subsection (2)(e) should be amended to reflect the wording so that it specifically refers to Land Registry expenses. If you are happy that it is not, do you not wish to pursue that?

677.

The Chairperson: Do members have any queries on that or are they happy enough?

678.

The Clerk: The Committee has expressed concern about what evidence the Land Registry needs to satisfy itself that subsection 4 should apply, that is that the rent payers are excused from serving notice on the rent owner. In response, the OLR said that the Land Registry would require written evidence to that effect. That is something, Mr Chairman, that you may wish to pursue.

679.

The Chairperson: Is there a member's query?

680.

Mr Leslie: It just depends on what the written evidence is.

681.

The Clerk: Again, a member may ask about that.

682.

The Chairperson: The question really is: what evidence will be required?

683.

Ms Goldring: We envisage its taking the form of a declaration that would ordinarily be provided by the solicitor doing the processing. A definite form would be set out in rules. That is how we see it.

684.

The Chairperson: There would either be a form or a declaration of some sort written in the rules that a person could sign. That would be straightforward then. That would be clear.

685.

Ms Goldring: We anticipate that.

686.

Mr Lambe: The legislation provides remedies for where a rent payer has obtained a certificate of redemption as a result of fraud or a mistake. I refer you to clause 25 of the Bill.

687.

The Chairperson: Are Members satisfied that there is a clear mechanism for identification?

688.

Mr Close: Is there going to be a cost to that?

689.

Ms Goldring: In providing the declaration?

690.

Mr Lambe: It is not a separate application, simply part of the application. When you fill in the form seeking to obtain the certificate of redemption, you either give the name and address of the rent owner or fill in a separate part of the form saying that you do not know the rent owner or cannot locate him.

691.

Ms Goldring: It is part of the overall application.

692.

Clause 4 agreed to.

693.

The Clerk: The Committee agreed clause 5 on 19 September. There have been no further concerns, and it does not need to be readdressed.

Clause 6 (Disposal of money lodged with Land Registry under section 4(2): claims thereto).

694.

Clause 6 deals with the disposal of money, and other moneys, lodged with the Land Registry under clause 4(2). There was a general concern, and the Committee asked the Office of Law Reform about the feasibility of a streamlined procedure to be used when the identity of a rent owner is known and the rent payer has served notice. In response, the OLR and the Land Registry provided a possible streamlined procedure. There are two proposals. For simple claims there would be certain conditions. The ground rent would be a certain amount, or less - presumably set by regulation; the rent owner's identity would be known; and the rent payer would have served notice under clause 4(3). The procedure would be that the rent owner would send an application, in a prescribed form, plus a copy of his statutory notice to the Department of Finance and Personnel (DFP), and it would make a payment of redemption money plus interest.

695.

For other claims the rent owner would send an application, in a prescribed form, with evidence of his title and an application fee - probably £25 (which will not appear in the scheme, I assume). The Land Registry would send a certificate of entitlement to the DFP or reject the application, if appropriate. The DFP would make a payment of the redemption money plus interest. This would include an amount under clause 4(2)(e) to defray the cost of the application fee. That is the scheme.

696.

If members were agreeable to a two-track approach, it would require an amendment to clause 6, which would need to be drawn up in some detail.

697.

Ms Goldring: This scheme was not put forward by the OLR but by the Land Registry. We did not have an opportunity to agree it before it went to the Committee, and we have two concerns about it. The first is the direct payment by the DFP, which is not a good idea because of the quasi-judicial nature of the payment of compensation. The Land Registry should do that. The level of compensation could be the subject of an appeal to the Lands Tribunal, which again suggests that payment should remain with the Land Registry. We would like to discuss further with the Land Registry whether that is an appropriate way forward.

698.

The second concern is about how we take into account any superior rent owners. This scheme is probably applicable where there are no superior rent owners - with one rent owner it is straightforward. We need to ensure some kind of mechanism to take into account the interests of any superior rent owners and ensure their access to the compensation.

699.

The Chairperson: As we are not clear on the mechanism, would it be best if the OLR proposed an amendment to clause 6?

700.

Ms Goldring: We will take that forward with the Land Registry and try to work out something appropriate.

701.

The Chairperson: It would not be necessary to involve the DFP if the Land Registry were dealing with the issues.

702.

Mr Leslie: I was very surprised to see the Department of Finance and Personnel mentioned here; I expected the matter to be dealt with by the Land Registry.

703.

I have a further point to make to the OLR on superior rent owners. Curiously, when we questioned the Land Registry, it was much less concerned about protecting itself against mispayment in relation to a superior owner than it was about the immediate ground rent owner, which did not make sense. That should be taken into account when determining the exact working of the scheme. We also have to decide what the value of 'X' should be.

704.

The Chairperson: Is it accepted that the fees would compensate for the operation of the fast-stream procedure?

705.

Mr Lambe: The adoption of parallel procedure according to the amount of the ground rent redemption may be dealt with by rules without amending primary legislation. However, we are exploring that with legislative counsel.

706.

The Chairperson: We cannot move any further on that.

707.

The Clerk: There was concern about clause 6(3). Members asked what fee a rent owner would need to pay and how the Bill would provide for such a fee. The OLR indicated that a fee of £25 would be payable, but the Bill does not include a power to charge such a fee. Members may want to pursue that point.

708.

The Chairperson: Does that come into rules or into another part?

709.

Mr Lambe: The general rule-making power is operated under the Land Registration Act (Northern Ireland) 1971, which specifies that the Land Registry may charge fees for the services that it provides.

710.

The Chairperson: Will the Bill include a power to vary that fee, or will that power be provided elsewhere?

711.

Mr Lambe: That would come under the 1971 legislation, which is the principal legislation that established the Land Registry.

712.

The Chairperson: Are there any other questions?

713.

The Clerk: There is the issue of a revised clause to introduce a possible fast-stream arrangement. The Committee could return to that and, I hope, agree it.

714.

Clause 7 was agreed on 19 September, and there are no further issues.

715.

The Clerk: Clause 8 was agreed on 19 September, and there is no suggestion that we need to return to it.

716.

The Clerk: Clauses 9, 10 and 11 were agreed, and there is no indication that we need to return to them.

Clause 12 (Lands in separate occupation subject to single ground rent)

717.

The Clerk: There are a number of concerns about clause 12, which deals with lands in separate occupation subject to single ground rent. First, the Royal Institute of Chartered Surveyors (RICS) questioned its clarity and reasoning. The Committee was concerned that where two or more rent payers share a single ground rent, a redeeming rent payer may have difficulty in recouping appropriate contributions from those jointly liable to pay ground rent before redemption.

718.

The Office of Law Reform was asked to explain the background to the system by which a joint rent payer indemnifies a second joint rent payer. In the response the OLR indicated that clause 12, dealing with lands in separate occupation subject to single ground rent, is quite straightforward and deals with a not uncommon occurrence where two - it usually is two in its experience - terraced houses are subject to a single rent payable by one of the occupiers of one of the properties. Either of the two occupiers may separately redeem the ground rent under clause 1 if they do not join together to redeem the rent as is provided for in clause 4(6). In the case of a compulsory redemption, the purchaser of either of the properties is required to redeem the ground rent on both the properties subject to a single ground rent.

719.

The Committee can be reassured that the cases in which this occurs always involve very small ground rents - they could be no more than £5 per annum. The detail of this clause ensures that whoever redeems the ground rent receives a proportionate share of the redemption cost from each of the other ground rent payers. This is a pre-condition of the Land Registry's issuing a copy of the certificate of redemption to any party who did not enjoin in the redemption of the ground rent. Since the certificate of redemption or a copy thereof will form part of the title deeds to any property concerned, this clause makes sure that every person benefiting from being free of the obligation to pay a ground rent shares in the cost of obtaining that benefit. The primary aim of this clause is to ensure that these residential properties fall within the redemption scheme.

720.

The Chairperson: Does anyone have anything to add and? Is it agreed?

Members indicated assent.

721.

Ms Goldring: Agreed. I have nothing further to add.

722.

The Clerk: The Office of Law Reform was asked about the circumstances in which a party who did not redeem the ground rent might wish to obtain a certificate under clause 12(3). In its response the OLR indicated that a person who did not join in redeeming the ground rent on lands in separate occupation, subject to a single ground rent, would require a copy of the certificate of redemption should he or she wish subsequently to sell the house and was required under conveyancing practice to provide evidence of title to the property. Any solicitor acting for a purchaser would require this as a matter of course.

723.

The Chairperson: Is everyone content with that explanation?

Members indicated assent.

724.

The Clerk: I have a further point in relation to subsections (4) and (5). These state only that a redeeming rent payer "may require reimbursement" of an appropriate part and do not expressly entitle him to that money. In light of the fact that subsection (5) indicates that this legislation is intended to secure that money to the redeeming rent payer, the Committee was concerned that subsection (4) would possibly be unsatisfactory. The Office of Law Reform was asked whether subsection (5) would in all circumstances allow recovery of the appropriate part. In its response the OLR said that the use of the word "may" in subsection (4) indicates that the redeeming rent payer may choose not to require reimbursement of his expenses in redeeming the ground rent. Such a person may privately forward a copy of the certificate of redemption to the other person whose land is subject to a single ground rent.

725.

On the other hand the Land Registry will always require proof that reimbursement has occurred before it will issue a copy of the certificate of redemption to a non-redeeming rent payer. Subsection (5) provides that the amount of reimbursement is a debt owed by the non- redeeming rent payer and may be recovered in civil proceedings. One way or another, should the redeeming rent payer require reimbursement of a proportion of his expenses, there is a mechanism for achieving that.

726.

The Chairperson: Are members happy that there is no confusion? The main point is that someone who redeemes the rent cannot then hold back that person from selling his property.

727.

Mr Leslie: There is a measure of confusion, but it is capable of being unravelled.

Members indicated assent.

728.

The Clerk: There is a further point. The Office of Law Reform was asked if clause subsection (4) could be safely redrafted to state an entitlement to that money, rather than a mere entitlement to "require reimbursement" of that money, and whether an amendment to that effect was needed. The word "entitlement" to the money is the significant point. The response from the OLR said

"Clause 12 (4) cannot require an entitlement to reimbursement as the redemption may occur voluntarily. In this case the non-redeeming rent-payer should not be obliged to contribute towards the cost of something which he did not seek in the first place" ...An amendment is not advised at this stage."

We need to establish whether members are satisfied that the question of entitlement has been sufficiently addressed.

729.

The Chairperson: My only concern is about a second person's getting a certificate if he wanted to sell his property and its being held back from him unduly, or that he would have to pay more for it than the original rent.

730.

Ms Goldring: It is clear that the amount involved is an apportionment of the compensation owed.

731.

The Chairperson: It could not, therefore, be an exorbitant figure?

732.

Ms Goldring: No, it could not.

733.

The Chairperson: Are members happy?

734.

Mr Leslie: Yes. The only point I would make is that it is fine to say that the non-redeeming rent payer should not be obliged to contribute towards the cost of something which he did not seek in the first place. However, I want to remind everyone that throughout this Bill the rent owner is required to contribute towards the cost of something that he did not necessarily seek in the first place. Although the point is different, it is an unfortunate piece of logic to use in the Bill.

735.

The Chairperson: The first purpose of the Bill is to ensure that people have the means to redeem their ground rent.

736.

Mr Leslie: Yes, but it is forcing a cost upon the ground rent owner. It does not give him full value.

737.

The Chairperson: Well, that could all be debated again. Are members content?

738.

The Clerk: There is a final point of clarification. The Office of Law Reform was asked to explain the system of indemnification referred to in clause12(4). It said

"The system of indemnification referred to in clause 12(4) deals simply with a private arrangement between the different occupiers of properties subject to a single ground rent as to how much each occupier contributes on a yearly or twice yearly basis to the payment of the single ground rent. If there are two properties subject to a single ground rent then the usual indemnity is that each occupier contributes half of the cost of the ground rent."

739.

The Chairperson: This is similar to the previous point that it cannot be an exorbitant figure. Are members agreed that clause 12 stand part of the Bill?

Members indicated assent.

740.

Clause 12 agreed to.

Clause 13 (Effect of redemption on titles)

741.

The Clerk: Clause 13 deals with the effect of redemption on titles. The Committee was concerned that the nature of the legal interest remaining in the rent owner after redemption was unclear. The Office of Law Reform was asked to explain what residual interest, or title, remains in the rent owner after the operation of subsections (1) and (2) and whether it includes any rights enforceable against the rent payer. In its response, the Office of Law Reform said

"The residual interest of the rent-owner and his or her successors in title following the operation of Clause 13 (1) dealing with fee farm grants and Clause 13 (2) dealing with leasehold estates is the right to enforce covenants in accordance with clauses 16 and 17."

The OLR was also asked whether the residual interest is capable of transfer by the rent owner, and the reply was that the right to enforce a covenant was capable of transfer for market value.

742.

The Chairperson: That will come in under the clause about certain covenants. Any there any comments?

743.

Ms Goldring: I have nothing to add.

744.

The Chairperson: Are members agreed that clause 13 stand part of the Bill?

Members indicated assent

745.

Clause 13 agreed to.

746.

Clause 14 agreed to.

747.

Clause 15 (Mortgages and leases)

748.

The Clerk: Clause 15 deals with mortgages and leases. About subsections (1) and (4) the Committee expressed concern. It was stressed that existing or pending mortgages should not be affected by the Bill. The Office of Law Reform has asked us to confirm that redemption will have no practical effect on any mortgage in existence, or pending. It has confirmed that mortgage lenders expressed concerns and two amendments were proposed. Members have copies of these.

749.

We have said that there are two amendments. However, we are probably only dealing with one amendment. We earlier thought that there were two, but there is only one amendment to clause 15.

750.

Ms Goldring: That relates to the deletion of subsection (3).

751.

Mr Lambe: The amendment that will remove subsection (3) has not yet been drafted. We intend to repeal that because it is an unnecessary obligation for mortgage lenders to have to resubmit a certificate of redemption to the Land Registry. The registrar has the power, under other provisions in the Bill, to make any necessary corrections to the title to the property.

752.

The Clerk: That will be an amendment.

753.

Mr Lambe: It will be a repeal amendment.

754.

The Clerk: The one mentioned here is: In page 10, line 24, at end insert

'and any provision in the instrument providing for an estate acquired by the mortgagor to be held in trust for the mortgagee or appointing the mortgagee as the mortgagor's attorney in relation to such estate, applies to the fee simple'.

755.

Can we have an explanation of that?

756.

Mr Lambe: The purpose of that amendment is to put beyond doubt the interests of the mortgagors, as the lenders. This will ensure that once the title to a property has been enlarged, if it becomes a freehold estate after redemption, the mortgagor's title will apply to the enlarged freehold estate rather than to the original leasehold estate. We are trying to put the matter beyond doubt, so that the position of the banks is secure. The banks appear to be quite content.

757.

Ms Goldring: We are not absolutely convinced that there is any mischief in the current wording. However, in order to be sure we are making this amendment. This is one of the amendments that I initially had reservations about. We have not absolutely agreed with legislative counsel the exact format, or the placement of the amendment within the clause. I ask the Committee to keep that in mind. The substance is contained in the draft that it was given.

758.

The Chairperson: The best way to deal with this is probably to consider it at the same time as the second amendment to this clause. We could deal with both of them together.

759.

Ms Goldring: That is the repeal of subsection 15(3).

760.

The Chairperson: Yes.

Clause 16 (Covenants)

761.

The Clerk: Clause 16 deals with the covenants. The Committee had a number of concerns. First of all, the Office of Law Reform was asked to confirm whether an amendment is proposed to protect the position of the Northern Ireland Housing Executive (NIHE) as regards the enforceability of covenants which the NIHE includes in deeds under which dwellings are sold to sitting tenants. The response from the OLR was

"The Committee is aware of the concerns of the Housing Executive as regards routine covenants contained in leases when they sell on properties to sitting tenants. Officials in the OLR have met with colleagues in Housing Executive to discuss their concerns. First Legislative Counsel has drafted an amendment to Clause 16 (see attachment) expressly to refer to the particular Housing Executive covenants. A consequential amendment to Clause 17 on the enforceability of such covenants has also been drafted."

762.

The Chairperson: Are both of those in the letter?

763.

The Clerk: Certainly the first one is.

764.

Amendment proposed: In page 12, line 11, at end insert

'(j) any covenant, not falling within any of the preceding paragraphs, which is contained in a lease granted by the Northern Ireland Housing Executive before 10^tJanuary 2000 and relates

(i) to a district heating supply provided by the Executive; or

(ii) to the repayment to the Executive of any discount of any part of the purchase price under a house sales scheme made under the Housing (Northern Ireland) Order 1983 (NI 15).'

765.

The Chairperson: OK. Are members happy enough with that amendment?

766.

Suggested amendment agreed to.

767.

The Clerk: May I just confirm that no further amendments are needed?

768.

Ms Goldring: No further are required.

769.

The Clerk: Mr Chairman, if members are content you may wish to put the question that clause 16, as amended, stand part.

770.

The Chairperson: Agreed?

771.

Mr Leslie: Hold on. We have not talked about subsections (4) and (7).

772.

The Clerk: Quite right. Actually we have not talked about subsection (3) either. I am jumping ahead of myself. The Committee was concerned about covenants relating to party walls. The Office of Law Reform was asked to provide a detailed explanation of the policy reason for this subsection and to indicate the connection between this provision and the purposes of the Bill. In response, the OLR said

"Clause 16(3) deals with the future effect of party fence declarations where a ground rent payable by either or both of two neighbours is redeemed. Such covenants are converted into positive covenants by each party to pay half the cost of repairing or replacing the fence or wall, and such covenants bind successors in title (see Clause 17(3)). The policy behind this provision acts to mitigate the general principle that redemption of a ground rent extinguishes all covenants on the ground redeemed apart from those listed in Clause 16. This provision is necessary to preserve the interest of a neighbour of someone who redeems the ground rent where there is a covenant expressed to benefit that neighbour's land in regard to boundary/party walls or fences by a virtue only of a covenant enforceable between the rent-owner and the rent-payer. In such circumstances the person benefiting from the covenant may not be the rent-owner. This is a necessary provision."

773.

The Chairperson: OK.

774.

The Clerk: There is a concern that subsection (4) appears to cancel a considerable part of the effect of subsection (2) in that covenants that bind only the covenantor - the ground rent owner - even if the list of surviving covenants will not survive. In the response, the OLR said that clause 16 (4) provides that personal covenants enforceable only against the covenantor cease to have effect post-redemption. In that case, there would be no question of the covenant,s being enforceable against successors in title, even without redemption, as they are personally enforceable only against the covenantor. Personal covenants that are not expressed to bind successors in title would never be covenants benefiting or burdening land, and there is no policy requirement to continue their operation after the redemption has taken place. An example from case law is that the original lease holder covenants to pay the rates in respect of other land.

775.

Members of the Committee should say whether they are satisfied.

776.

Mr Leslie: On subsection (3), I wonder whether the assumption that 50-50 is a fair apportionment is right. The covenant might have prescribed another apportionment.

777.

Mr Lambe: As a particular wall or fence relates only to two adjoining properties, a 50-50 split seems fair because both would benefit from the maintenance and repair of that structure.

778.

The Chairperson: Nobody else would benefit in that situation?

779.

Mr Lambe: No.

780.

Mr Leslie: But if the ground rent owner sold the adjoining land, provided that the person on the adjoining land maintained the wall or fence, he would be in a 0-100 position - quite deliberately - under the covenant. Surely he should be able to stay in that position.

781.

Ms Goldring: We may want to look at that to see whether it is possible to use general wording that might reflect the original agreed terms.

782.

Mr Leslie: If there were agreed terms, they should subsist.

783.

Ms Goldring: We will have a look at that issue if the Committee is content.

784.

The Chairperson: Are we agreed on the other issues? This is the only point on which we are not agreed.

785.

Mr Leslie: On subsection (3).

786.

The Clerk: Members have no issues to raise on subsection (4)?

787.

Mr Leslie: Subsection (4) concerns an assertion that personal covenants would never benefit or burden land. I do not know whether that is true.

788.

Mr Lambe: Personal covenants are extremely rare, especially in modern days.

789.

Mr Leslie: If I sold land to Billy Bell, whom I know to be noisy, and I personally bound him under covenant to be quiet, I would not want to lose that covenant just because he had redeemed the ground rent.

790.

Mr Lambe: You would not lose the benefit of that covenant because of the wording of the covenant -

791.

Mr Leslie: But it would bind only Billy Bell.

792.

Mr Lambe: But any lease would always contain a covenant for quiet enjoyment of the property.

793.

Mr Leslie: Perhaps that is not a good example, but I was trying to think of some sort of personal covenant that would be. Does this apply only to what you have cited here?

794.

Mr Lambe: Such covenants are extremely rare and the examples we can give emanate from nineteenth century case law, when they were much more prevalent.

795.

Ms Goldring: The list of covenants in clause 16 covers all that a common covenant would cover, such as causing nuisance or annoyance.

796.

Mr Leslie: But surely if any of the covenants under subsection (2) were particular to a certain person, then, as a result of subsection (4), they would fall.

797.

Ms Goldring: It would be foolish conveyancing to put one of these standard covenants that benefits or burdens land into a purely personal capacity. I do not think that that would happen.

798.

The Chairperson: Especially in relation to one individual where it has been part of the ongoing process. It would be bad dealing on the part of the solicitor.

799.

Mr Leslie: That does not mean that it would not happen.

800.

The Chairperson: So Mr Bell is going to have to keep the jukebox down.

801.

Mr B Bell: I would like you to keep me out of it.

802.

The Chairperson: That deals with subsection (4).

803.

The Clerk: The Committee has expressed a concern about the definition of neighbours in subsection (7). The Committee was concerned that the limited definition of neighbours appeared to allow the covenants at 16(2)(g) and 16(2)(i) to survive only in the context of a building scheme. It appeared that similar covenants between a rent owner and a rent payer who were neighbours, in the ordinary sense of the word, would not survive. In its response the OLR said

"The reference to neighbours in this context is to make 'special provision' for neighbours who live within a new build development where the leases contain reciprocally enforceable covenants (for example, not to erect garden fences).

Whether or not 'neighbours' are benefited or burdened by surviving covenants will always depend on the nature of the covenant and the land specified therein. An occupier of a parcel of property may benefit from a covenant even if he or she has not been party to the deed containing the covenant."

804.

Members may wish to consider whether they have any further concerns about the definition of neighbours.

805.

Mr Leslie: Subsection (2) says

" 'neighbours' means other participants".

If "means" were changed to "includes", it seems to me, that would avoid doubt.

806.

Mr Lambe: I have some difficulty with that suggestion. What the Committee needs to remember about this definition of neighbours is that it is not the traditional definition, as in "the person who lives next door to you". It could be any person living within a particular development who would have the right to enforce certain types of covenant if that, on the back of enforcement, is contained within the lease, which is normally a common lease to which all occupiers within that development are subject. It defines neighbours in a special way to accommodate building schemes that are modern developments.

807.

The Chairperson: Part of our debate was about whether it related to a single house where someone had sold off a piece of land and one house had been built on it. It would not be part of a building scheme but there could still be the same sorts of problems.

808.

Mr Lambe: If it were a traditional pair of semidetached properties adjoining one another, any covenant listed in clause 16(2) that benefited or burdened either of those properties would continue to be enforceable according to the terms of clauses 16 and 17. Special provision does not need to be made for neighbours in that traditional context.

809.

Mr Leslie: So are you saying that the interpretation of the drafting is that this is additional to the common definition of neighbours?

810.

Mr Lambe: Yes. This binds neighbours to put any owner-occupier of any one that is relevant -

811.

Mr Leslie: That was the word that I was suggesting that we should put in.

812.

Mr Lambe: I am content to go back to counsel.

813.

Mr Leslie: I thought that it made it more clear.

814.

The Chairperson: If it is additional, and the existing legislation is already in place, the question is whether it serves a useful purpose where the clause refers to a building scheme.

815.

Mr Lambe: Perhaps using the word "includes" gives rise to the presumption that the covenants referred to in 16(2)(g) and 16(2)(i) were the type of covenants that would be enforceable between the traditional style of neighbours.

816.

The Chairperson: You could be reducing to some extent rather than extending.

817.

Mr Lambe: It could produce a false presumption. These types of covenants are expressed only to apply to a development building scheme.

818.

Ms Goldring: It could have the effect of narrowing down the application of 16(2). Perhaps it would raise a question there.

819.

Mr Leslie: We want to be sure that it means neighbours in the traditional sense and participants in the building scheme. I am referring not to paragraph (i) but to (g)(ii), for example.

820.

Ms Goldring: Our view is that it does cover it, but we can go back and have a further discussion on it. I doubt if we could settle it today.

821.

The Chairperson: Do we want the OLR to consider it further?

822.

Mr Leslie: Yes. We need to be satisfied on that point.

823.

The Chairperson: OK. We will come back to this clause.

824.

The Clerk: May I confirm that there are two areas for further consultation under clause 16 - subsections (3) and (7).

Clause 17 (Enforceability of covenants)

825.

The Clerk: The Committee had some concerns on clause 17 - the enforceability of covenants. The clause provides the circumstances in which covenants that survive under clause 16(2) may be enforced. Each type of covenant is dealt with individually. The Office of Law Reform was asked whether the covenants listed under clause 16(2) would be enforceable only as described in clause 17. It has confirmed that this is the case.

826.

The Chairperson: There is an amendment as well.

827.

The Clerk: There are amendments to that part of the clause, but they are not related to that particular point.

828.

Are members content with the Office of Law Reform's response about the covenants under clause 16(2) being enforceable only as described in clause 17? If so, we can then look at the two amendments.

829.

The Chairperson: Are members content?

830.

Mr Leslie: I will think about it while you look at the other two.

831.

The Clerk: The Office of Law Reform has proposed two amendments to be inserted at this part of the clause.

832.

The first is : In page 12, line 30, after '16(2)(a)' insert 'or (j)(ii)'.

833.

The Chairperson: May we have an explanation of that please?

834.

Mr Lambe: These amendments are to ensure that the new covenants relating to the Housing Executive leases can be enforced.

835.

The Chairperson: So they relate to the Housing Executive?

836.

Mr Lambe: Yes, they relate only to the Housing Executive.

837.

The Chairperson: OK.

838.

The Clerk: The second amendment is: In page 12, lines 40 and 41, leave out 'or (h)' and insert ' (h) or (j)(i)'.

839.

The Chairperson: This is the same issue.

840.

Mr Lambe: Yes.

841.

Ms Goldring: Just to remind you of the proviso I made at the outset, the substance of this amendment has been agreed with legislative counsel. There is a query over the placing of the amendment, and I would not advise you to agree it as it is set out here.

842.

The Chairperson: Maybe we should come back to it instead of finalising it now. If we agree an amendment, we will be agreeing its specific terms. It is probably safest to come back to that.

843.

Ms Goldring: Yes.

844.

The Clerk: The schedule would probably be the same anyway. The amendment would not be absolute.

845.

Members raised concerns about the impact of clause 17(6) on clause 16(2)(g). Subsection (6) provides for covenants described at clause 16(2)(g) to be enforceable by and against the rent owners and participants. Participants exist only in the context of a building scheme, and it therefore appears that a covenant of the type described in clause 16(2)(g), where a building scheme is not deemed to exist, will not be enforceable. The Office of Law Reform was asked about the enforcement of such covenants and a response indicated that clause 17(6) deems a building scheme to subsist in relation to the enforceability of covenants listed in clause 16(2)(g) where no building scheme already exists. Clause 17(6)(b) preserves the enforceability of these important amenity covenants between neighbours who otherwise have no legal relationship.

846.

The Chairperson: Are members happy enough with that response? Agreed.

847.

The Clerk: The Office of Law Reform was also asked whether the existing wording at line 17 of subsection (6)(a).

"the rent-owner and his successors"

is intended to mean the rent owner and his successors in title. This interpretation implies that it would not be appropriate to involve successors who have no interest in the title. The OLR has indicated that it has sought judicial counsel on this matter. Members may wish to see whether there is any outcome.

848.

Ms Goldring: It is a minor drafting point. We have not yet received a response.

849.

The Chairperson: We will come back to that.

850.

Mr Lambe: Because the phrase "successors in title" is used in line 14, it might be a little unnecessary for counsel to have to repeat the full phrase, but we are going to check that.

851.

Mr Leslie: I have a question about 17(2), which reads

852.

"A covenant to which section 16(2)(b) applies is enforceable by the covenantee and his successors in title against the covenantor and his successors in title."

853.

This should be the position in relation to 16(2), and I wonder why it is not.

854.

Mr Lambe: That is an interesting point. The interest that a rent owner has in a property subject to a ground rent is the interest in receiving the rent. The rent owner normally has very little other interest in that property. With the extinguishment of the ground rent as a result of the redemption, we are trying to break the tie between the rent owner and the rent payer, unless it is necessary to preserve the tie for the integrity of property. That is why we are not continuing the effect of personal covenant and laying down specific rules about what types of covenant are enforceable, by whom and against whom.

855.

It is a new statutory scheme which the Law Society feels will be a considerable improvement on existing law.

856.

Mr Leslie: The problem is that clause 16(2)(g) refers to a series of covenants. Very often these covenants have been much more valuable to a ground rent owner than the ground rent itself. If they evaporate, a great many ground rent owners will think it exceedingly unjust. It is quite possible that much of this land would not have been sold without those covenants.

857.

Therefore the restrictions that clause 17 places on the ability to enforce covenants under clause 16(2) considerably expand the impact of the Bill, which I see as being about the extinguishing of ground rent and the uplifting of title. It cannot be justified in removing covenants. Being a policy matter, it is a little difficult for you. I do not wholly accept the explanation you have given.

858.

Ms Goldring: We remain of the view which we put forward in our response - namely, that the non- applicability of personal covenants is the correct policy approach.

859.

The Chairperson: Mr Leslie has said that there are occasions on which the land would not have been sold if the covenants had not been placed. The covenants sometimes become a negotiating point. If land is vested from people with covenants built in, the situation is different. However, where people sold land with a covenant, they also sold that covenant. The concept of people's trying to sell something while holding on to it at the same time does not appeal to me.

860.

Mr Leslie: One must remember that sale prices almost certainly reflect both the covenants and the ground rent. Sold completely free of encumbrances, land is clearly more valuable and will command a higher price than if subject to them. There is a distinct difference in the contract and the price which it would have fetched.

861.

Ms Goldring: All the common covenants for the protection of the land are already covered under clause 16(2).

862.

The Chairperson: Landscaping, cutting down trees and so on are all covered?

863.

Ms Goldring: Yes.

864.

Mr Leslie: Clause 17(4) says that a covenant

"is enforceable . against the same person as it would have been enforceable . had the ground rent not been redeemed".

865.

Does that cover the person's successors? If so, there is no problem with your answer.

866.

Mr Lambe: That would preserve the enforceability of the covenants listed in clause 16(2) paragraph (b), (e) or (g), as agreed between the original parties to a lease or whomsoever that particular covenant would have been enforceable against or enforced by. That is not a general rule which applies to all covenants which survive redemption.

867.

Mr Leslie: Where covenants would have applied to successors in title, that continues to be the position, since it is the same person.

868.

Mr Lambe: Only so far as the covenant is expressed by this legislation - namely, to be enforceable by or against successors in title.

869.

Mr Leslie: That is the nub of the issue. I return to the same point. Let us take for example a covenant in clause 16(2)(g) which currently exists. Mr Bell is the covenantor and I am the covenantee. Let us suppose that Mr Bell sells the land to another. Is that person then the covenantee under the same terms? If the covenant has successors in title, does it survive the impact of clause 17(4)?

870.

Mr Lambe: It does. Line 43 states that

"a person taking conveyance of the estate in fee simple"

is to be regarded as a person with regard to whom one of the covenants listed there is enforceable by or against.

871.

The Chairperson: There appears to be a stalemate? Either we look at this again or we agree to it. I suggest that we agree to it.

872.

Mr Leslie: I will have to return to that. I am not sure whether the assignee of the lease - I believe that is the term for the next person who buys property subject to a ground rent - is redeeming the ground rent.

873.

Mr Lambe: In the majority of leasehold estates when the property is subsequently sold it is sold by way of assignment rather than with the creation of a sub-lease.

874.

Ms Goldring: It may reassure the Committee to know that the Law Society, the group of expert conveyancers, is content with the covenant scheme. It just raised the issue about the actual interest that remained, but other than that it was generally content that this is a fair and workable scheme and said that in its evidence.

875.

The Chairperson: I would go along with the Office of Law Reform, but it is not as simple as that.

876.

Mr Leslie: It is very odd that clause 17(2) does not apply to most of the provisions in clause 16(2). Why is it differentiated by clause 17(4)? If it is not different, why is it differentiated?

877.

Mr Lambe: The answer is that covenants for indemnities are the equivalent to a debt obligation.

878.

Mr Leslie: Is that what clause 16(2)(b) is?

879.

Mr Lambe: That is why it excludes indemnities that are expressed as relating to the ground rent but there could be other indemnities in the lease.

880.

The Chairperson: Does it wipe them out?

881.

Mr Lambe: It does not wipe them out because that would normally involve a money payment.

882.

The Chairperson: Perhaps we could agree on this, unless there is a specific point that we need to clarify, although there will be further opportunities to explore it.

883.

Mr Leslie: Clause 17(2) should read

"a covenant to which section 16(2)(b), (d), (e), (g) and (h) applies",

and perhaps paragraph (c) should be included as well.

884.

The Chairperson: That has already been covered and there is no point in rewriting it.

885.

Mr Leslie: If clause 17(4) provides the same ability to enforce a covenant against successors in title, why is it written differently? There may be a covenantor in the case of clause 16(2)(b), who is the person giving the specific indemnity.

886.

Mr Lambe: That provision deals with a very specific covenant.

887.

Mr Leslie: We should move on, but I shall continue to reflect on that issue.

888.

The Clerk: We will need to return to clause 17 to deal with finalised amendments. Perhaps at that point the Office of Law Reform will be able to give us further explanation.

889.

The Chairperson: We can go back to these points later.

890.

Mr B Bell: We have not finalised clause 17.

891.

The Clerk: No. The two amendments require further refinement and confirmation.

Clause 18 (Settled land)

892.

The Clerk: Clause 18(1)(b)(2) provides that references, however expressed, to an estate of a rent payer are to be read as including references to the estate in the settled land, which is the subject of the settlement or the title to that estate. The Office of Law Reform was asked whether subsection 1 is intended to apply to all references anywhere, and not merely those in this Bill. The OLR has confirmed that in clause 18(1)(b)(1) "references, however expressed" needs to be read subject to the governing principle stated at the beginning of this clause, that is "in the application of this Act to settled land." This Bill does not touch on other aspects of the law dealing with settled land, such as the powers and duties of limited owners or trustees. Are members satisfied with that explanation?

893.

The Chairperson: Are we happy that this is just dealing with one particular issue and not wiping out other clauses or guarantees within the settled land Act?

Members indicated assent.

894.

Clause 18 agreed to.

895.

Clauses 19 and 20 agreed to.

896.

Clause 21 (Mental patients)

897.

The Clerk: Clause 21 had one item of concern. When considering this clause, members noted that "controller" was not defined in the Bill. It was defined in the Mental Health (Northern Ireland) Order 1986, but members considered that the definition could be included in this Bill. The OLR was asked to consider this point and confirmed that "controller" is defined in the Mental Health (Northern Ireland) Order 1986 and that it is unnecessary to replicate that definition in the Bill. It is now a matter of members agreeing that clause 21 stand part of the Bill.

898.

The Chairperson: Are Members agreed?

Members indicated assent.

899.

Clause 21 agreed to.

900.

Clauses 22 to 26 agreed to.

901.

Clause 27 (General interpretation)

902.

The Clerk: Clause 27 deals with general interpretation. The Committee noted that "Registrar" and "Land Registry" are used throughout the Bill, but are not defined. The Office of Law Reform was asked to confirm that the terms, as used in the Bill, are properly defined. Its response was that "Registrar" and "Land Registry" are defined in the Land Registration Act (Northern Ireland) 1970 and there is no need to repeat the relevant provisions in the light of clause 27(4).

903.

The Chairperson: The thinking was that it should stand part of the explanations at the end for general guidance rather be written into the Bill itself.

904.

Ms Goldring: It is general drafting policy not to clutter a Bill with definitions that are already set out in other legislation.

905.

The Chairperson: That is usual, but some straightforward definitions, such as that of the National Trust and issues concerning it, are given. We are confused because the Land Registry may mean one thing under this Bill and another under other legislation.

906.

Ms Goldring: Clause 27(4) covers that.

907.

The Chairperson: Are members content that clause 27 stands part of the Bill?

Members indicated assent.

908.

Clause 27 agreed to.

909.

Clause 28 (Interpretation: ground rent)

910.

The Clerk: In considering subsection (1) the Committee is aware that a considerable number of ground rents are set at £1. The definition of nominal rents excludes those rents. The Office of Law Reform was asked whether the definition of a nominal rent should be amended to include rents of £1 or less. In its response the OLR said

"It is a matter of judgement at what level the definition of a nominal ground rent should be set. We have decided that the nominal rent should be set at an amount of less than £1. Setting a figure of £1 or higher would take a large number of existing ground rents outwith the redemption scheme. We believe that at this stage it is prudent to include such rents within the redemption scheme."

The OLR is to seek further advice, but this is a decision for the Committee.

911.

The Chairperson: The Committee's view is that the proposal would speed up the process because the issue would be removed from the Bill and put into the declaration.

912.

Ms Goldring: The OLR is concerned because so many ground rents are set at £1, so there are a lot of exclusions and there is no satisfactory system in place for rents under £1. That is what we meant by "prudent". At this stage it would be better to include such rents to achieve clarity.

913.

The Chairperson: Do members agree?

914.

Mr B Bell: I am inclined to take that advice.

915.

Mr Hussey: If a nominal rent were set at £1, would a lot more people take out a ground rent?

916.

Mr Leslie: Leaving the figure as it is would cover a considerable proportion of rents, but if we make it £1 or less, as the Law Society suggests, it would knock a huge number of ground rents out of the Bill.

917.

Mr Hussey: Surely that is the whole purpose of the provision.

918.

Mr Leslie: What is?

919.

Mr Hussey: The main purpose is to get rid of as many ground rents as possible.

920.

Mr Leslie: So leave it as it is.

921.

Mr B Bell: That is what we are saying.

922.

The Chairperson: Mr Hussey's interpretation is the same as mine. There is a simple declaration for £1 ground rents, but people might feel that it was not worth while going through the proposed procedure. The current procedure is simpler and cheaper.

923.

Mr Hussey: There would be a procedure to go through, and solicitors would have to be contacted - all for the sake of £1.

924.

Ms Goldring: I realise that, under the multiplier, £1 will not amount to a great deal.

925.

Mr Hussey: It would be lost in fees.

926.

Ms Goldring: Under that system, the objective is to get as few ground rents in as possible because an alternative has not been worked out.

927.

The Chairperson: Rather than leaving such ground rents in limbo, would bringing them under the provision allow speedier and more effective clearing?

928.

Ms Goldring: I think so, but I am concerned that so many would be excluded from the main scheme.

929.

The Chairperson: No one would bother to take them out if they were excluded from the scheme.

930.

Ms Goldring: Yes.

931.

Mr Leslie: They are unlikely to use the section 1 procedure and cost is not a problem with the section 2 procedure because they have to pay the solicitor anyway.

932.

The Chairperson: You are going to be selling the property on, so it is only a -

933.

Mr Leslie: The way it works in practice is in line with what you are saying.

934.

Mr Hussey: If that is the way it is going to work in practice -

935.

The Chairperson: It would not actually happen, and this way forces it to be sorted out if the property is up for sale. With the other way, it would not have to be sorted out, and it would continue on in just the same way. To achieve what we want, and what Derek Hussey is covering, we have to include it rather than exclude it.

936.

Ms Goldring: It is probably the best way to achieve that.

937.

Mr B Bell: Are we all satisfied about this Mr Chairman? There is no strong feeling either way.

938.

The Chairperson: The problem is to find a way to get rid of as many ground rents as possible, and as quickly as possible. If a ground rent is not included in the scheme, when the property is being sold it will not be dealt with, and will continue after the sale. We have to include ground rent to ensure that it is dealt with at the time of sale.

939.

Is it agreed that clause 28 stand part of the Bill?

Members indicated assent.

940.

Clause 28 agreed to.

941.

Clauses 29 to 32 agreed to.

942.

Clause 33 (short title)

943.

The Clerk: Clause 33 deals with the short title, and perhaps we can agree both short title and long title.

944.

The Office of Law Reform was asked about a possible change to the long and short title, mainly the short title. It shows that the Bill covers domestic ground rents only. In its response, the OLR said that legislative counsel has suggested that the short title to the Bill should be left as it is. Any reference to dwelling house or domestic property in the title would be potentially misleading, as the Bill may apply to mixed property, which is not totally domestic, or to undeveloped land subject to a building lease. We agree with this, and advise against any change to the short title. It is a matter, therefore, for members.

945.

The Chairperson: Are the Members content with that? Is it agreed that clause 33 stand part of the Bill?

Members indicated assent.

946.

Clause 33 agreed to.

947.

Schedule 1 (The redemption money)

948.

The Clerk: There are a couple of issues in schedule 1. The Committee considered the intention that, when ground rent is fixed and the multipliers applied to the redemption money, where the ground rent is subject to a provision for increase, the redemption money takes account of that provision, but is subject to a discount of 8% per annum. The increase is ignored if it occurs more than 12 years after the application date. The Office of Law Reform was asked to clarify the matter.

949.

We seem to have lost a little bit of the clause. Could we possibly return to schedule 2 on the next occasion?

950.

The Chairperson: Do you want to deal with it?

951.

Ms Goldring: We have a little note here explaining that clause. This kind of provision for an increase is a characteristic of modern leases not to be found in the older leases. What we are trying to do here, as in the rest of the Bill, is strike a balance between the rights of the rent payer and those of the rent owner.

952.

The paragraph provides that any increase would take place more than 12 years after the date of redemption. Twelve years has been selected because that is the time used in the doctrine of adverse possession. Any action to recover land 12 years after the right of action is accrued is time-barred.

953.

The paragraph takes account of the value represented by the provision for future increases by aggregating the amounts represented by the increase in the calculation of the redemption money. It tries to take account of the value of the fact that the ground rent can be increased within the 12-year period. We have discounted it because it is not an immediate right but something that is in the future. In accordance with normal valuation practices, there is a need for a discount on that.

954.

The figure of 8% is intended to reflect a balance between the interests of the rent owner and the rent payer. We are content that the human rights implications of the policy are coherent with the rest of the policy in the legislation.

955.

The Chairperson: Are we satisfied with the explanation?

956.

Mr Leslie: No. What you are doing here is applying a double discount. It very specifically applies to this kind of ground rent which had set out to protect itself against inflation by having some provision for increasing the amount of the ground rent. Therefore, the ground rent had real money value which was protected over time, and by taking that away and paying a multiplier that is about 50% of my value, you are already heavily discounting it.

957.

The Chairperson: We will have to close at that point. There is a Division in the Chamber.

MINUTES OF EVIDENCE

Thursday 16 November 2000

Members present:
Mr Molloy (Chairperson)
Mr Leslie (Deputy Chairperson)
Mr Close
Mr Hussey
Mr Maskey
Mr P Robinson
Mr Weir

Witnesses:
Ms J Goldring ) Office of Law Reform
Mr N Lambe )

958.

The Chairperson: You are very welcome. The Committee Clerk will take us further through the Ground Rents Bill.

959.

The Committee Clerk: At the last meeting on the Ground Rents Bill it was agreed that we would return to some clauses and reach a conclusion on the issues relating to them The Committee has yet to address the three schedules. We will work through the document and address the outstanding issues. Although the Committee previously agreed in principle to some amendments, we will address each of them again and make sure that when we agree the clause, as amended, we do so with all the amendments having been taken on board. Ms Goldring will keep us right.

960.

With regard to clause 3, subsections (7) and (8), the Committee had been concerned about the definition of the words "flat" and "common parts". The Law Society recommended that in subsection (7), line 24 after the words "'common parts' means" insert "party boundaries or any parts of the development or facilities therein".

961.

The Office of Law Reform was asked to make a statement of the policy reasons for differentiating between flats on the basis of whether or not common parts are shared. It was asked if it agreed that the Law Society's draft amendment, attached at that time, would safely have the effect of removing that distinction? If it did not agree, it was asked to suggest an alternative draft amendment.

962.

The previous response from the Office of Law Reform stated

"Along with Legislative Counsel we have considered the Law Society's comments as regards the definition of a flat. We are not entirely clear as to how the Law Society's suggested amendment would improve matters. The current definition originated in the final report of the Land Law Working Group. Flats need to be excluded from the ground rent redemption scheme because of the nature of the development concerned and the presence of common parts in the vast majority of developments. In such cases individual occupiers of units have a leasehold interest in their own property but the ownership of the common parts such as stairwells is vested in either the developer or a management company. It should be noted by the Committee that the reference to "common parts" need not refer to internal structures but may include roads and footpaths. We will revert to the Committee again following further consideration."

963.

In its most recent correspondence with us regarding the definition of a flat, the Office of Law Reform stated

"I am not persuaded that there are cogent reasons for departing from the definition of "flat" contained in Clause 3 of the Ground Rents Bill. This definition originated in the final report of the Land Law Working Group in 1990 and until recently has not been challenged. Officials in OLR have continued to discuss this issue with the Law Society. Although the Law Society have argued that the reference to "common parts" in Clause 3 should be deleted, they have been unable to predict all the likely consequences of such an amendment. In light of this uncertainty I would recommend that the existing definition remain unamended. In view of the debate that this conceptual issue has generated OLR will keep a careful watch on conveyancing practice (along with Law Society and Land Registry colleagues) to determine if the definition of "flat" requires amendment at a later date. Courts will obviously have an important role in interpreting the definition."

964.

A further e-mail has arrived, headed "definition of flat". There are further comments members may wish to discuss.

965.

Ms Goldring: The only new information in this e-mail is that the land law expert, Professor Wylie, agrees that the definition should remain. It is also consistent with the definition in the Property (Northern Ireland) Order 1997. It is important to keep the definitions consistent in those two pieces of legislation.

966.

The Chairperson: Any comments from Members?

967.

Mr Leslie: I think that is that.

968.

The Chairperson: Are members happy with the amendment?

969.

Mr Leslie: The non-amendment.

970.

The Committee Clerk: There is another unrelated amendment, which members have discussed on previous occasions. I will not read the whole item through, since the amendment is spelled out there. But, for safety sake, we should formally adopt the amendment. The amendment would be

In clause 3 at page 3, line 42 at end insert

"() Section 2 does not apply to the conveyance or transfer of a dwelling house to

The Northern Ireland Co-Ownership Housing Association; or

(b) any other housing association (within the meaning of the Housing (Northern Ireland) Order 1992 (NI 15)) specified by an order made by the Department for Social Development subject to negative resolution."

971.

The Chairperson: Are we agreed?

Members indicated assent.

972.

The Committee Clerk: In clause 6, the Committee had asked the Office of Law Reform about the feasibility of a streamlined procedure to be used when the identity of the rent owner is known and the rent payer has served notice. I am not sure whether the previous response came from the Office of Land Reform or the Land Registry.

973.

Ms Goldring: Can we correct the document? The proposal for the two-track approach came from the Land Registry, not from the Office of Law Reform.

974.

The Committee Clerk: That is correct. When we examined this, the proposal for the two-track approach was spelt out. On 15 November the Office of Law Reform replied

"OLR is conscious that Committee Members have expressed a desire for a simpler procedure to enable rent-owners to claim redemption money owed to them. The Committee has already heard our evidence that we find ourselves unable to agree with the proposal of the Land Registry that monies should be paid out by the DFP without a Certificate having first been issued by Land Registry. As I have indicated previously, the amount of redemption money is subject to appeal to the Lands Tribunal (Clause 23(4)) and hence the payment of the redemption money to an entitled rent-owner is in the nature of a quasi-judicial decision. I can see no other course of action than to continue with Land Registry involvement. Committee Members will wish to be assured that the application fee paid by the rent-owner will be reimbursed in accordance with Clause 4(2)(e).

As Clause 6(3) is currently drafted, Land Registry Rules may prescribe a modified procedure for disposal of redemption money to rent-owners if the amount of redemption money is small. We are actively pursuing this option and one change to the "normal" procedure may be to provide in Rules that where the redemption money is small the Registrar will not require evidence of title provided, that along with the application for redemption money the rent-owner provides a copy of the notice received from the rent-payer and signs (as part of the application form) an undertaking to apportion the rent amongst superior owners where they are known to him. An alternative "short procedure" could be confined to cases where there are no superior owners entitled to an apportionment of the ground rent. This is likely to be the case in modern properties with a substantial annual ground rent."

975.

The Chairperson: Are Members happy with the current proposal that we simply apply this mechanism to the rules, rather than introduce the previous proposals from the Land Registry?

976.

Mr Leslie: I just want to make sure I have got this right. With reference to the text in italics, is the objection to all of it or only to some of it?

977.

Ms Goldring: We cannot agree that the money should be paid out by the Department of Finance and Personnel without an initial certificate from the Land Registry. Any shortened procedure will have to remain within the Land Registry. That can be dealt with by rules.

978.

Mr Leslie: OK, but has it got the money?

979.

Ms Goldring: Yes, it will have the money.

980.

Mr Leslie: Right. It has the ability to write a cheque to satisfy the payment of redemption money?

981.

Ms Goldring: No. The redemption money is paid out of the consolidated fund.

982.

Mr Lambe: The redemption money will be paid out by the Department of Finance and Personnel, but only on receipt of a certificate of entitlement to the redemption money.

983.

Ms Goldring: It will therefore have to go through the Land Registry. The proposal put forward is that the Land Registry could be bypassed and the certificate would not be required. However, that is not an appropriate way to deal with this.

984.

Mr Leslie: You cannot get money without the certificate, but you cannot be given the money by the person who gives you the certificate. Is there no way of getting out of the two being involved?.

985.

Mr Lambe: No. The Land Registry does not have a general account on which it can draw. It is part of the Department of Finance and Personnel and, therefore, it relies on the general account of the Department for issuing moneys.

986.

Mr Leslie: We want to keep the mechanics as simple as possible. The Land Registry issues a certificate to the ground rent owner, who has then got to send it to the Department of Finance and Personnel. Is that right?

987.

Mr Lambe: Yes.

988.

Mr Leslie: To short-circuit that, could it go across the desk from the Land Registry to the Department of Finance and Personnel?

989.

Ms Goldring: Even if it were short-circuited, there would have to be rules to deal with the matter. I am not sure about the suggestion of it going straight from the Land Registry.

990.

Mr Lambe: Clause 6(7), as currently drafted, does not make specific reference to the entitled rent owner making a separate application to the Department of Finance and Personnel. It simply says

"On receipt of a certificate of the Registrar, or an order of the Lands Tribunal, that a person is entitled to payment of the money lodged under section 4(2) in relation to the redemption of a ground rent, the Department of Finance and Personnel shall issue out of the Consolidated Fund and pay to that person-

(a) the amount of money so lodged"

991.

Mr Leslie: It could be accommodated in that.

992.

Mr Weir: It seems nonsensical to wait for a certificate from the Land Registry, which is a branch of the Department of Finance and Personnel, only to have to send it back to the Department to get the money. It would make a lot more sense to cut out the middleman, or at least make the process a little easier. Of course, I appreciate that the best way to deal with this may be under Land Registry rules, and that the rules may have to be adapted accordingly.

993.

Ms Goldring: We intend to look at the Land Registry rules to see if we can streamline the procedure. They would then come before the Committee as subordinate legislation. I am not sure that we can settle on a procedure here.

994.

Mr Weir: Perhaps you could bear in mind what the Committee has said when the rules are being drafted, so that we do not have to fight that battle again.

995.

The Chairperson: Does the Committee think that we should leave everything to the rules instead of trying to finalise it here?

996.

The Committee Clerk: There is one further matter. An amendment has been proposed. It is of a technical nature and is designed to ensure that all the requirements of the Northern Ireland Act 1998 are complied with in the matter of allocated amounts out of the consolidated fund to individual Departments.

997.

The amendment is on page five 5, line 34, and proposes to leave out

"issue out of the Consolidated Fund and".

998.

We are seeking clarification on that.

999.

The Chairperson: Can you provide some clarification on that?

1000.

Mr Lambe: This is simply to ensure that the Department does not make ad hoc payments out of the consolidated fund, and that any redemption moneys that come to the Department of Finance and Personnel are paid out from the general account rather than directly out of the consolidated fund. It merely ensures compliance with the voted budget allocation to the Department.

1001.

The Chairperson: Are Members content?

Members indicated assent.

1002.

The Committee Clerk: We need to adopt a formal motion. The motion would read

The Finance and Personnel Committee recommends that clause 6 of the Ground Rents Bill be amended as follows: That on page 5, line 34, leave out "issue out of the Consolidated Fund and".

1003.

The Chairperson: Are Members content?

Members indicated assent.

1004.

The Chairperson: We move on to clause 15.

1005.

The Committee Clerk: The Committee has been concerned that subsections 1 to 4 of clause 15 should not affect existing or pending mortgages. It was agreed on 24 October that the proposed amendment to this clause would be considered at this meeting. The Office of Law Reform has been asked to confirm that redemption would have no practical effect on any mortgage in existence or pending. The previous response from the Office of Law Reform confirmed that mortgage lenders had expressed concern, and that amendments to the clause would be proposed.

1006.

My recollection is that the Deputy Chairperson raised that question, and I am not sure that it was specifically addressed. It may be just a technicality to reassure the Committee.

1007.

Mr Leslie: On 24 October?

1008.

The Committee Clerk: Yes. You said that you wanted an assurance that redemption would have no practical effect on any existing or pending mortgage. I know that you had asked for that assurance, but I do not think that we have a record of such a specific assurance being given. Perhaps it just slipped by, but it would be as well to have it on record. According to Hansard this confirmation was not given last time.

1009.

Mr Lambe: The first substantive amendment, adding words at the end of clause 15(1)(a)(ii), is probably not necessary. It is implicit in the wording of the governing principle of that clause. However, the banks want reassurance that their existing mortgages would be protected, and this amendment provides that reassurance.

1010.

The Chairperson: That is actually the next item we are dealing with. Is that right?

1011.

The Committee Clerk: Yes. At the previous meeting the Deputy Chairperson sought the assurance that redemption would have no practical effect on any existing mortgage. It was just a matter of stating that. We are now moving on to the next amendment.

1012.

Ms Goldring: These amendments are to provide further reassurance that mortgages are not affected.

1013.

The Chairperson: That is that cleared up.

1014.

The Committee Clerk: Mr Lambe had moved on to the next point, and there are two amendments to clause 15 to deal with this issue. The first amendment deals with provisions on mortgages, and it is probably unnecessary. However, mortgage lenders have requested the amendment as an assurance that their existing mortgages on property, subject to voluntary redemption, will apply to the enlarged fee simple estate. The amendment is as follows

Clause 15, page 10, line 24, at end add "and any provision in the instrument providing for an estate acquired by the mortgagor, to be held in trust for the mortgagee or appointing the mortgagee as the mortgagor's attorney in relation to such estate applies to the fee simple."

1015.

The Chairperson: Are members happy with that?

Members indicated assent.

1016.

The Committee Clerk: To formalise that, the motion would be

That the Finance and Personnel Committee recommends that clause 15 of the Ground Rents Bill be amended as follows: Clause 15, page 10, line 24 at end add "and any provision in the instrument providing for an estate acquired by the mortgagor to be held in trust for the mortgagee or appointing the mortgagee as the mortgagor's attorney in relation to such estate applies to the fee simple."

Members indicated assent.

1017.

The second amendment, proposed by the Office of Law Reform, removes the requirement of mortgagees to submit a certificate of redemption to the Land Registry to have the register corrected. The certificate will have been issued by the Land Registry and the Registrar of Titles has power in clause 13 to make any necessary corrections. The amendment would be as follows

Clause 15, page 10, line 38, leave out subsection (3).

1018.

The Chairperson: Agreed?

Members indicated assent.

1019.

The Committee Clerk: To formalise that, the motion would be

That the Finance and Personnel Committee recommends that clause 15 of the Ground Rents Bill be amended as follows: Clause 15, page 10, line 38, leave out subsection (3).

1020.

The Chairperson: All agreed?

Members indicated assent.

1021.

The Chairperson: We now move on to clause 16.

1022.

The Committee Clerk: The Committee had a number of concerns about covenants, and the Office of Law Reform has subsequently proposed some amendments to the clause. The Office of Law Reform was asked, in writing, to confirm that the amendment was to protect the Northern Ireland Housing Executive, as regards the enforceability of covenants which the Housing Executive includes in deeds under which dwellings are sold to sitting tenants. In reply, the Office of Law Reform stated that the Committee is aware of the concerns of the Housing Executive as regards routine covenants contained in leases when properties are sold to sitting tenants. Officials in the Office of Law Reform have met with colleagues in the Housing Executive to discuss their concerns.

1023.

First Legislative Counsel drafted an amendment to clause 16, expressly to refer to the particular Housing Executive convenants. The consequential amendment to clause 17 on the enforceability of such covenants has also been drafted.

In their most recent letter, the Office of Law Reform states: "The second set of amendments to Clause 16 make special provision for common covenants contained in leases by the Housing Executive to sitting tenants purchasing property under the statutory house sales scheme. The Committee has already had sight of these."

Its proposed amendments are: "Clause 16, page 12, line11, at end insert -

'(j) any covenant, not falling within any of the preceding paragraphs, which is contained in a lease granted by the Northern Ireland Housing Executive before 10 January 2000 and relates -

(i) to a district heating supply provided by the Executive; or

(ii) to the repayment to the Executive of any discount of part of the purchase price under a house sales scheme made under the Housing (Northern Ireland) Order 1983 (NI 15).'"

Members indicated assent.

1024.

The Chairperson: We now move on to sub section 3 and the concerns about covenants and party walls.

1025.

The Committee Clerk: There is some new information on that point. On a previous occasion the Office for Law Reform was asked to provide a detailed explanation of the policy reason for this subsection and to indicate the connection between this provision and the purposes of the Bill.

Its response at that time said: "Clause 16(3) deals with the future effect of party fence declarations where a ground rent payable by either or both of two neighbours is redeemed. Such covenants are converted into positive covenants by each party to pay half the cost of repairing or replacing the fence or wall, and such covenants bind successors in title (see Clause 17(3)). The policy behind this provision acts to mitigate the general principle that redemption of a ground rent extinguishes all covenants on the ground redeemed apart from those listed inClause 16. This provision is necessary to preserve the interests of a neighbour of someone who redeems the ground rent where there is a covenant expressed to benefit that neighbour's land in regard to boundary/party walls or fences by virtue only of a covenant enforceable between the rent-owner and the rent-payer. In such circumstances the person benefiting from the covenant may not be the rent-owner. This is a necessary provision."

Immediately before the most recent information was received, the letter of 15 November from the Office for Law Reform said: "the OLR has not yet finalised its response on party-fence covenants. It expects to be able to present its consideration of this matter to the Committee at its meeting on 16 November."

1026.

These views have been presented and it is now a matter of asking for comment from the Office for Law Reform before Members consider the matter.

1027.

Ms Goldring: The explanation given in the note today is an accurate interpretation of the conditions. Clause 16(3) will only deal with the declarations of covenants and boundaries. The 50/50 split will only relate to those declarations of boundary walls. If there are covenants dealing with the maintenance and repair of walls and fences these will not be subject to the 50/50 split. Such covenants are, however, very rare.

1028.

The Chairperson: I know that Members only received this paper today and are reading it for the first time. Are there any issues which Members want to raise with reference to the party walls?

1029.

Mr Weir: We had an earlier discussion when it was said that the issue was generally resolved amicably by neighbours. That set alarm bells ringing with some of us. There is a clause which states that should resolution be impossible then application may be made to the Lands Tribunal for definitive interpretation of the covenant. Is there a specific legislative provision for that matter or what are the grounds for it?

1030.

Mr Lambe: The Property Order of 1978 confers a general jurisdiction on the Lands Tribunal. It deals with governing. Normally matters relate to one person wanting to get rid of a restrictive covenant.

1031.

Mr Weir: So it would have the power under that?

1032.

The Chairperson: The Office of Law Reform is saying that there is no need for an amendment. Are members happy with that?

1033.

Mr Leslie: I am not totally persuaded, but I am not going to spend any more time on the argument.

1034.

The Chairperson: OK?

Members indicated assent

1035.

The Committee Clerk: We will continue with subsection (7) and the concern about the definition of "neighbours".

1036.

The Committee was concerned that the limited definition of neighbours appeared to allow the covenants at 16 (2) (g) and (i) to survive only in the context of a building scheme. It appeared that similar covenants between a rent-owner and rent-payer who are neighbours - in the ordinary sense of the word - would not survive.

1037.

The previous response from the Office of Law Reform stated

1038.

In its most recent response, the Office of Law Reform says

"The first amendments to Clause 16 appearing on the first page of the attachment provide that the amenity covenants mentioned in Clause 16 (2) (g) will survive redemption and be enforceable as between neighbours in a building scheme (participants in a building scheme) and between any person by or against whom such covenants would have been enforceable if redemption had not occurred (ie in accordance with Clause 17 (4)."

1039.

I have underlined that because my understanding is that it applies to all neighbours.

1040.

Ms Goldring: We have extended the definition.

1041.

The Committee Clerk: The first of the two amendments is to page 12, line 6.

Leave out from "his" to the end of line 11, and insert " other participants in a relevant building scheme immediately before the redemption of the ground rent by virtue of that scheme".

1042.

I have just mentioned a little error in the paper to be corrected. The first line will read

"leave out from "his" to end of line 11".

1043.

The Chairperson: Are we happy? Agreed?

Members indicated assent.

1044.

The Committee Clerk: The second amendment is to page 12 - again there is a slight error. It should read "page 12, line 26".

Leave out from "2 (g)" to the end of 28 and insert " (i) - "building scheme" means a scheme (express or implied) under which land (whether freehold or leasehold) is divided into two or more parcels subject to obligations which are reciprocally enforceable (whether at law or in equity) between owners of the parcels; and

"relevant building scheme" in relation to any land, means a building scheme which includes the land or which is taken to subsist in respect of the land by virtue of section 17 (6)".

1045.

That is the second of the two amendments.

1046.

The Chairperson: Those are the two amendments from the Office of Law Reform. Are members happy that they cover the issues?

Members indicated assent.

1047.

The Committee Clerk: Perhaps we should just formalise those two amendments.

The Finance and Personnel Committee recommends that clause 16 of the Ground Rents Bill be amended as follows: Page 12, line 6, leave out from "his" to the end of line 11, and insert "other participants in a relevant building scheme immediately before the redemption of the ground rent by virtue of that scheme".

1048.

The Chairperson: Are members agreed?

Members indicated assent.

1049.

The Committee Clerk: To formalise the second amendment the motion would be: The Finance and Personnel Committee recommends that clause 16 of the Ground Rents Bill be amended as follows: Page 12, line 26, leave out from "2(g)" to the end of 28 and insert "(i) - "building scheme" means a scheme (express or implied) under which land ) whether freehold or leasehold) is divided into two or more parcels subject to obligations which are reciprocally enforceable (whether at law or in equity) between owners of the parcels; and

"relevant building scheme" in relation to any land, means a building scheme which included the land or which is taken to subsist in respect of the land by virtue of section 17(6)".

1050.

The Chairperson?

1051.

Members agreed?

Members indicated assent.

1052.

The Chairperson: We move to clause 17 and the enforceability of covenants.

1053.

The Clerk: The final clause. We can then go back and formally adopt each of the clauses, as amended. I have just realised that we forgot to do that as we went through.

1054.

The Committee delayed agreement of this clause because of a number of amendments that the Office of Law Reform wished to make to clauses 16 and 17.

1055.

The Office of Law Reform was asked, regarding subsection (6) (a), whether the existing wording at line 17, that is "the rent-owner and his successors", is intended to mean "the rent-owner and his successors in title" - it would not be appropriate to involve successors who have no interest in the title.

1056.

The Office of Law Reform said that it had sought the views of the Legislative Counsel on the matter. In its most recent letter, the Office of Law Reform has proposed three amendments to the clause, saying they

"are consequential to amendments made to clause 16 relating to the Housing Executive and the definition of 'neighbours' as regards the amenity covenants listed in Clause 16(2)(g). There is also a drafting amendment in relation to 'successors in title' which was previously recommended by the Committee."

The first amendment to clause 17 relates to the successors. The motion is: The Finance and Personnel Committee recommends that clause 17 of the Ground Rents Bill be amended as follows: On page 13, line 17, after 'successors' insert 'in title'.

1057.

The Chairperson: Agreed?

Members indicated assent.

1058.

The Committee Clerk: The two further amendments are consequential to the changes in clause 16. They have been transposed in the typing, but perhaps we should keep them in order and deal with the second. In clause 17, page 12, line 40

leave out 'or (h)' and insert ',(h) or (j)'.

1059.

Mr Leslie: Subsection (j) is our new insertion.

1060.

The Committee Clerk: Yes. Perhaps we might formalise the amendment to clause 17, page 12, line 40. The motion is: The Finance and Personnel Committee recommends that clause 17 of the Ground Rents Bill be amended as follows: In clause 17, page 12, line 40, leave out "or (h)" and insert ",(h) or (j)".

1061.

The Chairperson: Agreed?

Members indicated assent.

1062.

The Committee Clerk: We come to the second amendment to clause 17. The motion is: The Finance and Personnel Committee recommends that clause 17 of the Ground Rents Bill be amended as follows: On page 13, line 37, leave out "same meaning as in section 16(2)(i)" and insert "meaning given in section 16(7)".

1063.

The Chairperson: Agreed?

Members indicated assent.

1064.

The Committee Clerk: Perhaps the Committee might formally adopt clause 3 as amended.

1065.

The Chairperson: Are members agreed that clause 3, as amended, stand part of the Bill?

Members indicated assent.

1066.

We have to formally agree each of the clauses.

1067.

Do the members agree that clause 6, as amended, stand part of the Bill?

Members indicated assent.

1068.

Do members agree that clause 15, as amended, stand part of the Bill?

Members indicated assent.

1069.

Do members agree that clause 16, as amended, stand part of the Bill?

Members indicated assent.

1070.

Do members agree that clause 17, as amended, stand part of the Bill?

Members indicated assent.

1071.

The Committee Clerk: The Committee, at its last meeting, did not have time to consider the three schedules. There are several issues. In schedule 1(4)(3), the Committee considered the intention that (when the ground rent is fixed and the multiplier is applied to the redemption money) where the ground rent is subject to a provision for increase, the redemption money takes account of that provision, but is subject to a discount of 8% per annum. Where that increase would occur more than 12 years after the application date, it is ignored.

The Office of Law Reform was asked to clarify the way in which this would work. In its most recent letter, the Office of Law Reform said: "The amendment to Schedule 1 arises from the discussion with the Committee as regards the discount payable upon redemption of a ground rent subject to a future increase. The effect of the amendment is to remove the figure of 12 years and 8% from the face of the Bill and leave it to the Department's Order making power to fix the relevant number of years and the appropriate discount rate. As these figures may change over time, the OLR advise that the primary legislation should remain neutral as to the actual figures to be used. The Department's Order making power will be subject to scrutiny by the DFP Assembly Committee and further consultation and consideration may appropriately be postponed."

The amendments then proposed by the Office of Law Reform to the schedule are as follows: The first amendment is to Schedule 1, page 22, line 36: Leave out "is more than 12 years after the application date" and insert "falls after the expiration of the relevant period."

1072.

The Chairperson: Are Members happy with that?

Members indicated assent.

1073.

The Committee Clerk: To formalise that, the motion would be that: The Finance and Personnel Committee recommends that schedule 1 of the Ground Rents Bill be amended as follows: That at page 22, line 36, leave out "is more than 12 years after the application date" and insert "falls after the expiration of the relevant period."

1074.

The Chairperson: Are we all agreed?

Members indicated assent.

1075.

The Committee Clerk: The second amendment is at page 23, line 1.

Leave out from "is 12 years" to the end of line 9 and insert "falls within the relevant period, the yearly amount of the ground rent shall be determined in such manner as may be specified in an order under paragraph 2.

(4) In this paragraph 'the relevant period' in relation to a ground rent, means the period commencing on the application date and consisting of the number of years fixed by an order under paragraph 2 as the number of years purchase applicable to ground rents (or, as the case may be, applicable to ground rents of the same class or description as that ground rent)."

1076.

The Chairperson: Is that clear to everyone? Agreed?

Members indicated assent.

1077.

The Committee Clerk: The formal motion is therefore: The Finance and Personnel Committee recommends that schedule 1, page 23, line 1 of the Ground Rents Bill be amended as follows: Leave out from "is 12 years" to the end of line 9 and insert "falls within the relevant period, the yearly amount of the ground rent shall be determined in such manner as may be specified in an order under paragraph 2.

1078.

The Chairperson: Agreed?

Members indicated assent.

1079.

The Committee Clerk: We should formalise that schedule 1, as amended, stand part of the Bill.

1080.

The Chairperson: Do members agree that schedule 1, as amended, stand part of the Bill?

Members indicated assent.

1081.

The Committee Clerk: We move on then to schedule 2. The concern was that the Bill will amend article 35 of the Property (Northern Ireland) Order 1997 to include "nominal" rents in its procedure. The Law Society expressed concern that article 35 will be of no application. The Office of Law Reform was asked whether it would be possible for a formula to be devised that would meet these concerns. In a previous response the Office of Law Reform said

"Having consulted with First Legislative Counsel we have now decided to repeal article 3 (2) (a) of the Property (NI) Order 1997 as it can no longer have any practical impact. This repeal should address the concerns of the Law Society as to the possibility of confusion in the 1997 Order on the definition of a 'ground rent'."

1082.

That repeal is dealt with in schedule 3. Perhaps it might be best, if members are agreed that the repeal should go ahead, for us to deal with the amendment when we get to schedule 3. It is probably just a matter of agreeing in principle that the repeal should be made.

1083.

The Chairperson: Are we happy enough? Agreed?

Members indicated assent.

1084.

The Committee Clerk: The next item in this schedule deals with fee farm grants. The concern was that article 35 expressly applies only to "a leasehold estate". Although the standard redemption procedure in the Bill does not distinguish between ground rents and fee farm rents, the article 35 procedure is available only as regards ground rents. While the Bill amends the article 35 procedure to include nominal ground rents, it does not amend the procedure so as to include fee farm rents.

1085.

The Office of Law Reform was asked whether the Bill should be amended to provide for an amendment to the article 35 procedure that would allow redemption thereunder of nominal fee farm rents. In its previous response, the Office of Law Reform said:

"We have already instructed First Legislative Counsel to amend Article 35 of the Property (NI) Order 1997 to cover nominal fee farm rents as well as nominal leasehold rents. At present that amendment is being considered by expert conveyancers. As with all draft amendments, we will put these to the Committee before the end of the Committee Stage."

1086.

In its most recent response, the Office for Law Reform proposed three amendments to the schedule, the third of which takes into account concerns about article 35 of the Property (NI) Order 1997. On the third amendment:

"The amendment listed at line 18 of page 24 applies the enlargement of a leasehold estate subject to no or a nominal rent to no or nominal fee farm rents. This amendment addresses the concerns of the Committee and the Law Society in relation to nominal fee farm rents. The substantive provisions of this amendment mirror (with appropriate modifications) the provisions on article 35 of the Property (NI) Order 1997."

1087.

What follows - I think it is necessary to read this out so that we can adopt it properly later, if that is the Committee's decision - is the amendment to schedule 2, page 24, 18, at end insert: "( ) After Article 35 insert -

Redemption of nominal ground rent

35A. - (1) Subject to paragraph (2), this Article applies where the rent payable under a fee farm grant is a nominal rent.

(2)This Article does not apply at a time when -

(a) the land is used wholly for business purposes; or

(b) the rent-payer is prohibited by any term of his title from using the land otherwise than wholly for business purposes;

(4) On an application under paragraph (3) -

(a) if the land is registered land, the deed of declaration is sufficient authority for the Registrar (subject to compliance with rules) -

(i) to discharge any burden such as is mentioned in paragraph 2 of Part 1 of Schedule 6 to the Land Registration Act; and

(ii) to make such alteration in the class of title with which the land is registered as appears to him to be appropriate;

(6) Subject to paragraphs (4), (5) and (7), the deed of declaration operates by virtue of this paragraph to discharge the estate of the rent payer from all estates in the land of the rent-owner and any superior owners to the extent that those estates carry entitlement to ground rent or superior rent or relate to matters connected with the rent and to that extent those estates are extinguished.

(7) Where a ground rent is discharged under this Article, section 13(8) (read with subsection (10)) and section 15(2), 16 and 17 of the Ground Rents Act (Northern Ireland) 2001 apply in relation to the land as if the ground rent had been redeemed under that Act; and, accordingly, for the purposes of this Article those sections shall be read with the necessary modifications.

(9) In this Article "nominal rent" has the same meaning as in Article 35."

1088.

The Chairperson: OK. Have members any issues that they want to raise on that, or any comments to make?

1089.

Mr Leslie: For clarification purposes I refer to page 12 of the notes on the third amendment where it says

"applies the enlargement of a leasehold estate subject to no or a nominal rent to no or nominal fee farm rents."

1090.

This is just a drafting point, but does it mean fee farm rents subject to no or a nominal rent?

1091.

Mr Lambe: It means the same thing.

1092.

Mr Leslie: I wondered if it meant something different as it was worded the other way around.

1093.

Ms Goldring: It means the same thing.

1094.

The Chairperson: Any other points? Do you want to give any further clarifications?

1095.

Ms Goldring: No, nothing further.

1096.

The Chairperson: Are members agreed?

Members indicated assent.

1097.

The Committee Clerk: The motion is as follows

The Finance and Personnel Committe recommends that schedule 2 of the Ground Rents Bill be amended as follows

Page 24, line 18, at end insert

"( ) After Article 35 insert -

Redemption of nominal ground rent

35A. - (1) Subject to paragraph (2), this Article applies where the rent payable under a fee farm grant is a nominal rent.

(2) This Article does not apply at a time when -

(a) the land is used wholly for business purposes; or

the rent-payer is prohibited by any term of his title from using the land otherwise than wholly for business purposes;

(4) On an application under paragraph (3) -

(a) if the land is registered land, the deed of declaration is sufficient authority for the Registrar (subject to compliance with rules) -

(i) to discharge any burden such as is mentioned in paragraph 2 of Part 1 of Schedule 6 to the Land Registration Act; and

(ii) to make such alteration in the class of title with which the land is registered as appears to him to be appropriate;

(5) Except where the Registrar is satisfied that the land was subject to no or nominal superior rent on the date of execution of the deed of declaration, the Registrar shall enter on the register a note to the effect that the fee simple estate is subject to a rentcharge of so much (if any) of any superior rent as would have been redeemed by virtue of Article 11(1) of the Ground Rents Act (Northern Ireland) 2001 if a ground rent to which the land was subject had been redeemed under section 1 of that Act on that date; and such a note may be discharged in accordance with rules, and it is sufficient to satisfy the Registrar as to the matter mentioned at the beginning of this paragraph that is furnished by a solicitor with a certificate to that effect.

(6) Subject to paragraphs (4), (5) and (7), the deed of declaration operates by virtue of this paragraph to discharge the estate of the rent payer from all estates in the land of the rent-owner and any superior owners to the extent that those estates carry entitlement to ground rent or superior rent or relate to matters connected with the rent and to that extent those estates are extinguished.

(9) In this Article "nominal rent" has the same meaning as in Article 35."

1098.

The Chairperson: Agreed?

Members indicated assent.

1099.

The Committee Clerk: The two other amendments are technical changes. The Office of Law Reform has stated that the first two amendments to schedule 2 are to tighten up the Bill. The first is as follows

That in Schedule 2, page 23, line 34, after "35(8)" insert "or 35(A)7".

1100.

The Chairperson: Agreed?

Members indicated assent.

1101.

The Committee Clerk: To formalise that, the motion is as follows

The Finance and Personnel Committee recommends that clause 2 of the Ground Rents Bill be amended as follows: That at page 23, line 34, after "35(8)" insert "or 35(A)7"

1102.

The Chairperson: Agreed?

Members indicated assent.

1103.

The Committee Clerk: The second amendment is also to schedule 2

At page 24, line 12, leave out "(7) to (10)" and insert '"7), (8) and (10)"

1104.

The Chairperson: Agreed?

Members indicated assent.

1105.

The Committee Clerk: To formalise that, the motion is as follows

That the Finance and Personnel Committee recommends that schedule 2 of the Ground Rents Bill be amended as follows: At Page 24, line 12, leave out "(7) to (10)" and insert "(7), (8) and (10)"

1106.

Mr Hussey: Before the motion is put for agreement, I want to refer to page 13 of the schedule of remaining clauses for agreement. I know that this is already agreed, but at the end of paragraph (5), where it refers to the furnishing of a certificate, is a solicitor the only person who can properly furnish such a certificate?

1107.

Mr Leslie: There was some discussion about a surveyor providing that.

1108.

Mr Hussey: If that is so, is it right that this should be so restrictive? I know we have agreed it, but should it not read "that he is furnished with a certificate to that effect"?

1109.

Mr Lambe: The previous discussion as to who could provide sufficient evidence to the Land Registry arose in the context of an application by a rent payer to redeem ground rent - this is a quite separate mechanism.

1110.

Mr Hussey: Can it only be effected by a solicitor?

1111.

Mr Lambe: That is so according to the wording of the legislation, and I would suggest that it is entirely appropriate.

1112.

Mr Hussey: That is not my question. It may be appropriate, but is a solicitor the only person who can effect a certificate?

1113.

Mr Lambe: That is what the legislation specifies.

1114.

Mr Leslie: The point Mr Hussey and I are making is that, when we took evidence from the Land Registry, we discussed how evidence of title would be provided. They suggested that normally it would be a solicitor, but there would be some flexibility, and it was going to be specified by the rules. However, that is in relation to the repeal of the Ground Rents Bill, rather than to article 35 of the Property Order. There is that distinction. I think that is how I remember it.

1115.

Mr Lambe: Yes. Clause 6 of the Ground Rents Bill is silent as to who may provide sufficient evidence of good title to the Registrar.

1116.

Mr Leslie: We would seek the lower level.

1117.

Mr Weir: If there is a question mark over whether someone else supply a certificate, what do the words "by a solicitor" add to it? It might not make any difference in practical terms, but -

1118.

Mr Leslie: The reason why a solicitors certificate is taken by the Land Registry is that it is more or less indemnifying. A solicitor takes responsibility for the statement that the title is correct, without actually having gone through the whole business of providing the indemnity. Therefore, in a sense, that is simplifying the procedure. To try to get an indemnity before making a statement would be another exercise.

1119.

The Chairperson: Is there a danger, if we do not tie it down, that each person could claim that his or her certificate of authorisation is as good as the other one?

1120.

Ms Goldring: To do it this way is established conveyancing practice. We would be reluctant to interfere with that.

1121.

The Chairperson: The fact that the solicitor is an officer of the court in other circumstances also ties the solicitor down. Are we agreed that it is best to tie it down. It probably does not make a lot of difference whether a solicitor or someone else provides it. If it comes up, somebody is going to have to be paid for it anyway.

1122.

Mr Leslie: I think that Derek Hussey has made a very eagle-eyed point, but I would be inclined to leave it as it is.

1123.

Mr Hussey: It is not to say that I do not like solicitors. [Laughter]

1124.

The Chairperson: There is certainly merit in your concern.

1125.

OK. Is everybody happy enough?

1126.

Mr Leslie: I just want to go back to this arm wrestle that we have had with the Law Society about whether "nominal" should be "£1 or less", or "less than £1". We have stayed throughout with "less than £1". The effect of this then is to consolidate that provision because it kicks "less than £1" into the article 35 procedure of the Property (Northern Ireland) Order 1997. £1 and over would.

1127.

The Chairperson: We agreed that that was the best system.

1128.

The Committee Clerk: We need to formally agree the second amendment. The motion would be

1129.

The Finance and Personnel Committee recommends that schedule 2 of the Ground Rents Bill be amended as follows

1130.

Page 24, line 12, leave out "(7) to (10)," and insert (7), (8) and (10)".

1131.

The Chairperson: Agreed?

Members indicated ascent.

1132.

The Committee Clerk: Members may wish to agree that schedule 2, as amended, stand part of the Bill.

1133.

The Chairperson: Agreed?

1134.

Members indicated ascent.

1135.

The Committee Clerk: We move on to schedule 3. The Office of Law Reform previously indicated that an amendment to the schedule of repeals would be needed to give effect to the proposal in order to address the concerns of the Law Society. In its most recent response on 15 September 2000, the Office of Law Reform proposed two amendments to the schedule to tidy up the Property (Northern Ireland Order) 1997. It stated

The first amendment is a drafting law repeal measure to ensure that unnecessary definitions are not retained in the Property (NI) Order 1997."

1136.

The amendment is

At page 24, line 29, at end insert "and in the definitions of 'rent-owner' and 'rent-payer' the words 'without prejudice to Article 32'.

Members indicated ascent.

1137.

The Chairperson: Do members agree?

1138.

The Committee Clerk: To formalise matters, the motion would be

The Finance and Personnel Committee recommends that schedule 3 of the Bill be amended as follows: Page 24, line 29, at end insert "and in the definitions of 'rent-owner' and 'rent-payer' the words, without prejudice to Article 32,"'.

1139.

The Office of Law Reform says

The second amendment has similar effect in repealing the definition of a nominal rent in the 1997 Order. With the Ground Rents Bill coming into operation there is no need to retain this definition in Article 3 of the 1997 Order."

1140.

The amendment is

Page 24, line 32, at end insert "Article 3(2)(a)."

1141.

The Chairperson: Do members agree?

Members indicated assent.

1142.

The Committee Clerk: The formal motion then would be

The Finance and Personnel Committee recommends that schedule 3 of the Ground Rents Bill be amended as follows: That at page 24, line 32, at end insert "Article 3(2)(a).

1143.

The Chairperson: Agreed.

Members indicated assent.

1144.

The Committee Clerk: As the Committee agreed long and short titles of the Bill at its last meeting, that effectively concludes this part of the consideration.

The Chairperson: I thank Ms Goldring and Mr Lambe for their patience and perseverance throughout. The process has been drawn out, but hopefully the right amendments have been made, and we have a better Bill. Thank you very much indeed for coming along. I also thank Members for their endurance.

TOP
Appendix 3

Annexes to the minutes of evidence

The Annexes to the Minutes of Evidence of the Committee that were submitted to the Committee as evidence on the Ground Rents Bill are given below.

Annex 1:

Written submissions by The Law Society of Northern Ireland, comprising:

A letter dated 25 August
A note of the oral evidence given to the Committee on 5 July 2000
A note on The Property (NI) Order 1997 Article 35.

Annex 2:

Written submission by The Royal Institution of Chartered Surveyors in Northern Ireland.

Annex 3

Written submission by the Northern Ireland Housing Executive.

Annex 4

Written submissions by Grent Trust Limited, comprising:

Letter dated 28 June 2000
Letter dated 30 August 2000.

Annex 5

Written submission by The National Association of Estate Agents.

Annex 6

Written submission by Mary E O'Donnell, Old Saintfield Road, Carryduff, Belfast dated 25 July 2000.

Annex 7

Written submission by the Office of Law Reform, Department of Finance and Personnel, dated 14 November 2000.

ANNEX 1

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
the law society of northern ireland

25 August 2200

committee stage

Thank you for your letter of 26 July. I note that the Committee is due to commence a detailed scrutiny of the Bill on Thursday 7 September.

I confirm that the Society is in agreement with the overall purpose of the Bill and welcomes the move towards simplification of title. However, there are a number of points on which the Society would like to make submissions. These are as follows:-

1. Under the Property (NI) Order 1997, Article 35, there is a procedure whereby a lease subject to a nominal rent can be enlarged into a freehold estate by means of a declaration. Would it be possible to extend its scope to include fee farm grants which are subject to a nominal rent?

2. In Section 28(2) of the Ground Rents Bill, a nominal rent is defined as rent which is less than £1. As we are informed that there are a large number of £1 rents, in existence we wonder whether it would be possible to amend the definition to "£1 or less". Indeed, one of our members has suggested that in his view the definition should be extended further to include rents up to say £10 because the capital values of such rent does not justify use of the proposed redemption procedure.

3. We note a flat is defined in Section 3(7) of the Ground Rents Bill as being a unit of accommodation which:

depends on another for support or shelter;
has a boundary between at least 2 such units; and
shares common parts.

We wonder if that definition is too narrow in that certain properties which ought to be excluded from the legislation are effectively included. For example, we have been informed that some apartments have been constructed in such a way that they do not share any common areas and in our view these properties should be included in the definition.

4. When a ground rent payable out of a property has been redeemed by the rent payer, the former rent owner is left with an interest in the property. We are uncertain as to the legal status of this interest although we do not consider that it amounts to a legal estate. We also doubt whether such an interest would generally have any market value, although we acknowledge that in certain circumstances the right to enforce a covenant may be an interest that could be sold. Is it the intention of the legislature that such interest should be able to be transferred either inter vivos or by will? If, as is anticipated, it transpires that many of the residual reversionary interests are of no value either in market terms or as legal interests, will they simply "wither on the vine" as equitable interests affecting land previously did when local registration of title came into existence?

We should be grateful if you would give consideration to these points. Perhaps you would also note the need for the Society to be consulted when the detailed rules which will set out the requirements under which the redemption scheme will operate.

If necessary, representatives of the Society would be willing to appear before the Committee for a more detailed presentation.

SARAH WITCHELL
Assistant Secretary

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
the law society of northern ireland

1. My name is John Neill. I am Junior Vice President of The Law Society of Northern Ireland. I am accompanied by Mrs Sarah Witchell, Assistant Secretary of the Society and author of the recently published book "Residential Property Law in Northern Ireland", Brian Walker, Past President of the Society and currently Chairman of our Home Charter Committee, and Donald Eakin, Member of Council, and former Lecturer in Property Law at Queen's University Belfast. We are all Solicitors with wide experience in real property and conveyancing law and practice, and in the process of buying and selling of property generally.

2. I welcome this opportunity of submitting evidence to the Committee, and to be constructively involved in the legislative process. We have been in mutually constructive dialogue with the Office of Law Reform in connection with the Property (Northern Ireland) Order 1997, and with the Ground Rents Bill. We have jointly benefited from the involvement in the process of Professor John Wylie, perhaps the leading living authority on the land law of Northern Ireland.

3. We have already written to you, setting out some detailed comments on the Bill as currently drafted, and I shall revert to this shortly. First I would like to make some general comments about the Bill, and property law and practice generally.

4. The Law Society is eager to play its part in the modernisation of the law of property. We commend the thinking behind this legislation and the policies of striving to achieve a culture of freehold ownership of private residential property, the progressive abolition of hierarchy titles, and the abolition of ground rents. We would encourage Government to take up some of the further measure recommended in the Final Report of the Land Law Working Group published in 1990 by the Department of Finance and Personnel, which formed the basis of the current legislation, and further recommended the removal of some outdated legal concepts, and the introduction of new ones, such as the creation of commonholds for blocks of flats. The Law Society has promoted the Home Charter Scheme for private housing developments, which has improved the house buying process significantly. We have actively supported the ongoing computerisation of the Land Registry and the extension of compulsory registration of titles, and we welcome the Government initiative to modernise the systems whereby property certificates and searches are provided.

5. Turning to the Ground Rents Bill itself, we await with interest the publication in draft of the necessary subordinate rules and forms, which will be of vital importance if this whole concept is to flourish. We would urge Government to provide all necessary resources to enable the Land Registry to perform its pivotal role in this process, not only so as to ensure that the redemption procedure will operate smoothly and that certificates of redemption may issue quickly under seal of the Registrar of Titles, and that records of transactions will be readily available to interested parties, but also that as many ground rents as possible may be redeemed over as short a time span as possible. The Land Registry should have sufficient resources made available by Government funding to enable it to employ sufficient suitably trained staff to enable matters to move forward quickly. It would clearly be unsatisfactory for the redemption process to take many years to be completed. And Government has an important role in educating the public as to what this process is all about. It cannot simply be left to the legal and estate agency professions to do this.

6. Our specific comments on the Bill are as follows:-

(a) We note a flat is defined in Section 3(7) of the Ground Bill as being a unit of accommodation which:

depends on another for support or shelter;
has a boundary between at least 2 such units; and
shares common parts.

We consider if that definition is too narrow in that certain properties which ought to be excluded from the legislation are effectively included. For example, we have been informed that some apartments have been constructed in such a way that they do not share any common areas and in our view these properties should be included in the definition.

(b) When a ground rent payable out of a property has been redeemed by the rent payer, the former rent owner is left with an interest in the property. We are uncertain as to the legal status of this interest although we do not consider that it amounts to a legal estate. We also doubt whether such an interest would in most cases have any significant market value, although we acknowledge that in certain circumstances the right to enforce a covenant would be an interest of value that could be sold. Is it the intention of the legislature that such interest should be able to be transferred either inter vivos or by will? This needs to be clarified. If, as is anticipated, it transpires that many of the residual reversionary interests are of no value either in market terms or as legal interest, will they simply "wither on the vine" as equitable interests affecting land previously did when local registration of title came into existence?

(c) Under Article 35 of The Property Order there is a procedure (subject to what I shall say in the next paragraph) whereby a lease subject to a nominal ground rent can be enlarged to a freehold estate by means of a declaration. We think that its scope should be extended so as to include fee farm grants which are subject to a nominal rent. There is no logical reason, in our view, why this should not apply equally to fee farm grants as to leases.

(d) Article 3 of The Property Order has not been repealed by the Ground Rents Bill, and by sub section 2(a) of the Order it is provided that where a Ground Rent is of a yearly amount of less than One Pound or is a Peppercorn or other rent having no money value, it shall be treated as a yearly amount of One Pound. It seems to us that Article 35 can therefore never apply, as it only operates where no or nominal rent is incident to the reversion. We wonder if this is what was intended, and suspect that it was not. Perhaps the drafting of this could be revisited and Articles 3(2)a and 35 of the Property Order amended so as to enable nominal ground rents and fee farm rents to be redeemed by the declaration procedure.

(e) In section 28(2) of the Ground Rents Bill a nominal rent is defined as rent which is less than One Pound. We would suggest that as there are a significant number of One Pound Rents in existence the definition should be amended so as to cover yearly payments of "One Pound or less" as opposed to "less than One Pound". Indeed one of our members has suggested that in his view the definition should be extended further to include rents up to, say, Ten Pounds, because the capital value of such rents do not justify the use of the proposed redemption procedure.

7. We should be grateful if you would give consideration to these points. We would request that the Society, and indeed our colleagues in the Estate Agency Profession, should be consulted when the detailed rules and forms which will set out the requirements under which the redemption scheme will operate are being prepared.

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
THE LAW SOCIETY OF NORTHERN IRELAND

property (ni) order 1997 and ground rents bill 2000

specific points made by the law society of northern ireland
Property (NI) Order 1997, Article 35

This provision preserves a procedure which was available under Section 65 of the Conveyancing Act 1881. It enables a lessee of a lease with a nominal or valueless rent to enlarge his lease into a freehold estate by way of a straightforward declaration. This means he does not have to go through the redemption procedure nor pay any redemption money to obtain the freehold.

In order for the enlargement procedure under Article 35 to be effective, a nominal rent must be excluded from the definition of a ground rent which has to be redeemed under the redemption scheme sent out in the Ground Rents Bill.

Ground rent is defined in Article 3 of the Property (NI) Order 1997 as follows:-

3(1) in this Order "ground rent" means -

(a) a fee farm rent; or

(b) the rent payable under a lease granted for a term of more than 50 years.

3(2) for the purpose of this Order -

(a) where a ground rent is a yearly amount of less than £1 or is a peppercorn or other rent having no money value, it shall be treated as a yearly amount of £1.

If this definition stands, all ground rents are treated as having a value of at least £1 per annum.

Ground rent is defined in Section 28 of the Ground Rents Bill 2000 as follows:-

28. (1) In this Act "ground rent" means:-

(a) a fee farm rent; or

(b) the rent payable under a lease granted for a term of more than 50 years, other than a nominal rent.

(2) In subsection (1) "nominal rent" means, -

(a) a rent of a yearly amount of less than £1 or

(b) a peppercorn or other rent having no money value.

(3) For the purposes of the Act where a ground rent is payable if demanded (however expressed), it shall be treated as payable even though there is no demand.

It had been suggested that Article 3(2)(a) of the Property Order might be redrafted as follows:-

3(2)(a) a ground rent shall not include a nominal ground rent (this is a ground rent of a yearly sum of less than £1 or a peppercorn or other rent having no money value).

This amendment was not made to Article 3(2)(a) and the definition in the Ground Rents Bill is as stated above.

Article 35 of the Property (NI) Order 1997 applies to a leasehold estate where:-

(a) the unexpired residue of the term of the lease is more than 50 years; and

(b) no or nominal rent is incident to the reversion.

[the words "or nominal" were added to Article 35(b) by Schedule 2 paragraph 2(5)(a) of the Ground Rents Bill 2000]

It had also been proposed that (b) should be amended to read:-

"there is incident to the reversion -

(i) no rent; or

(ii) only a nominal rent (ie yearly amount of less than £1 or a peppercorn or other rent having no money value)"

but this amendment was not incorporated in the Ground Rents Bill.

synopsis

Nominal rents were intended to be covered by the Article 35 procedure in the Property (NI) Order 1997.
Arguably, for Article 35 to be effective the definition of nominal rent in the property (NI) Order 1997 should be as proposed by Professor Wylie.
Otherwise all nominal rents are excluded because they are deemed to be of £1

In that case Article 35 is of no application.

Annexes to the Minutes of Evidence

ANNEX 2

COMMITTEE FOR FINANCE AND PERSONNEL
ground Rents bill 2000

WRITTEN SUBMISSION BY:
THE ROYAL INSTITUTION OF
CHARTERED SURVEYORS IN NORTHERN IRELAND

1. Introduction

The RICS is pleased to have this opportunity to comment on the Bill at its Committee Stage.

There is insufficient detail in the Bill to enable a comprehensive response, and the RICS suggests that the Bill be delayed until these detailed points can be included. In particular, clarification is required on issues of redemption money, the various rules including apportionment rules and the speed of conveyance due to delays with local authority searches rather than title difficulties.

However, a number of comments are noted below and further oral evidence can be supplied.

2. General Comments

In the view of the RICS, the Bill appears to be biased towards the ground rent payer and lacks detail from the ground landlord's point of view. We would also query the position under the Bill of Human Rights.

It is apparent that more work will fall upon the Land Registry. The RICS would like to know what provision the Government has or will be making to increase staffing and training within Land Registry.

The Bill should contain an indication of what duty of notice applies to Land Registry to notify all interested parties where redemption takes place. Similarly, what duty of notice applies to solicitors acting for vendor or purchaser, to notify all interested parties when the redemption procedure has been invoked?

3. Redemption - 4.

It is suggested that the payee should lodge six years' arrears with the Land Registry if he contends he could not trace the ground landlord to pay the ground rent and therefore has no receipt. Six years is generally held to be the maximum arrears which can be sued for and this provision would mean that the payee would not have an incentive to try to avoid paying ground rent as demanded. Clarification is required that this section should be interpreted to cover this eventuality.

Is the sum referred to purely to cover Land Registry charges, or is it intended that it should cover any costs of the landlord, such as solicitors or agents' costs etc?

4. Disposal of money lodged with Land Registry under section 4(2) - 6

There seems to be no provision for the endorsement of deeds. A number of documents will need to be endorsed to show the effect of the redemption, especially where the redemption is a partial, rather than a whole redemption. This is particularly important to head landlords where the redemption would be on a piecemeal basis and indeed in some cases, the redemption may never be a total redemption on the basis that some of the property that secures the head rent is commercial rather than residential. Are there any costs to be paid to solicitors etc when endorsing the appropriate apportionment on the title documents?

No definition is given as to the rules referred to throughout this section.

There is a reference to an apportionment, but no indication as to how that apportionment is to be calculated.

An indication is required as to what exactly are the rules referred to.

Clarification as to who pays the costs of Lands Tribunal Appeals is required.

Interest should be compound interest - not simple interest and the rate should be equivalent to the interest allowed by the Government on foot of unpaid compensation.

5. Superior Rents - 11.2

It would appear that the same percentage apportionment will apply throughout the pyramid of title, which is illogical. Each case should rise and fall on its own percentage and not be based on the same apportionment throughout.

6. Lands in separate occupation subject to single ground rent - 12

It is not clear what this section intends to achieve. How far up the chain is it intended for the scheme to go, and where does it stop? It would appear to be a mechanism of exchanging one ground landlord for another without achieving much in the process.

7. Covenants/Enforceability of covenants - 16/17

Can covenants still be enforced against previous owners in breaches of covenant eg rent arrears etc?

8. Interpretation "ground rent" - 28

The three issues of ground rents of less than £1, the position of lands held with a dwelling, and town park leases have not been addressed.

What involvement has the ground landlord when the rent is less than £1 and the rent payer can make a deed of declaration?

9. Schedule 1

There does not seem to be anything in the draft which indicates what the likely redemption figure is going to be and indeed whether the redemption figure will take into account not only the Land Registry costs, but also the costs of the landlord's solicitor in proving title and the landlord's agents in providing information and sorting out apportionments etc.

Is there any provision for a sliding scale between head rents and sub-rents?

Finally, the schedule refers to ground rents payable under a building lease, with no provision for the situation where rents are not payable under a building lease.

ANNEX 3

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
northern ireland housing executive

31 August 2000

committee stage

Thank you for your letter of 26 July, offering the Housing Executive the opportunity to comment in relation to the purpose and detail of the above Bill.

The Housing Executive is in full agreement with the overall purpose of the Bill.

Our Officers have had the opportunity to have discussions with Officers of the Office of Law Reform, in relation to the detailed provisions of the Bill.

We understand that the Minister for Finance and Personnel intends to propose certain amendments to the Bill, with a view to making sure that the legislation does not affect the enforceability of certain covenants which the Housing Executive includes in deeds under which dwellings are sold to sitting tenants of the Executive. If those amendments are approved, the Executive will have no concerns about any aspects of the detailed provisions of the Bill.

P McINTYRE
Chief Executive

ANNEX 4

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY: GRENT TRUST LIMITED

28 June 2000

COMMITTEE STAGE

I am writing to you as Chairman of a grant making charity whose income is derived solely from ground rents regarding the above bill.

First of all, I wish to say that I completely agree that ground rents are an archaic carry over from earlier years and that the sooner procedures for their redemption are in place the better. I also wish to say that I consider the Bill to be an excellent one and the proposals for redemption a great improvement on those contained in The Property Order (Northern Ireland) 1997.

I am concerned however with the Minister's proposal that the multiple to be applied to the annual rent for redemption purposes should be 9. I understand your comments in the debate on the second reading to the Bill regarding compensation "for something that did not belong to you in the first place", but most ground rent owners today have purchased their rents to provide an income, in our case to provide an income to be able to make grants to other charities, and to us it is important that the redemption monies should be such that our income will not be seriously depleted.

Part 1 of the Final Report of the Land law Working Group published in 1991 dealt with ground rents and in Chapter 1.3 it is stated (1.3.2)-

Our basic difficulty in framing the Interim Report was that we were intent on securing that, when redemption money is substituted for a ground rent, the return to the rent-owner (and any superior owners) from an investment representing that money should, as far as possible, be exactly the same as the amount of the rent .. a multiplier should be prescribed which will give an approximate but fair result.

Later on in Chapter 1.5.19, 'The calculation of the redemption money' it states:

We envisage that, say, one or twice a year the Department (of Finance and Personnel) should make an order fixing the multiplier for the following year or six months .. The figure so fixed could be arrived at by taking the previous middle price of a suitable stock . and rounding it up to the next whole number.

It would appear that the Department has moved away from this principle in suggesting a figure of nine and I believe that this would be a contravention of the Rent Owner's Human Rights.

Paragraph 22 of the Explanatory and Financial Memorandum issued with the Bill earlier this month refers to Human Rights Issues and accepts that the proposals for redemption affects rent owners and goes on in paragraph 23 to say that the possession and peaceful enjoyment of property as guaranteed by Article 1 of the First Protocol to the European Convention on Human Rights will be complied with on the grounds that:

(a) there will be adequate compensation paid to the rent owner.

In the view of the Directors of this Trust, nine years purchase of the annual rent will not represent adequate compensation as we will be unable to reinvest such a payment to produce a similar income. As stated above, our income is derived wholly from ground rents and any reduction in that income would seriously affect the amount we are able to distribute annually, £50,000 for 1999 and hopefully £60,000 for the present year. At present the yield on War Stock is 4.74% so that to obtain the same income by investing the redemption monies in a perpetual Government stock would require a multiple of over 20.

There will however be a saving to ground rent owners as the income of subsequent reinvestment will not be subject to the costs of collection that he has to suffer to receive his ground rent income, and accordingly a lower multiple might be necessary. In our case however, any multiple lower than 12 would have a serious effect on our income and our ability to support good causes.

I appreciate that the multiple to be applied is not a part of the Bill under consideration by your Committee but a matter for the Minister to determine. I hope however that it is a matter which your committee will include in your review and make a recommendation to the Minister. Mr Durkan mentioned in the Debate that the Valuation and Lands Agency had advised that a multiplier of nine is a good reflection of the purchase price currently being paid when a ground rent is redeemed. There is a great difference however between a figure agreed between a willing buyer and a willing seller and a case where the seller has no say in the matter but is forced to sell.

I trust that you will be able to take these matters into consideration at the Committee stage of the Bill.

Yours faithfully

R A HOUSTON
Chairman

ANNEX 5

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
THE NATIONAL ASSOCIATION OF ESTATE AGENTS

31 August 2000

COMMITTEE STAGE

Following a brief conversation with Sharon Bowman earlier this afternoon I wish to put on record the association's position concerning the proposals currently under consideration.

I should commence by stating that upon receipt of your original correspondence I forwarded copies of the proposals to the chairman of our Northern Ireland committee and also a member of our executive committee who currently practices in Northern Ireland.

Apparently on Friday of last week a call was received from the chairman stating that in principal he was in favour of the proposals although unable to confirm positively that this would be the view of all members within the province.

Under the circumstances therefore I believe that the association would maintain a neutral stance in regard to the draft bill although at the same time supportive of any measures that have the overall effect of simplifying the conveyancing process for the benefit of both sellers and buyers.

Although therefore we wish to remain neutral in terms of our response, the one area that does require defining is the question of the multiplier used to calculate the payment of compensation. Clearly this is an important issue in terms of defining the precise amount of compensation for both an existing owner and also of course the new purchaser of a leasehold property on which there is a ground rent payable. Clearly if the compensation calculation is too generous towards the existing ground rent owner then that might have the effect of deterring to potential purchasers from buying a property where a ground rent is payable if the financial burden of redemption is too high.

Apart from this observation the association's position remains as stated.

Yours sincerely

HUGH DUNSMORE-HARDY FRSA FNAEA (Honoured)
Chief Executive

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY: grent trust limited

30 August 2000

Thank you for your invitation to speak to the Committee on the above Bill next week. I would have been very pleased to do so but unfortunately I will be abroad for the next three weeks.

In general we are pleased with the Bill and indeed have been pressing for a redemption scheme since the Final Report of the Land Law Working Group was published in 1991.

Our concern is however that the original proposals of that report for fixing the redemption value appear to have been abandoned and instead a multiple is to be decided by the Department of Finance and Personnel. This would be satisfactory if the formula proposed by the Land Law Working Group was still being used as the basis for calculating such multiple, but in the light of the multiple of 9 given by the Minister in introducing the Second Reading on 20 June, this is not the case.

As a charity, our concern is that our income will fall substantially, possibly by over 50%. At present the yield on Perpetual Government Securities is around 5%, so, on the redemption of a £10 pa ground rend for £90, we would only be able to reinvest the £90 to produce £4.50. The Government Stock does not suffer the collection charges involved in the ground rent, which is approximately one-third of the rent, so a figure of 12 for the redemption multiple would come closer to maintaining our income.

In the memorandum issued along with the publication of the Bill, paragraphs 22 and 23, reference is made to Human Rights issues. It is stated in paragraph 23 that it is thought that the Bill complies with the European Convention of Human Rights as (a) there will be adequate compensation paid to the Rent Owner. As explained above, however, I do not believe that the present proposal will provide adequate compensation and, unless the multiple is looked at and more clearly defined, it would appear that the Bill could be challenged under the Convention.

R A HOUSTON
Chairman

ANNEX 6

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
mary e o'Donnell, Old saintfield road, carryduff, belfast

25 July 2000

I should be most grateful if you could furnish me with some additional information with regard to the above proposed new legislation.

The position is that I hold my bungalow at the above address under two Leases one dated 16 November 1987 for the term of 9,500 years from 1 January 1988 at the yearly rent of five pence (if demanded) and subject to the covenants by the lessees therein contained and the other Lease dated 11 April 1988 for the term of 9,500 years from 1 January 1988 at the yearly rent of five pence (if demanded) and subject to the covenants by the lessees therein contained.

I have read in the press a certain amount about the above proposed legislation but I have been unable to establish whether or not this proposed legislation will enable me to buy out the various covenants which were imposed on the lessees in the Leases.

My Solicitor has explained to me that the position is that under Article 5 of The Property (NI) Order 1978 a lessee can generally apply to the Lands Tribunal to have various covenants modified or partly extinguished and that such applications are usually successful. However there is an exception to the general rule which would affect me. It seems that where the terms of the Lease has a commencement date of less than 21 years from the date of the reference to the Lands Tribunal, (and this would apply to me as the terms of both of my Leases commenced just 12 years six months ago), then the reference can only be made with the leave of the Lands Tribunal and my Solicitor understands that it is very difficult to obtain this leave unless the term of years from the Lease commenced is close to 20 years.

I would be most anxious to discover if the proposed new legislation will contain any provisions enabling a lessee such as myself to buy out the lessee's covenants and I should be most grateful to hear from you.

I have written in similar terms to the Deputy Chairperson.

MARY E O'DONNELL

ANNEX 7

COMMITTEE FOR FINANCE AND PERSONNEL ground Rents bill 2000

WRITTEN SUBMISSION BY:
OFFICE OF LAW REFORM, department of finance and personnel

14th November 2000

Mr Martin Wilson
Clerk
Committee for Finance and Personnel
NI Assembly
Parliament Buildings
Stormont
Belfast BT4 3XX

Dear

GROUND RENTS BILL

I am enclosing a final copy of amendments to the Ground Rents Bill. Committee Members have already had sight of the vast majority of these amendments. In this letter I shall provide a brief summary of each of the amendments.

First, however, I should like to state why we are not suggesting certain other amendments to the Bill which would address some of the concerns the Committee has raised with the Office of Law Reform.

Definition of "flat"

I am not persuaded that there are cogent reasons for departing from the definition of "flat" contained in Clause 3 of the Ground Rents Bill. This definition originated in the final report of the Land Law Working Group in 1990 and until recently has not been challenged. Officials in OLR have continued to discuss this issue with the Law Society. Although the Law Society have argued that the reference to "common parts" in Clause 3 should be deleted, they have been unable to predict all the likely consequences of such an amendment. In light of this uncertainty I would recommend that the existing definition remain unamended. In view of the debate that this conceptual issue has generated OLR will keep a careful watch on conveyancing practice (along with Law Society and Land Registry colleagues) to determine if the definition of "flat" requires amendment at a later date. Courts will obviously have an important role in interpreting the definition.

Disposal of Redemption Money

OLR is conscious that Committee Members have expressed a desire for a simpler procedure to enable rent-owners to claim redemption money owed to them. The Committee has already heard our evidence that we find ourselves unable to agree with the proposal of the Land Registry that monies should be paid out by DFP without a Certificate having first been issued by Land Registry. As I have indicated previously, the amount of redemption money is subject to appeal to the Lands Tribunal (Clause 23(4)) and hence the payment of the redemption money to an entitled rent-owner is in the nature of a quasi-judicial decision. I can see no other course of action than to continue with Land Registry involvement. Committee Members will wish to be reassured that the application fee paid by the rent-owner will be reimbursed in accordance with Clause 4(2)(e).

As Clause 6(3) is currently drafted, Land Registry Rules may prescribe a modified procedure for disposal of redemption money to rent-owners if the amount of redemption money is small. We are actively pursuing this option and one change to the "normal" procedure may be to provide in Rules that where the redemption money is small the Registrar will not require evidence of title provided that along with the application for redemption money the rent-owner provides a copy of the notice received from the rent-payer and signs (as part of the application form) an undertaking to apportion the rent amongst superior owners where they are known to him. An alternative "short procedure" could be confined to cases where there are no superior owners entitled to an apportionment of the ground rent. This is likely to be the case in modern properties with a substantial annual ground rent.

Party-Fence Covenants

[To be finalised]

I shall now deal with each of the amendments as they appear on the attachment.

Clause 3

The amendment to Clause 3 has already been considered by the Committee and ensures that when the Northern Ireland Co-Ownership Housing Association (or other designated housing associations) purchase property for inclusion in a co-ownership scheme they will not be required to redeem the ground rent under Clause 2. This amendment protects those organisations providing affordable social housing from incurring additional costs which they would then have to pass on as part of the purchase price of the property to first time buyers.

Clause 6

This amendment is technical in nature and is designed to ensure that all the requirements of the Northern Ireland Act 1998 are complied with in terms of allocated amounts out of the Consolidated Fund to individual departments.

Clause 15

This amendment deals with the provisions on mortgages. It is probably unnecessary but mortgage lenders have requested such an amendment as an assurance that their existing mortgages on property subject to voluntary redemption will apply to the enlarged fee simple estate.

The second amendment removes the requirement on mortgagees to submit a Certificate of Redemption to the Land Registry in order to have the Register corrected. The Certificate will have been issued by Land Registry and the Registrar of Titles has power in Clause 13 to make any necessary corrections.

Clause 16

The first amendments to Clause 16 appearing on the first page of the attachment provide that the amenity covenants mentioned in Clause 16(2)(g) will survive redemption and be enforceable as between neighbours in a building scheme (participants in a building scheme) and between any person by or against whom such covenants would have been enforceable if redemption had not occurred (ie in accordance with Clause 17(4)).

The second set of amendments to Clause 16 make special provision for common covenants contained in leases by the Housing Executive to sitting tenants purchasing property under the statutory house sales scheme. The Committee has already had sight of these.

Clause 17

The three amendments here are consequential to amendments made to Clause 16 relating to the Housing Executive and to the definition of "neighbours" as regards the amenity covenants listed in Clause 16(2)(g). There is also a drafting amendment in relation to "successors in title" which was previously recommended by the Committee.

Schedule 1

The amendment to Schedule 1 arises from the discussion with the Committee as regards the discount payable upon redemption of a ground rent subject to a future increase. The effect of the amendment is to remove the figure of 12 years and 8% from the face of the Bill and to leave it to the Department's Order making power to fix the relevant number of years and the appropriate discount rate. As these figures may change over time, OLR advise that the primary legislation should remain neutral as to the actual figures to be used. The Department's Order making power will be subject to scrutiny by the DFP Assembly Committee and further consultation and consideration may appropriately be postponed.

Schedule 2

The first two amendments to Schedule 2 are drafting amendments to tidy up the Bill.

The amendment listed at line 18 of page 24 applies the enlargement of a leasehold estate subject to no or a nominal rent to no or nominal fee farm rents. This amendment addresses the concerns of the Committee and the Law Society in relation to nominal fee farm rents. The substantive provisions of this amendment mirror (with appropriate modifications) the provisions on Article 35 of the Property (NI) Order 1997.

Schedule 3

The first amendment is a drafting law repeal measure to ensure that unnecessary definitions are not retained in the Property (NI) Order 1997.

I trust this information is of help to the Committee.

Yours sincerely

Judena Goldring
Director of Law Reform

GROUND RENTS BILL (NIA Bill 6/99)
AMENDMENTS TO BE MOVED AT CONSIDERATION STAGE

Clause 3, page 3, line 42, at end insert -

'(9) Section 2 does not apply to the conveyance or transfer of a dwelling house to-

(a) the Northern Ireland Co-ownership Housing Association; or

Clause 6, page 5, line 33, leave out 'issue out of the Consolidated Fund and'

Clause 15, page 10, line 27, at end add 'and any provision in the instrument providing for an estate acquired by the mortgagor to be held in trust for the mortgagee or appointing the mortgagee as the mortgagor's attorney in relation to such estate applies to the fee simple.'