A big part of the solution to meeting the urgent requirements for social housing in Ireland is the entering into of 25-year leases of housing units by local authorities and approved housing bodies.
Recently the validity of such leases was called into question on the basis that such a lease was void under S.2 of the Landlord and Tenant Act of 1978, which prohibited the creation of any fresh leases of private residential dwelling houses. Leases can of course be created in respect of all other types of property, e.g. flats, commercial or development property and generally of property on which there is no private dwelling house.
The provisions of Section 2.—(1) of the Landlord and Tenant (Ground Rents) Act of 1978 provides as follows:
“Subject to subsection (2), a lease of land made after the passing of this Act shall be void if the lessee would, apart from this section, have the right under section 3 of the Act of 1967 to enlarge his interest into a fee simple and the permanent buildings are constructed for use wholly or principally as a dwelling.”
Section 3 of the Act of 1967 sets out the persons who have the right to enlarge their existing interest in the land into a fee simple and for that purpose to acquire by purchase the fee simple in the land and any intermediate interests therein, including persons holding under building leases (as defined in section 4 of the Landlord and Tenant (Reversionary Leases) Act of 1958, and persons holding the land under a proprietary lease (as defined in Section 7 of the Landlord and Tenant (Reversionary Leases) Act of 1958.
It is clear from review of this section that a 25-year lease at market rent does not confer a right on the lessee to enlarge his or her interest into a fee simple under Section 3 of the Act of 1967.
The 25-year lease is clearly an occupational lease at market rent and differs fundamentally from all of the leases and tenancies set out in Section 3 of the Act of 1967.
The 25-year leases entered into by local authorities and approved housing bodies are not caught by Section 2 as there is no right pursuant to this form of lease to acquire the freehold interest in the dwelling house.
The Land Registry have helpfully issued an amended Practice Direction, now available on their website www.prai.ie, which helpfully confirms “that Leases under the Housing Acts 1966 to 2015 of private dwelling house’s for terms of up to 20 or 25 years at market rent are not prohibited by section 2 as the lessee would not have a right to enlarge its interest into a fee simple under section 3 of the 1967 Act. The PRA can register a note of such a lease for up to 20 years under Section 72(3) of the Registration of Title Act 1964 [1964 Act] and can, in relation to such a lease for 25 years, register it as a burden under section 69(1)(g) of the 1964 Act and open up a leasehold folio.
Whilst the amended Land Registry Practice Direction references Leases under the Housing Acts 1966 to 2015, it is clear from the above analysis, and a logical extension of the Land Registry view, that all leases where no right to acquire the freehold accrues are valid leases.