Republic of Ireland

Author: | Published: 3 Apr 2003
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Commercial leasing

1. What legislation and/or regulatory bodies are responsible for regulating the relationship between landlord and tenant?
The Acts that govern the relationship of landlord and tenant in Ireland are the Landlord and Tenant (Amendment) Act (Ireland), 1860 (Deasy's Act), the Landlord and Tenant Act, 1931 (the 1931 Act) which was repealed by the Landlord and Tenant (Amendment) Act, 1980 (the 1980 Act) and the Landlord and Tenant (Amendment) Act, 1994 (the 1994 Act) (which amended sections 13, 17, 23, and 80 of the 1980 Act), (collectively known as the Landlord and Tenant Acts).

Deasy's Act defines a lease as any instrument in writing, whether under seal or not, containing a contract of tenancy in respect of any lands in consideration of a rent or premium. It is founded on the express or implied contract between the parties where one party holds land under or from another in consideration of rent. The minimum requirements are that all leases, not being from year to year or for a lesser period, must be by deed executed or noted in writing signed by the landlord or his agent lawfully authorized in writing.

In essence, there must be an intention to create the relationship of landlord and tenant and compliance with the legal formalities laid down by law. Once these requirements have been fulfilled the tenant obtains the benefit of all rights and protections afforded to an occupier of premises under the provisions set out in the Landlord and Tenant Acts.

Notable exceptions are leases with business or commercial users stated to be for temporary convenience or to meet the temporary convenience of the landlord or tenant and which are excluded from the provisions of the 1980 Act pursuant to the provisions of section 82(b) of the Housing (Private Rented Dwellings) Act, 1982.

2. What is the effect of a tenant's insolvency and what remedies are available to landlords?
The primary legislation governing the law of insolvency is contained in the Companies Acts, 1963 to 2001 and the Conveyancing and Law of Property Act, 1881. The principal mechanisms for dealing with insolvencies are as follows:

a) Liquidation
Pursuant to section 290 of the Companies Act a liquidator has the power, within 12 months of the commencement of the winding up or such extended period as may be allowed by the court, to disclaim any onerous contracts entered into by the company. Failure by the liquidator to apply to the court within the 12 month period will render the liquidator liable to discharge all rents payable under the lease. Under section 295 (of the 1990 Act) the liquidator may not disclaim if he has failed to give notice of his intention to disclaim within 28 days of receiving written application from the landlord requiring him to decide whether or not he will disclaim. By virtue of section 290 (3) of the 1963 Act the disclaimer operates as and from the date thereof to determine the rights, interests and liabilities of the company and the property of the company in or in respect of the property disclaimed.

Section 290 (7) enables the court, on application by any interested party, to make an order vesting the property in any person entitled thereto on such terms as it thinks fit. Section 290 (8) of the 1963 Act provides that where the relevant property disclaimed is of a leasehold nature the court shall not make a vesting order in favour of any person claiming under the company except upon the terms of making the applicant subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up or, if the court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date. This subsection goes on to provide that any mortgagee or underlessee declining to accept a vesting order upon such terms shall be excluded from all interests in and security upon the property.

A disclaimer of a lease by the liquidator amounts to a breach of contract giving rise to a claim for damages against the company whereby the landlord can prove in a liquidation for the loss sustained by it as a result of the disclaimer as an unsecured claim.

Section 217 of the Companies Act 1963 provides that once a petition is presented for the winding up of a company, the court can order a stay or restrain any new proceedings. Section 219 of the Companies Act 1963 provides that any execution against the goods or property of the company is void. Under section 291 of the Companies Act 1963 a creditor may only retain the benefit of an execution against lands of a company where the execution is completed before the winding up is commenced or the date on which it got notice of the creditors meeting (whichever is earlier). Therefore the landlord cannot execute a judgment for rent or for possession once liquidation proceedings have commenced. He can always seek permission of the court to continue any proceedings which were in existence at the time of the liquidation and may recover the arrears of rent as an unsecured claim in the liquidation or as an expense of the liquidation in certain circumstances, but, there is no guarantee that the landlord will recover these rents.

Therefore while legal proceedings are ruled out, it may be possible for the landlord to execute a quick and speedy forfeiture if he can execute a peaceable re-entry under the forfeiture clause in the lease. Under Section 14 of the Conveyancing Act, 1881 as amended by section 2(2) of the Conveyancing Act 1892, the right to re-enter on the appointment of a liquidator cannot be exercised against the company until one year after the date of the appointment of the liquidator. The landlord's right to enforce re-entry on forfeiture is also restricted by section 14(1) of the Conveyancing and Law of Property Act, 1881, as amended by section 35 of the Landlord and Tenant (Ground Rent) Act, 1961. This provides that, with certain exceptions, any provisions for re-entry are subject to section 14 of the Conveyancing Act, 1881, which provides that the landlord must serve notice on the tenant before re-entry in certain circumstances. Once the landlord has served the appropriate section 14(1) notice and the time has elapsed under the notice the landlord may demand possession once again and re-entry may be affected if it can be done peacefully, but, if re-entry cannot be affected peacefully the landlord cannot use force under the prohibition of Forcible Entry and Occupation Act, 1971 where it makes it a criminal offence to do so.

If a peaceful re-entry cannot be effected the landlord's remedy is to issue an ejectment civil bill on title based on forfeiture and seeking an order for possession from the courts where the tenant refuses to vacate. The local sheriff or county registrar executes this order.

Summary of practical steps to be taken by the landlord

  • Determine the tenancy as appropriate by serving a section 14(1) notice.
  • Issue the appropriate legal proceedings.
  • Serve a motion for judgment or set the case down for a full hearing as the circumstances may require.
  • Obtain an order for possession. The terms of the order will also cover arrears of rent and mesne rates (including rent from the date of issue of proceedings until the date of the order) and legal costs if all or any of these items are claimed.
  • Serve a true copy of the order on the tenant and demand immediate possession.
  • If the tenant still does not leave, lodge an execution order (Circuit Court) of fifa (High Court) with the sheriff or county registrar who will then eject the tenant.

Landlords should be aware that procedures for effecting forfeiture through the courts can be very long and cumbersome and needless to say, costly, particularly if the tenant decides to strenuously defend the proceedings.

The landlord may also continue to rely on any collateral security arrangements that are made at the time of the lease such as a third party guarantees or rental deposits which are unaffected by the liquidation

Forfeiture of a lease does not necessarily determine all interests arising thereunder. Section 78 of the 1980 Act provides that any sublease to which the act applies does not automatically terminate under such circumstances but continues to exist as if the superior landlord were the immediate landlord. The rents may, however, be subject to an increase. The Conveyancing Act, 1892 (the 1892 Act) also dealt with the rights of tenants by virtue of section 4, which gave the court the power to vest property comprised in the lease, or any part thereof, for the whole of the term of the lease or any lesser term, in any person entitled as underlessee. In fact the provisions of the 1892 Act are much more far reaching as they appear to include any person deriving title under or from and underlessee.

Tenants should be mindful that these reliefs are only available to subtenants who have entered into possession with the consent of the superior landlord and where they have set up rights of renewal under the Landlord and Tenant Acts. Relief is always given sparingly and with caution and the court must be satisfied that the subtenant is blameless and has taken all reasonable precaution. Under section 20 of the 1860 Act the landlord also has the right to serve a notice on a subtenant to pay rent directly to him where the immediate tenant has neglected to pay rent.

b) Receivership
A receiver is appointed by a secured creditor pursuant to the terms of the creditors mortgage, charge or debenture to act in realizing for the benefit of that secured creditor the assets of a company which are subject to the mortgage, charge or debenture in question. Most security documents under which a receiver is appointed will contain a provision whereby the company authorizes the receiver to act as its agent to perform various functions. The Conveyancing and Law of Property Act, 1881 implies certain statutory powers to a security holder enabling that security holder to appoint a receiver to take control of the assets subject to the security with a view to liquidating such assets and discharging in whole or in part the liabilities owed to the holder of the security. When a receiver is appointed there are no statutory prohibitions against the landlord seeking to exercise his rights in the normal way nor does it affect the landlords rights regarding third party guarantees or security deposits.

c) Court protection and examinership
The process of examination was introduced into Irish law by the Companies (Amendment) Act, 1990 for the purposes of avoiding liquidation and to facilitate survival of the company, despite the fact that the company may in fact be insolvent. In short, examination provides a maximum of a one hundred day period in which the court appointed examiner seeks to take control of the company and manage it so that the company may continue to trade. The court will only appoint an examiner if it is satisfied that there is a reasonable prospect of the survival of the company and the whole or any part of the undertaking as a going concern. Once appointed by the court it is the examiners function to assess the viability of a company and prepare a scheme of arrangement which must in turn be submitted to and be approved by a majority of the creditors and by the courts. Section 5 of the Companies Act, 1990 contains a prohibition against any steps being taken against guarantors. From the day the company applies to the court seeking protection the commencement of new proceedings against the company are prohibited and a stay is placed on all existing proceedings. Whether a landlord has the right to re-enter on foot of a forfeiture clause in a lease on foot of failure to pay rent is questionable in the light of the provisions of section 9 of the 1990 Act which provides that the examiner has the power to reverse or remedy any proposed acts in relation to the assets of a company which would benefit the company. In addition, once the scheme of arrangement has been agreed by the creditors and the court it becomes binding on all parties and their rights are accordingly modified.

3. How has statutory reform affected the lease renewal process in your jurisdiction?

Section 66 of the 1980 Act (as amended by the 1994 Act) impacted seriously on the covenants against alienation in commercial leases. The 1980 Act, which came into operation on the August 10, 1994 provided for new tenancy renewal rights to tenants in respect of premises which came within the definition of a tenement as set out in section 5(1) of the 1980 Act, subject to the tenant setting up one of the following four equities;

  1. Business equity under section 13 (1)(a);
  2. Long Possession Equity under section 13 (1) (b);
  3. Improvements equity under section 13(1)(c) ;
  4. Rent Acts Equity under sections 14 and 15.

These rights could not be contracted out of by the tenant.

Section 13 (1) (a), dealing with business equities, has proved to be the most far reaching of the provisions dealing with business tenancy renewal rights as it provided that a tenant had a business equity if "the tenement (as defined) was, during the whole of the period of five years (as inserted by s.3 of the 1994 Act) ending at that time, continuously in the occupation of the person who was the tenant immediately before that time or of his predecessors in title and bona fide used wholly or partly for the purpose of carrying on a business"

The period of occupation previously required under the 1980 Act was three years, however, this period was subsequently extended to five years under the 1994 Act and has resulted in the standard short term letting agreement no longer being for a period of two years and nine months but for a period of four years and 11 months, similar to the European average.

More importantly, the 1994 Act also introduced a new provision allowing an office tenant to contract out of his rights to a new tenancy where the premises are used wholly and exclusively as offices by executing before the commencement of the tenancy, a valid renunciation and where the tenant has obtained independent legal advice.

The act is disappointing because it limited the contracting out provisions to premises used "wholly and exclusively as offices" and it failed to define what constitutes an "office". It also appears from the wording of section 4 of the 1994 Act that a tenant of premises with non-office use or ancillary non-office use is not in a position to contract out of the provisions of the 1980 Act. It is hard to understand why this section was not extended to all commercial leases including businesses, retail and manufacturing and it is something which will have to be addressed in future statutory reform.

4. How does human rights legislation in your jurisdiction affect the landlord-tenant relationship?
While there is no specific human rights legislation in Ireland, any lease provisions that are contrary to the basic rights guaranteed in the Irish Constitution will not be upheld by the Irish Courts. In the case of commercial leases the courts will tend to uphold the contractual terms incorporated in the leases on the basis that they are normally drafted and negotiated by the solicitors acting for the landlord and tenant respectively. In the case of residential leases the Irish Courts, in dealing with any particular dispute between a landlord and tenant, do tend to have regard to the general equitable principles of fairness and will, in certain circumstances, where they consider the interests of justice or fairness require such action, set aside or disregard the provisions of the lease.

5. What is the effect of conditions restricting tenants wishing to divest themselves of surplus properties ('alienation'), and how can those restrictions be satisfied or circumvented?
It is common for leases to contain provisions absolutely prohibiting alienation or prohibiting alienation without the landlord's consent, however, provisions of this nature must be considered in the light of section 66 of the 1980 Act, which provides that covenants in leases of tenements (as defined) absolutely prohibiting alienation, regardless of the terms of the lease, will be interpreted as stating that alienation may be made with the consent of the landlord which consent must not to be unreasonably withheld. The section applies to all leases including yearly tenancies arising by operation of law or by inference on the expiration of a lease and a statutory tenancy implied by holding over premises on the expiration of a lease. The word alienation would include assignments and sublettings, but the general view appears to be that the implied covenant only applies to the alienation of the whole and does not apply to alienation of a part.

If the lease contains a covenant requiring consent and stipulating that same is not to be unreasonably withheld or if the property demised is a tenement within the statutory meaning of the word and the lease contains a covenant against alienation and the landlord refuses consent upon same being sought the proper step to be taken by the tenant is to apply to the court for relief in the form of a declaration that in the circumstances the consent has been unreasonably withheld. The onus of proving that consent has been unreasonably withheld lies on the tenant and it is generally accepted that the landlord must not act arbitrarily or capriciously.

Securitization of real estate assets

1. How significant is the real estate securitization market in your jurisdiction?
(a) The real estate securitization market is not significant in the Irish market. To date there have been no securitization of Irish real estate/property.
(b) On the other hand the Irish Mortgage Backed Securitization market is quite significant in the Irish context with about 10% of Irish residential mortgages having been securitized.

2. What have the key real estate securitization deals been in your jurisdiction over the past 12 months?
The volume of mortgage backed securities in Ireland for the year 2002 was only around €500 million which is down marginally from the 2001 when the figures were about €1.8 billion.

3. To what degree of detail (if at all) are the parties obliged to disclose the lease terms on a formal registry (for example, the land registry) in your jurisdiction?
There are two systems of registration of title in Ireland.

a) Registry of Deeds Title (otherwise known as unregistered title)
Introduced under the Registry of Deeds (Ireland) Act, 1707 (the 1707 Act) it was set up for the purpose of giving priority to deeds registered in the Registry of Deeds as against deeds that had not been registered and to prevent fraud in dealing with land.

The registration of a deed in the Registry of Deeds is achieved by the completion of a memorial which is in essence an extract from the deed containing details of the date of the deed, the names and addresses of the parties to the deed, the nature and effect of the deed and a full description of the property affected by it. Titles have to be continually examined in detail every time a transaction is undertaken. Section 17 of the 1707 Act provides that a lease for a term not exceeding 21 years, where actual possession goes with it is not registerable nor is it normal in the case of any lease for the memorial in respect thereof to record details of the individual provisions of the lease. Registration in the Registry of Deeds is not compulsory under the 1707 Act. There is, however, an obligation upon a solicitor to ensure the registration of a particular deed for the purposes of obtaining priority against any subsequent deeds or mortgages on title.

b) Land Registry Title (otherwise known as registered title)
Registration in the Land Registry is governed by the Registration of Title Act, 1964 and the Land Registry Rules, 1972 (as amended). This is an alternative system of registration to the Registry of Deeds, being a system providing a state guaranteed title and which is computerized and based on Ordinance Survey maps. In the Land Registry the title itself is registered and not just the particular deed. Each registered title has a separate folio number which details the county to which it relates, the property included in the folio which has a particular map reference on the registry map, the class, title and ownership and details of any charges or burdens registered against the property.

All leases created for period of 21 years or more must be registered in the Land Registry. In the case of leases for shorter periods registration is neither necessary nor appropriate. The Land Registry retains a copy of the original lease and a copy can be obtained from the Land Registry with the written consent of the registered leaseholder.

When acting on behalf of a borrowing company or for a lender in a commercial loan transaction it is also crucial to remember the provisions of the Companies Act, 1963 section 99, which states that unless a notice of the charge created by a company is lodged within 21 days of the date of its creation with the Companies Office the charge will be void as against the liquidator or any creditor of the company. While it is not necessary to detail all of the charging provisions contained in the mortgage, details of any negative pledge contained in the security document must be specifically disclosed in order to ensure the priority of the charge.

4. Is there any debate in your jurisdiction as to who holds the legal title to a mortgaged property?
While there is no debate on this issue in Ireland it should first be understood that unregistered property is mortgaged and registered property is charged and the position regarding title differs in each instance.

In unregistered title the property is conveyed leased or assigned by the borrower to the lender subject to the equity of redemption in the property. For as long as the loan is in place the title is vested in the lender and the borrower has only an equity of redemption, with the right to get the title back and have it vested in him once more when the loan is repaid.

In the case of registered title land may be mortgaged only by the registered owner by means of a registered charge. This does not, unlike a mortgage, involve the transfer of ownership to the lender. Ownership remains with the registered owner and the lender only acquires rights over the property.

Property outsourcing

1. What are the relative benefits of private finance initiatives (PFIs) and public-private partnerships (PPPs)?
The term PPP in the Republic of Ireland and the term PFI in Northern Ireland provides for projects commissioned by the public sector and financed by the private sector. Normally the private investment will be supplemented by an exchequer contribution to the capital and/or the operating cost. To date PPPs and PFIs have been adopted to implement public policy in the realm of toll roads, bridges, science projects, education projects and sports infrastructure. In essence it helps to allocate risk to the person best placed to manage and deal with a particular risk. It is advantageous from the point of view of the public sector's balance sheet as the cost incurred in an infrastructure project is transferred from the capital account to a series of future payments from the current account, that is, off balance sheet. It should also lead to an ultimate cut in the costs of infrastructure, accelerated rate of investment, more effective use of resources and a faster response to new community demands and requirements

Financing of real estate transactions

1. What are the most common methods by which purchasers finance high-value real estate transactions in your jurisdiction?
Secured lending through the creation of a mortgage over the property to be acquired or a floating charge over company assets is still a common way of financing property transactions in Ireland. In the case of developments it is quite common for lenders to take additional security through assignments of contracts or agreements entered into by a developer. In some instances there may be more than one lender who would enter into priority agreements to cover the manner of distribution of the sale proceeds in the event that the security has to be realized.

2. To what extent does stamp duty (or the equivalent in your jurisdiction) affect the cost and method of financing real estate transactions?
Stamp duty is charged at the rate of 9% on commercial property transactions (exceeding €150,000). It has therefore proved to be quite prohibitive and it is for this reasons that some investors consider purchasing the shares of a company as distinct from the assets owned by the company where the stamp duty charged is 1% of the consideration paid for the shares.

The stamp duty charged on the creation of a lease is 1% of the annual rent, (although up to 9% stamp may still be charged on any premiums)

Conveyancing issues

1. What are the various forms of property ownership in your jurisdiction?
Title to property may be described as freehold where it will be one of the following, namely:

  • fee simple (tantamount to absolute ownership);
  • fee tail (where the entitlement to lands is confined to the descendants of the person in whom the original estate was vested) and;
  • a life estate (which lasts for the duration of a named individual's life only).

Or leasehold, which is divided into the after categories, namely:

  1. Term certain (this is very common in Ireland and is a lease for 25 years that automatically determines on the expiry of the term);
  2. Periodic tenancy (where the original minimum period is fixed until either party terminates the lease and where the period of notice required to determine the lease is determined by the manner in which the rent is reserved or calculated).
  3. Tenancy at will (a lease which continues indefinitely but may be determined by either party at any time. This is an uncertain type of tenure and it is questionable whether a tenant would have an interest to assign to a third party. There is no rent reserved under the lease.)

Property can be owned by a number of parties under a joint tenancy or a tenancy in common. In the case of investors it is normal to hold property as tenants in common and it is advisable to have an agreement put in place before the acquisition of the property dealing, at the very minimum, with matters such as decision making, expenditure, division of profits, disposal, dispute resolution and exit strategies.

In the case of joint tenancies there is a right of survivorship whereby the property automatically passes by law to the survivors upon the death on any one joint tenant. As a general rule, where a deed is silent on whether a joint tenancy or tenancy in common is created there is a common law presumption that the purchasers are acquiring the premises as joint tenants, save where the purchase money was provided in unequal shares. In this instance it is presumed that property will be held under a tenancy in common in accordance with each parties respective contribution to the purchase price.

2. Other than the general principles of contract law governing agreements between vendor and purchaser, what other statutory governance, regulations or guidelines exist to protect the parties to a property transaction?
The Competition Act, 2002 (which replaced the Competition Acts 1991 - 1996) regulates the law relating to the control of monopolies and the abuse of dominant position by certain undertakings (as defined).

The European Communities (Safeguarding of Employees rights on transfer of Undertakings) Regulations 1980 (as amended) regulates and protects the interests of employees where there is a transfer of an undertaking, business or part of an undertaking or business to another employer and pursuant to which the rights and obligations arising from an employment contract or relationship are transferred from the original employer to the new employer. The potential liability of a new employer should be noted in the context of the Unfair Dismissals legislation.

3. How has the legislation and recent case law in your jurisdiction addressed the issue of adverse possession?
There has been no recent legislation in Ireland dealing with the issue of adverse possession, which in essence means possession of property that is inconsistent with the title of the true owner, that is, possession giving rise to a right of action in the owner. Pursuant to the provisions of the Real Property Limitation Act, 1874 (the 1874 Act) a true owner has a period of 12 years from the date of accrual of the action, meaning the date of possession, during which he can assert his rights, failing which, his title is automatically extinguished. The 1874 Act stipulates that a person must be in undisputed possession of lands for a minimum period of 12 years before he can make a claim to the land. If the true owner fails to assert his rights within the limitation period the true owner is dispossessed of his title and his right of action and the squatter acquires a title good against anyone other than a person with a better title to the land. It is generally accepted that the squatter must show possession to the exclusion of the real owner, which is inconsistent with the enjoyment of the land by the real owner and that mere abandonment is not enough.

In the case of tenancies, a tenant is estopped from claiming adverse possession during the period of a tenancy and the landlords right of action does not accrue, that is, time does not begin to run against the landlord until the expiry of the term of the lease or when the freehold or leasehold interest vests in the reversioner.

There have been several recent cases in the area of adverse possession in Ireland, none of which would appear to have made any significant impact on the core principles that are now firmly set up in Irish law.

In James Mulhern v John F Brady a High Court judgement of Ms Justice Carroll delivered on February 14 2001, the applicant claimed possessory title to a disputed plot either by using it himself or by receiving rent for it. The legal owner claimed he accessed the plot four or fives times annually and that he had affixed a For Sale sign on the plot and entered into negotiations to sell the plot to a prospective purchaser, but the sale did not complete. It was held that there was no abandonment. The acts of advertising for planning permission on the site in local newspapers and the erection on the site of a For Sale sign by auctioneers meant there was no abandonment. Twelve years continuous occupation and possession to the exclusion of the true owner could not be set up.

Another case in point is that of James Battelle and Mary Pauline Batelle v Pinemeadow Limited. Judgement was delivered on May 9 2002. The plaintiff moved into property in February 1978. The plot of land between the rear boundary and river was overgrown and neglected. The plaintiff made full enquiries with regard to ownership, ending with his ground landlord who was unsure as to whether or not it owned the plot, but given that there was no access to it, advised that it would have no further use or interest in the plot. The plaintiff began works consistent with the presumption that he was the owner of the plot, that is, he cleared away overgrown briars, planted shrubs and laid out garden furniture. The court found that just because the ground landlord maintained that it had no interest in the plot that it could not be presumed that it had no title to the plot. But in this case it was held by the court that the plaintiff had effectively enclosed the plot and incorporated it into his garden and had acquired title by adverse possession.

Dillon Eustace
Grand Canal House
1 Upper Grand Canal Street
Dublin 4
Rep of Ireland
Tel: +353 667 0022
Fax: +353 667 0042