Ground rents and tenants' statutory rights

The principle

Irish statute gives tenants three enlargements of what the lease alone confers: a new tenancy, a buy-out of the fee simple, and a reversionary lease. Each has its own conditions, and a tenant can satisfy one without the others.

The regimes divide by use. Non-residential tenancies fall under the 1980 Act; dwellings fall under the Residential Tenancies Act 2004. Section 192 of the Residential Tenancies Act 2004 provides that, from 1 September 2009, Part II of the 1980 Act does not apply to a dwelling to which the 2004 Act applies.

The qualifying tenement

Renewal rights attach only to a tenement, defined by section 5 of the Landlord and Tenant (Amendment) Act 1980. There must be land covered wholly or partly by buildings, or a defined portion of a building; any land not so covered must be subsidiary and ancillary to the buildings; and the tenancy must be neither a letting expressed to be for the temporary convenience of lessor or lessee, nor one dependent on the tenant's continuance in any office, employment or appointment.

Is there a building at all? In Southern Health Board v Reeves Smith [1980] IR 26 IE · Supreme Court four adjacent parcels were demised by four separate sub-leases and used as one hospital site; the Supreme Court refused to read the leases as one, so the parcel used as a vegetable garden carried no right. Quality of construction is another matter. In Terry v Stokes [1993] 1 IR 204 IE · High Court ramshackle structures qualified, O'Hanlon J holding that the court should look instead to the use the tenant made of the property and to how much the structures mattered for those purposes. In Prime GP2 Ltd v Technological University Dublin [2021] IEHC 88 IE · High Court Hyland J held a fire escape attached to a building on an adjoining plot was not itself a building.

The second question is whether the unbuilt land serves the built land. The same phrase governs the ground rents scheme, and in Chambury Investment Company Ltd v Balark Investments Ltd [2018] IEHC 130 IE · High Court Haughton J held it conjunctive, with the onus on the tenant.

The three equities

Section 13 of the 1980 Act then supplies three alternative grounds, of which the tenant need establish only one.

• Business equity, s.13(1)(a): five years' continuous occupation by the tenant or predecessors in title, the tenement bona fide used wholly or partly for carrying on a business. Section 3 defines business broadly: any trade or profession whether or not carried on for gain, cultural, charitable, educational, social or sporting activity, and the public service.
• Long occupation equity, s.13(1)(b): twenty years' continuous occupation, with no business requirement.
• Improvements equity, s.13(1)(c): not less than half the letting value attributable to the tenant's improvements.

The business equity turns on whether the use is real. In Plant v Oakes [1991] 1 IR 185 IE a dining room held the paperwork and books of the family garage, and O'Hanlon J held this came within s.13. In O'Byrne v M50 Motors Ltd [2001] IEHC 196; [2003] 1 ILRM 275 IE the agreement allowed private residential use only; the business use broke that term and Ó Caoimh J refused a new tenancy. A temporary break may be disregarded under s.13(2) where the court considers it reasonable.

Procedure and loss of the right

The tenant must serve a Notice of Intention to Claim Relief within the limits in s.20(2): before a lease term expires, within three months of a landlord's notice terminating it, or, for a periodic tenancy, within three months of the notice. In Mealiffe v GN Walsh Ltd [1986] IR 427 IE · High Court Carroll J held the court cannot determine the application until an actual termination date is known. On duration, s.23(2), as substituted, gives thirty-five years or less as the tenant nominates, except on the business equity, where it is twenty years or less.

Section 17(1) defeats the right for tenant fault: termination for non-payment of rent, breach of covenant, the tenant's own surrender, or a good and sufficient reason based on the tenant's conduct. In McCarthy, Bolding & Cambridge v Larkin [2009] IEHC 75 IE · High Court Clark J held failure to keep a property in good repair was such a reason, even where repair was prohibitively costly. Section 17(2) covers no-fault grounds: rebuilding or development with planning permission, a local authority needing possession within five years, or that a new tenancy would not suit good estate management, illustrated by OHS Ltd v Green Property Co Ltd [1986] IR 39 IE. Compensation for disturbance follows. A tenant may also renounce in writing, having received independent legal advice, under section 47 of the Civil Law (Miscellaneous Provisions) Act 2008.

Buying out the ground rent

Ground rents came out of eighteenth and nineteenth century urban building leases: a lessor reserved a low rent for the ground only, the builder built and sold on by proprietary sub-leases, and the buildings would eventually revert to a lessor who had paid nothing for them. Section 2(1) of the 1978 legislation stops new ground rents over dwellings, and section 8 of the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 lets a qualifying lessee enlarge that interest into a fee simple by compulsory purchase at a statutory valuation. The scheme survived constitutional challenge in Shirley v A. O'Gorman & Co Ltd [2012] 2 IR 170 IE · Supreme Court.

Section 9 imposes four conditions, all of which must be met: permanent buildings, with any uncovered portion subsidiary and ancillary to them; where they comprise an alteration or reconstruction, that the work caused them to lose their original identity; that they were not erected in contravention of a covenant in the lease; and that one of the alternative conditions in section 10 is satisfied. Only one of the seven s.10 conditions is needed, commonly that the lessee erected the buildings, or that the lease runs for fifty years or more either at a rent below the rateable valuation or partly for a payment or expenditure of at least fifteen times the yearly rent.

The Landlord and Tenant (Ground Rents) (Amendment) Act 2019 reworked this, substituting paragraphs (b) and (c) of s.9(1) and inserting s.9(6), which lets the arbitrator weigh a change of use, the extent of any alteration, a change of character and any other relevant matter, and forbids refusal merely because parts of the old buildings remain identifiable. Section 4 rewrote condition 2 of s.10. Section 15 gives yearly tenants the same right after twenty-five years, and section 16 excludes certain leases.

Reversionary leases and dwellings

A tenant who qualifies to buy out the fee simple may prefer to stay a tenant. Section 30 of the 1980 Act gives a right to a reversionary lease taking effect on the expiry of the subsisting one, on the same s.9 conditions. Section 33 lets the landlord resist where the reversion is freehold or for at least fifteen years and the landlord intends to rebuild or develop with planning permission, or where the grant would not suit good estate management; a planning authority may resist in an obsolete area.

For dwellings the protection is automatic rather than earned. Six months' continuous occupation produces a Part 4 tenancy, which the Residential Tenancies (Amendment) Act 2021 made one of unlimited duration in place of the earlier fixed periods. Baker J described it in Hayes v The Minister for the Environment, Community & Local Government [2020] IECA 54 IE · Court of Appeal as a statutory implication of benefits, burdens, covenants and conditions into a relationship the parties still assume freely. Termination is confined to the grounds in section 34.

Statutory basis

• s.5, s.13 and s.16 of the 1980 Act — the tenement gateway, the three equities, and the new tenancy beginning on termination of the old one.
• Section 17 and Part IV — fault and no-fault refusals, with s.45 defining a qualifying improvement and s.58 measuring disturbance as pecuniary loss from having to quit.
• Sections 9, 10 and 15 of the 1978 Act — enlargement to fee simple for lessees and yearly tenants; s.30 and s.33 of the 1980 Act carry the reversionary lease.

Key authorities

• Southern Health Board v Reeves Smith [1980] IR 26 IE · Supreme Court — separate leases of adjoining parcels are assessed separately, so a parcel without buildings is not a tenement.
• Terry v Stokes [1993] 1 IR 204 IE · High Court — ramshackle structures can be buildings; the test is the use made of them and their significance for that use.
• Prime GP2 Ltd v Technological University Dublin [2021] IEHC 88 IE · High Court — a fire escape is not a building, so bare land served by one falls outside the definition.
• O'Byrne v M50 Motors Ltd [2001] IEHC 196; [2003] 1 ILRM 275 IE — business use in breach of an express residence-only covenant is not bona fide use for s.13(1)(a).
• Shirley v A. O'Gorman & Co Ltd [2012] 2 IR 170 IE · Supreme Court — the compulsory buy-out of the fee simple under the ground rents scheme is constitutional.

How it is examined

Landlord and tenant appears as a problem question on Irish land law papers, often pairing a commercial occupier with a residential one. The cues: a shop or office held for several years; a long lease at a small fixed rent with the tenant's own building on the site; a yard or garden attached to a building; heavy tenant spending on the premises.

Attack in order. Identify the use, and so the regime. Under the 1980 Act, prove the tenement under s.5 first, take each equity in turn and say which is satisfied, then check the s.17 bars and the notice timing under s.20(2). For a ground rent, work down the four s.9 conditions, name the single s.10 condition relied on, then ask whether a reversionary lease under s.30 suits the tenant better and whether s.33 defeats it.

Related Land Law notes: leases and forfeiture · Irish Shell & BP Ltd v John Costello Ltd · freehold estates and the fee simple · all free Land Law notes.