Wednesday, 6 December 1978
Dáil Eireann Debate
Minister for the Environment (Mr. Barrett): At the adjournment of the debate the last day I was replying to a point raised by Deputy Fitzpatrick on subsection (5) of section 1 which provides that in the case of domestic and mixed properties, secondary schools and community halls the determining use as regards eligibility for rates relief in any year shall be the use ordinarily made of the property at the time of the making of the rate. Deputy Fitzpatrick was concerned that this might be open to abuse. He felt it might be possible for the occupier of, say, a mixed property to use it entirely as a dwelling for only a week or  two before the striking of the rate and in this way he might qualify for full rates relief. The advice available to me is that the force of the qualification “ordinarily” will not allow this advantage to be taken by anyone. The relevant use of the property at the time of the making of the rate must be its ordinary or established use. If it can be demonstrated that a use was only temporary, this will not count for the purposes of assessing the entitlement of a premises to rates relief.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): I am obliged to the Minister for his explanation and I am glad to see him back hale and hearty and ready for the day's work. I appreciate what the Minister says about the use of the word “ordinarily”, but it is the ordinary use at a particular time and the subsection contains no mention of temporary use. It would be very hard to dispute that a building was not being ordinarily used for the purpose of a dwelling house if it were so used for a month or several weeks before the striking of the rate and if the entire building were occupied. It would clearly qualify for rate exemption because that would be the ordinary use of the building at the time. The subsection states “immediately prior to the making by the rating authority of the rate”. That is the time at which the test is to apply. If it were used as a domestic dwelling for two or three weeks before the striking of the rate I think it would qualify. I am fairly satisfied that this definition is open to abuse and I would go so far as to say it is wide open to abuse. The Minister and his advisers should take another look at it.
Mr. Barrett: The emphasis should be on the use of the word “ordinarily” because the ordinary use of a building is not the use made of it for a week or two before the striking of the rate or any time during the year. That could not be interpreted as the ordinary use of a particular premises. It could not be misinterpreted. The advice available to me satisfies me that the possibility of this kind of abuse is eliminated. The emphasis is on the word “ordinarily”.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): I wish to refer to subsection (6). This provides that a person can build a house, which may be as big or as expensive as he likes, and have as many out-offices or garages as he desires, provided it is all part of the same hereditament and provided all the buildings are rated together. A person owning an old house may decide to build a new one, retaining the old buildings for garage purposes or for use as domestic out-offices. If the original buildings were separately rated, as they would be if not built at the same time, then if the valuation exceeds £2 they will not qualify for exemption from rating. I should like the Minister's observations.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): If a person builds a house costing £100,000 and has very elaborate out-buildings and a garage, all the buildings would be rated at the same time and would be described as “a dwelling house, garage and out-offices”. In an extreme case the valuation could be £200 and it would still be exempt from rates. If a person avails of an old building or erects a second building some years after the original dwelling, unless the valuation of the second building is under £2 it will be subject to rates. That is not equitable. A much more elaborate building could escape rates because it was rated as one unit. If out-buildings are built some time after the dwelling house and for that reason are separately rated they will be subject to rates if the valuation is in excess of £2. I think that is not the Minister's intention and he should change this provision.  In a city or town a building can very easily attract a valuation in excess of £2. I hope the Minister understands the point.
Mr. Barrett: It could be built near the original structure. There is nothing to stop a man applying to have his existing valuation extended to cover that and if it is a reasonable case the Valuation Office will possibly comply. He can apply to have his valuation revised in view of the extra structure and he would be exempt if the Valuation Office put it in the one hereditament.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): The subsection as drafted visualises a dwelling house and separate building. It visualises in some cases the separate building being used in conjunction with the dwelling house and if that building is to escape rates the valuation must be under £2. As the definition stands, if the building, however elaborate, is built at the same time as the dwelling or is included in the valuation of the principal hereditament, then it will escape rates. That is unfair and the Minister should consider changing it. The test should be whether the building which is not the dwelling is used as a domestic out-office. If it is used as a domestic out-office or a domestic dwelling it should be exempt. Recently, I read about houses costing £60,000 each which are to be built in the city and the families who would occupy these were referred to as two-car families. These houses will have elaborate garages, and probably houses for garden tools and so on and they will all be exempt because the out-offices will be built at the same time. If somebody builds a dwelling house and uses the old dwelling house as an out-office he may not be exempt, so that is not a fair test. The test should be if the ancillary buildings are being used as domestic out-offices, and if they are they should be exempt.
Mr. Barrett: In cases such as those referred to by the Deputy if the out-offices are very extensive and do not appear as belonging to or usually enjoyed together with the existing buildings the practice is that the Valuation Office values them separately. Usually extensions such as out-offices in an ordinary house are not very large, but if they are exceptionally large the Valuation Office puts a separate valuation on them in order to ensure that they are not derated where a person is not genuinely entitled to derating. We believe the system will work this way but if it does not we will see what can be done about it.
Mr. Quinn: I have listened to Deputy Fitzpatrick's arguments and I wonder if the Minister could explain why subsection 6 is there in the first place. If a hereditament is defined as a dwelling and if any extension such as an out-office is put on to it which is clearly benefiting the dwelling as a dwelling, I cannot see what the purpose of this section is. Perhaps the Minister would clarify why subsection 6 and indeed subsection 7 are there, in the first place?
Mr. Barrett: Because in many places in the cities and towns as the Deputy is probably aware garages belonging for instance to terraced houses are far removed from the dwelling house and they would require a separate valuation.
Mr. Callanan: I am puzzled. I understood that in relation to business premises the domestic end is exempt and the business premises are rated. Would not the same thing apply in this case? Unless the house had a business of some sort is it not derated? Because out-offices are derated, whether there is a valuation on them or not, if they are not used for a business of some sort, are they not derated? I wish to be clear on that point.
Mr. Barrett: The Deputy is right about the business of the mixed hereditament. The business part will not be derated, but in relation to the out-offices or garages that the Deputy refers to, if  they have a separate valuation up to £2 they are derated.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): There is unfair discrimination against the person who because of lack of capital does not build his house and his out-houses at the same time. If a man finishes the job in one act, irrespective of the extent of the garage or the outhouse, provided that the dwelling and the garage and out-buildings are all used for domestic purposes, the whole lot is derated. But if a person builds a dwelling house and then builds a garage and out-houses, because they were not built at the same time the out-buildings are separately valued and he will have to pay rates on them if the valuation exceeds £2. That is not fair.
Why this test is applied I do not know, because what the Minister wants to ensure is that the buildings are all used in connection with the dwelling. In the case where all are in one hereditament and all are valued together it does  not matter if there is a £1,000 valuation, they will all be rate free, under the Act, but if a person is unfortunate enough to have his valuation separated, then even if his entire valuation is quite modest he will pay rates on the garage and out-buildings. This could occur in the very case that the Minister mentioned where a man living in a terraced house with no room for expansion takes a garage down the road and the valuation of the garage is over £2 which means he will have to pay rates on the garage.
That is not the spirit of this Bill or of the Minister's proposal and he should take it away and have it redrafted. In the last subsection we were dealing with, the Minister said that because the word “ordinarily” was used there was no danger of abuse, there was no danger of a person changing the use of a house from a mixed premises to a dwelling in order to qualify for derating. If the Minister believes that, he should carry that advice on into this subsection and say that all buildings ordinarily used as domestic out-offices or a garage would be rate free. That would be a simple way of getting over the difficulty. It is no answer for the Minister to say that the thinking behind this is to exclude elaborate buildings, because that is not the thinking or the policy behind it. The premises may be as elaborate as one likes but as long as they have the same rating it does not matter if they should attract a valuation of, say, £200 or £500, they are rate free. I think that some test such as “ordinarily used” as domestic out-offices or garage should be carried forward into subsection (6). If that were done it would get over the problem I have in mind.
Mr. Quinn: We are attempting to see what loopholes may exist and how they could be closed. Take the circumstances where a domestic garage is attached to a house in terms of ownership but not necessarily physically attached—which is really included in this section—and if that garage is subsequently rented—and therefore not ordinarily used by the residents of the primary dwelling—to another resident in the area, would rates  be then paid on it and if so would the person benefiting in terms of rent have to pay the rates or would the person paying the rent get some relief of rates in a manner equivalent to flatdwellers?
Mr. Barrett: To deal with Deputy Fitzpatrick's point first, if somebody building a new house is not financially in a position to complete a structure such as a garage or fuel sheds which would be included in the original plan of almost any house and if the house is valued before he completes the buildings and he later gets a further valuation, it is usually amalgamated with the existing valuation. The buildings the Deputy speaks about are usually beside an existing house. At most, a man would be building either a fuel shed or garage. If he were building something more expensive say, to be let as a flat or flats, that would still be a domestic property which would be exempt from rates. Very few garages of which I know exceed £2 in valuation even if separate. These would be amalgamated according to the usual practice but if they were extraordinary, elaborate buildings that could not be said to be used in conjunction with the domestic purposes of the existing building it would be open to the Valuation Office to give them a separate valuation.
Mr. Barrett: I was confusing it with something else. I do not see that a squash court would make that much difference. If people were being charged for the use of the squash court that would be another matter but as far as I know a private squash court would be regarded as being for domestic purposes, exercise and so on.
Mr. Barrett: The Valuation Office would have to examine it and if it required valuation it could be included in the original valuation. A squash court consists only of walls and floor space and there is not even a roof on many of them.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): I think they have roofs. My point is that if the person included the squash court in the original building it is certainly rate free but if he adds it afterwards it is subject to rates.
Mr. Barrett: It does not follow necessarily that it is subject to rates. The valuation officer may not decide to put a valuation on it. A roofless structure such as a handball alley would hardly require a valuation and a squash court would be used for the same sort of purpose. That is how I see it.
Mr. Quinn: We are talking about possible loopholes and this is the place where they should be cleared up rather than have the courts cluttered with claims as a result of them. If somebody erects a building, a squash court or swimming pool or whatever other fad may be in the country in another few years, the point Deputy Fitzpatrick is making is that if it is all built at the one time there is no problem; if it is built subsequently and its valuation is more than £2 it is conceivable that rates will have to be paid unless——
Mr. Quinn: That is the point I am coming to. If the Valuation Office take it on themselves in the revaluation to amalgamate the two at the request of the owner there is no problem but as regards this legislation the Minister has no say with the Valuation Office which is not included in his ministerial functions and so is not mentioned in this context. It is a technicality that has arisen in section 1 and perhaps now that the Minister's attention has been drawn to it he might  consider between now and Report Stage if there is any way of tightening up this so that the Valuation Office would be obliged to accept reasonable applications for the incorporation in the general valuation of projects such as this. We are talking of minority cases but there is potential injustice involved as regards treatment.
Mr. Barrett: This year's experience has shown us that these problems have not arisen so far. As regards ensuring that the Valuation Office would amalgamate the increase in valuation, that would not be a matter for this Bill but it will be necessary to amend existing valuation legislation and this matter is being examined by the Department of Finance. If it is necessary, that will be the time to copperfasten this and that would be the Bill under which it could be done. The practice has been to amalagamate the valuation.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): I am against this on the basis that it is a hit or miss section. Some people may be completely derated; others may not. It is not certain that it is the big buildings that will attract rates but rather the man who is not financially in a position to do a job in the first instance and has to rent a garage down the road or something like that. This is the man who may be hit, not the man who can build regardless of expense in the first instance and make an excellent job of it. So long as he is building a dwellinghouse and domestic buildings, no matter how elaborate or expensive or extensive, they are certain to be rent free. But if another man builds a dwellinghouse and adds to it later on he may—I do not say he will—be involved in rates. All through the discussion on this section so far we have heard too much talk about the Valuation Office being relied on to do this and that they will have this, that or the other approach. The Valuation Office should have guidelines. I do not envy the Commissioner of Valuation and his staff their job under this Bill because they will be expected to do the work we should be doing in this House now.
Mr. Barrett: As I have already told Deputy Quinn, we have not had this problem in the past 12 months. It may come up, but in practice it has not been a hit or miss arrangement before there was any derating. The matter will be kept under review and the forthcoming Bill amending valuation legislation will be the opportunity to copperfasten the arrangement or ensure that nobody will be victimised as has been envisaged. As I have said, the matter will be kept under review. If we find that it is not working out, or that it is necessary to make sure that it works properly, it can be dealt with in the amending legislation. At present, our experience has been that it has worked very well in the last 12 months. If it is seen not to be working that will be the time to deal with it.
Mr. Quinn: In fairness to the House, we are not telling any secrets out of school if we refer to the fact that there was considerable confusion in regard to what the Valuation Office should have been doing for a part of last year. Because it was the first year of the implementation of this, the Minister was enacting legislation after a particular measure had taken effect. Drafting legislation on the basis of the first year's experience is not the right way to make good laws. The Minister has heard Deputy Fitzpatrick's arguments. In so far as this Bill can introduce an element of certainty, the Minister should consider this section again and see if it can be tightened up on Report Stage. Perhaps the Minister would explain why subsection (7) has been included.
Mr. Barrett: Subsection (7) qualifies the definitions of “domestic hereditament” and “secondary school” to provide that where a separate hereditament of land is associated with either it will be regarded as forming one hereditament with the domestic hereditament or  the secondary school, as the case may be. This is a drafting device designed to make it easier to express in section 2 the limits applying to relief of land valuations, a £1 valuation in the case of domestic land and £40 in the case of secondary schools. These apply whether the land forms part of the same hereditament as the buildings or is separate.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): If they were renting land, it is unlikely that they would be the rated occupiers unless they had the land for a long time. Ownership of land has nothing to do with rated occupancy. People who are not the owners of land can be the rated occupiers. It appears that a secondary school that is the rated occupier of land will be free of rates up to a maximum valuation of £40 on land. If they do not own any land and rent land for an 11-month period, it appears that that land will be subject to rates.
Mr. Barrett: As the Deputy has rightly said, the person who rents land would become the rated occupier for a long-term letting. If a college or secondary school rent land it would not be for a short term. If the land is rented for recreational facilities it would have to be on a long-term letting. In that event it would be in the interests of all concerned for them to become the rated occupiers.
Mr. Barrett: It can vary. In some places it could be 20 acres. We had to arrive at some figure. It would normally cover the grounds used with the college rather than land used for extensive farming, which could have a much bigger valuation.
Mr. Quinn: Subsection (7) reads: “In case any land entered as land in the valuation lists belongs to and is usually enjoyed with a secondary school....” If a secondary school, as is the case in some Dublin areas, rents land from a sports club for three or four afternoons a week during a 10-month period, that land will not be exempt from rates in the first instance.
Mr. Quinn: I know that that is the intention in the Act. In the case of new schools that might not have access to sports fields and that enter into a sensible arrangement with a sporting organisation for the use of their facilities, is the Minister saying that they will have to pay rent and a proportion of rates as a result of this provision—presumably  the club will pass on some part of the rates? Is there any way in which the Minister can remove such discrimination?
Mr. Barrett: Perhaps the Deputy would regard some colleges as being more fortunate than others because they have farms. The limitation of £40 ensures that they will not enjoy derating benefits in respect of large farms, which many of them have. There is not anything from which to exempt colleges which are not the rated occupiers of land whose valuation is not more than £40. They would have to be the rated occupiers. The Deputy is making the point that a college might be sharing its sports areas with a club which would be the principal user of the land. Any exemption in that way would apply to the club, not to the college who are paying a rent for the use of the ground. Within the county borough of Dublin there is a reduced rate on land and the rates on a sports field, a football ground, would not be very much anyway—it should not be worth considering.
Mr. Quinn: Although it may not be much overall, we do not know how rates will go in the future in regard to the rate in the £. If a club rented out land on a regular basis to a school—I know of circumstances where this happens—and if they charge a rent plus a proportion of the rates, and if the school applies for relief on the portion which is the rates, would the school not make use of such a relief if it were there? Even if it were only £20, it is something the school manager would have to consider. Such a benefit is not dissimilar from what flat dwellers will try to get from this arrangement.
Mr. Callanan: I cannot see where the problem arises in the case of long term lessees. If I am the head of a college and I am renting land with a £20 valuation from somebody over, say, a period of three years, I can change the name of the rated occupier but that does not give me any right to ownership of the land. The moment I lose the right of occupation I have no other right. This is a matter I would not worry too much about. If such occupiers consider they are paying  too much for the use of the land because of rates they will come to some arrangement with the owner.
Mr. Barrett: Deputy Callanan is right. He has been talking about long term full use of land. Deputy Quinn has been referring to part use with others—it might be one club or more. The kernel of the matter is that the person who would not be the rated occupier would not be allowed to become the rated occupier. There is nothing we can do for such people.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): The basis of the Minister's argument has been that secondary schools must be the rated occupiers, but there is not a provisions in the subsection to provide that they must be the rated occupiers. The subsection states, “In case any land entered as land in the valuation lists....” It does not refer to the name, whether it be a college or the trustees on behalf of a college. Then there is use of the phrase “belong to”, an extraordinary and clumsy phrase which seems to denote a halfway position between ownership and something else—at school we used to use a phrase “That belongs to me”. I should like to know exactly what this means, because the courts may be forced to interpret it because of lack of definition here. Subsection (7) does not state that the land must be valued in the name of the college.
Mr. Barrett: If, as Deputy Callanan suggested, a college takes a long term letting and their name is entered as the rated occupier at local level, at the same time the change will be made in the valuation lists as well. Therefore it is not necessary to include it in the Bill. If a person's name appears on the demand note at local authority level the necessary change will be made in the valuation lists.
Mr. T.J. Fitzpatrick: (Cavan-Monaghan): On advice, the Minister told me that if a college rented land it would be entitled to the benefit of the rating only if it was the rated occupier. Where is the authority for that in the Bill? It is not in subsection (7).
Mr. Quinn: Further to the point the Minister was making about the use of such land, we will say, owned by a sports club, by a school, is there the possibility of a loophole emerging in subsection (7)? Let me put a hypothetical case to the Minister and his advisers because it would be a clear evasion of the intention of the Minister if this was the case. There are a number of sports clubs in this city comprised of past pupils of various schools, for example, St. Mary's Rugby Club, Blackrock, Wesley, or any of the other rugby clubs, with extensive land and property that is of considerable value. I am concerned with the words “is usually enjoyed” in line 29. It is frequently the case that the secondary school pupils “usually enjoy”, or it could be argued that they enjoy the lands of the club? On that basis, if they met that  first condition in the normal tradition could they then simply change the listing of the ownership of the land in the rating authority in order to benefit from this provision? In other words, does a loophole exist there?
If there is a situation in which land is usually enjoyed by a secondary school, in other words, the sports ground of a separate club comprised of the past pupils of that school, and if that land is usually enjoyed, as of now—and that is the case in some instances—is there not the opportunity for the board of management of the club to say: “if we change the land entered in the valuation lists as belonging to the club to land as belonging to the college”—and there is usually a close connection between the two; if they were to make that subsequent change, having met the first condition, i.e. “usually enjoyed”—would they then be eligible for exemption from the payment of rates? It is a possible evasion with which I am concerned.
Mr. Barrett: If the primary use is that of the secondary school, or the college and they become the rated occupier, they will be exempt. If it is, let us say, a rugby club, or a GAA club, and they enjoy the primary use of it, it could not be exempt.
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