We previously wrote about the Local Government (Rates) Bill 2018, noting that if the Bill was not significantly amended we envisaged that it would result in increased costs on landlords and lenders, which would ultimately be passed on to tenants.
That Bill has now been enacted as The Local Government Rates and Other Matters Act 2019 (Act), without significant amendment.
The Act, amongst other things:
- imposes liabilities on landlords and banks for the failure of occupiers to pay rates;
- provides for unpaid rates to be a charge on the property;
- provides the local authority with a right of set off;
- provides for minimum rates on unoccupied properties; and
- provides for the payment of interest on overdue rates.
The Act also re-enacts a number of provisions of section 32 of the Local Government Reform Act 2014, which remain untested and potentially problematic.
Owner liable to pay rates on a sale
Section 13(1) provides:
“The owner of a relevant property who proposes to sell the property shall, before the completion of the sale, pay to the local authority concerned any rates imposed under this Act and accrued interest which is due and payable in respect of that property.”
The terms highlighted above need to be carefully considered to understand the scope of this provision:
“owner” includes any person (other than a mortgagee not in possession) entitled to receive the rent of the property. Therefore it includes a receiver, the immediate landlord of the occupier or a mortgagee in possession.
“any rates imposed under this Act” we are of the view that this provision will only apply to rates levied after the commencement of the Act.
“sale” includes a transfer of the property for no consideration or for consideration under market value.
It therefore appears that a receiver appointed over a property, a landlord, or a mortgagee in possession must, before completing a sale, pay any rates imposed under the Act on that property together with accrued interest.
Unpaid rates to be a charge on the property
Section 14 provides that unpaid rates together with interest payable thereon are a charge on the property, removing the benefit of the existing limitation period of 12 years as against purchasers for value in good faith and mortgagees.
Minimum rates on unoccupied properties
The present system provides full abatement of rates in most areas and 50 per cent abatement in certain areas of rates on certain unoccupied properties. Section 9 provides for schemes for the abatement of rates to be prepared by local authorities within certain constraints to be set by the Minister. It is to be anticipated that this will result in an increase in the rates payable for vacant properties.
Set off, receivers and mortgagees in possession
Section 7 provides for set off of sums due by person to a local authority against sums due by that authority to that person. Receivers and mortgagees in possession appear to fall within the scope of this section.
This provision has the potential to enable local authorities to apply set off without reference to the identity of the borrower. For example, if the same receiver is appointed by bank A over assets of borrower X and by bank B over assets of borrower Y, the local authority could, on a literal interpretation of the Act, offset:
- a sum due to the receiver on the assets of borrower X against
- sums due by the receiver on the assets of borrower Y
This would be illogical and unworkable and hopefully will not be utilised in practice.
Interest on rates
Section 12 provides for interest at approximately 8 per cent per annum on overdue rates.
The Act is difficult to construe and will likely give rise to litigation to clarify its meaning.
If the Act is commenced without amendment, it will effectively make landlords and lenders liable for rates which have not been paid by occupiers.
We understand that there is a level of lobbying taking place seeking to amend the provisions of the Act. If that is unsuccessful, both landlords and lenders need to carefully consider their practices and standard documents.
Landlords may wish to consider actively monitoring the payment of rates and factoring unpaid rates into any decision to forfeit a lease or otherwise enforce against tenants. They may also wish to consider significantly increasing deposits on new leases to cover potential rates liability.
Secured lenders, both to landlords and owner occupiers, may wish to consider, amongst other things:
- actively monitoring the payment of rates;
- deducting unpaid rates, and interest thereon, from the value of property when evaluating loan to value covenants;
- including non-payment of rates as events of default; and
- carefully timing enforcement and sale to mitigate rates liability.
Update 16 September 2019
The Minister has indicated that this legislation will be amended before it comes into effect. See our new article here
The content of this article is provided for information purposes only and does not constitute legal or other advice.
 The Act, as enacted, includes amendments to the law relating to planning and development and residential tenancies, which are not considered in this article.
 All references to property below are to property on which rates are payable.
 For instance: the definition of “Owner” - which appears to include higher level landlords; the duty of owners to notify changes of occupation, even where they are not notified of same; and the fact that where an owner pays rates due by an occupier, the owner does not appear to have a subrogated claim against the occupier as the Act provides that such payment does not affect the liability of the occupier on rates for which he is primarily liable.
 At present, rates are imposed under section 61 of the Poor Relief (Ireland) Act 1838. The Act repeals that section and is not defined to be construed as one with the 1838 Act. Therefore, rates levied under the 1838 Act are not levied under “this Act”.
 The legal nature, ranking and registration requirements of this charge are not set out however, as it cannot be overreached on a sale by a mortgagee, it appears that it should be considered a first ranking charge.