Government losing land who is the thief?

MorningStar

Hi,

I know there is trouble with some land on the Old Irish Distillery site that is going to be purcahsed through a loop hole. I keep missing the articles and names etc.. Does anybody have any articles or names of people involved?

jesus_thats_gre

Its some bottling company or something.. They have held the lease for so long that they are entitled to puchase it for a few grand. Its worth 3 or 4 hundred million...

MorningStar

I pretty sure it is a little more complex as I know there is something to do with a sub-lease involved.

NotInventedHere

Here you go, From the sunday business post


Loophole may cost state millions
Sunday, July 24, 2005 - By Paul T Colgan
South Wharf, the company that is trying to buy a 25-acre state-owned site in Ringsend, Dublin, which has been valued at €300 million, for a mere €750,000, appears set to secure the property, despite desperate attempts by Dublin Port to stop it.

The bottling company, formerly known as Ardagh plc and Irish Glass Bottle, has been renting the site for about 30 years. Taking advantage of a previously little-known provision in the Landlord and Tenant Act of 1978, the company has cleverly lined itself up to wrest ownership of the site away from the state.

The legal loophole that may allow South Wharf, of which businessman Paul Coulson is a significant shareholder, to purchase the land at the foot of the Poolbeg peninsula, only came to the attention of government ministers in recent months.

In May, the hackles of several politicians in north Dublin were raised after it was revealed that a client company of the IDA had used the loophole to buy a state-owned property for a knockdown price in Clonshaugh. The deal, which is subject to a confidentiality clause, is thought to have cost the taxpayer several million euro.

On foot of this, the Minister for Enterprise, Trade and Employment, Micheál Martin, rushed through an amendment of the Landlord and Tenant Act that was meant to prevent future instances where private companies might attempt to acquire state-owned lands for substantially less than their market value.

The amendment covered the IDA, Shannon Development and Udarás na Gaeltachta. Crucially, however, Martin's amendment did not cover Dublin Port. While the amendment garnered much publicity - in no small part due to the protestations of Socialist Party TD Joe Higgins - at least two other ministers were scrambling to tidy up the loophole in their own departments.

The Minister for Community, Rural Affairs and the Gaeltacht, Eamon Ó Cuiv, had rushed to head off the threat with the British-Irish Agreement (Amendment) Bill 2005 - designed to protect the property of North-South body Waterways Ireland from being similarly targeted by private investors.

Then last month, Noel Dempsey's Department of the Marine ushered in the Maritime Safety Bill, which was designed to contain legislation that removed the loophole from applying to Dublin Port.

Luckily for South Wharf, it had already moved quickly to capitalise on the loophole, and on May 31 it sublet the land to a subsidiary company - only days before the bill passed through the Oireachtas.

The bill is not retrospective, and South Wharf would appear to be in the clear. Reports in recent days that the same legal team that secured the IDA site in North Dublin had been advising the company on its purchase of the Poolbeg property have been dismissed by the company.

However given that the Law Reform Commission (LRC) pointed out the problem as far back as 1989,many legal observers have been surprised both by the hesitancy with which companies have sought to purchase state lands and the failure of legislators to close off the option.

Martin acknowledged that the LRC noted the issue in 1989 and again in 1992 during his second stage speech to the Dáil in May. He said, however, that it had only been brought to his department's attention on March 2 this year.

“This has serious implications for IDA Ireland, both in relation to the execution of its statutory functions and in relation to the possible loss of value to the state in any sale of its land assets,” he said.

If companies interested in following the example of the IDA client company in north Dublin were not fully appraised with the legal subtleties of the process, they certainly were in little doubt following Martin's comments in the Dáil.

He told TDs that the IDA had leased the land to a company that was subsequently transferred to a second company and then sublet to a third.

The third company was then able to legally buy out the IDA rent fee, enabling it to avoid rules restricting the use of the land for manufacturing or trading activity, said the minister. South Wharf, already involved in a long-running and acrimonious dispute with Dublin Port, saw its chance and moved quickly to avail of the legal oversight. A South Wharf spokesman said it had been aware of the loophole since last year but only moved to use it when Dublin Port “went nuclear'' on the company.

The company was faced with an eviction order in March after a failed legal action against Dublin Port. It had been trying to renegotiate the terms of its lease with the state company since 2002.

South Wharf had stopped manufacturing bottles on the site and was looking to move into warehousing.

The terms of its lease meant that it could benefit from a favourable rent of €50,000 so long as it continued glass bottle manufacturing. Dublin Port sought to evict the company on the basis that it had changed its original manufacturing operation. South Wharf seized the opportunity to buy the site outright.

The origins of the flawed legislation dates back to the 1930s. Up to the early 20th century, landowners would lease vacant land to tenants and charge them rent on the ground, as opposed to on a building. In many cases, tenants would move onto the land and build a house. At the end of the lease, the land, and the building, would be returned to the landlord. Effectively, the landlord would benefit not only from the rent he had amassed, but from the increased valuation placed on the land as a result of the building work.

The Conroy Commission, which was set up to examine the issue, changed the situation, allowing tenants to buy out the lease under certain circumstances for a knock-down price. Tenants would qualify to buy out the freehold if their annual rent was less than the valuation of the land. In order to prevent companies that were renting ground from the state purchasing the land, the lease arrangements set the annual rent at a price higher than the land's worth.

However, leases under the new legislation had one crucial flaw, which only now appears to have been properly identified - they failed to include covenants which restricted tenants from subletting the property and setting subsequent rents.

Companies looking to buy state property could simply sublet the ground to a firm under their control and set its rent at such a low rate that it became a qualifying lease.

Opposition politicians believe that scores of state-owned properties could still be snapped up by eagle-eyed businesspeople, as the loophole still applies to many of those under the stewardship of other government departments.

Green Party TD Eamon Ryan said he feared that “every property developer in the country is engaged in a similar hunt'‘ to that of South Wharf.

“We were happy to get the Maritime Bill through before the Dáil rose, but we're far from certain as to whether it will hold water legally with regard to Dublin Port,” said Ryan. “No one saw the Port issue coming - it was a surprise to all of us. There are things there that still need to be sorted out.”

He said that the government had moved too slowly in removing the loophole.

“We should have recognised the need in May for legislation that would cover all government departments, not just one,” he said. The summer holidays have raised an interesting conundrum. Given Ryan's contention that recently enacted legislation may still be faulty and that many departments have yet to eradicate the loophole, the government may be forced to recall the Dáil if further state-owned sites come on the market.

“If we hadn't gotten the Maritime Bill through the Dáil before the summer, we would have had to do it now,” he said.

“The question we now face is whether we recall the Dáil if a case involving a similar amount of money arises. I would argue that we should.”

There is now concern in opposition circles that assets belonging to the Health Service Executive and the Vocational Education Committees may be open to similar approaches from private companies.

MorningStar

thanks