The Gazette 1971

Law Society objects to payment of owners by Land Bonds

Solicitors acting for owners whose lands are compul- sorily acquired by the Land Commission are expressing increasing concern at the fact that clients are finding difficulty in realising their securities on the stock exchange. It is an accepted constitutional and legal principle that where the State compulsorily acquires property of a citizen it should he in terms of full compensation in money or money's worth. Payment by means of land bonds was originally devised to deal with large estates of landlords compulsorily acquired under the Land Acts from 1886 onwards. Many of these estates were settled and the bonds were calculated to provide the estate including life tenants and remain- dermen with the same income as they got from the rents. This system which was devised in conditions of financial stability is inappropriate to today and parti- cularly to acquisition of lands of owner/occupiers. Due to rising interest rates the gilt market has been falling over the last twenty years. As a result any delay in clearing title, which is sometimes unavoidable, has worked against the vendor who has been compensated in bonds. Although the market for land bonds has improved during the past five years the present system is still the cause of substantial injustice to owners. Land bonds compare unfavourably with other Government securities in the following respects. (1) They are not available for the payment of death duties. (2) There is only one buyer in the market namely the Government stockbroker and it is not supported by the financial institutions. (3) Interest payments on the bonds have tax deducted at source. In the case of farmers who may not be liable to tax this causes considerable inconvenience through the necessity of making applications for refunds. (4) Although bonds are redeemable redemption is based on partial drawings rather than on a fixed date for all the stock. This is a much less certain and a more complicated system of redemption than other Govern- ment securities and makes land bonds a less attractive investment. (5) Immature land bonds are sometimes issued in which interest payment on the first day is passed and is not accrued as in the case of other Government securi- ties. The following table gives a comparison between the price of land bonds and other Government securities.

Ex div. price 30/6/1971

Ex div. price 30/6/1971

Stock

Stock

£102.75

£97.50

9f % National Loan 1984-89 9J% National Loan 1989-94 7J% National Loan 1981-86 61 % Exchequer

9 }% Land Bonds

£101.50

£95.50

91% Land Bonds

£84.50

£77.00

8% Land Bonds

£71.50

£66.00

7% Land Bonds

Stock 2000-05 On the only stock with similar coupon there is a full 5 point difference. Similar differences can he seen in the other stocks which is a reflection of the less attractive features of land bonds. It is a serious matter that there should be a small and unsatisfactory market for the sale of bonds issued by the Government on the compulsory acquisition of lands. It is thought that about 20 per cent of the total purchase monies of lands acquired by the Land Commission are paid in cash, 80 per cent being paid in bonds bearing interest at the rate current at the date of issue. The owner is under the double disadvantage that the bonds may have depreciated in value before they are available to him and that they may he difficult to sell. The Society have made repre- sentations to the Government that all lands should be acquired for payment in cash and if this is not feasible that the following conditions should be attached to each issue of land bonds. (1) All bonds should carry a right of conversion into any subsequent issue of land bonds at a higher rate of interest. (2) Bonds should be convertible into subsequent issues of Government stocks. (3) Bonds should be available for payment of death duties and income tax. These representations have not, as yet, been successful. Some years ago the Department of Lands recognised that the present position is inequitable when they made an agreement with the Auctioneers' Association that commission should be paid in cash instead of land bonds on the negotiation of a sale between the owner and the Land Commission. Nevertheless the owner him- self is still paid in bonds. There is a greater moral obligation on the State to maintain the market value of securities which must he accepted by the citizen in exchange for his property compulsorily acquired than in the case of Government securities issued for voluntary subscription.

Establishing a viewpoint Mr. John Carrigan, Thurles, presented the Incorporated Law Society's views on Section 7 of the Finance Act, 1971, and its impact on marriage settlements in a special interview in R.T.E.'s "Here and Now" pro- gramme on 29th June 1971.

The programme has an estimated listenership of between 300,000 and 400,000 and the transmission not only expressed the Society's view but also its concern with the social effect of such legislation.

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