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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
Ex div. price
Stock
30/6/1971
Stock
30/6/1971
9 }% Land Bonds
£97.50
9f % National
£102.75
Loan 1984-89
91% Land Bonds
£95.50
9J% National
£101.50
Loan 1989-94
8% Land Bonds
£77.00
7J% National
£84.50
Loan 1981-86
7% Land Bonds
£66.00
61 % Exchequer
£71.50
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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