Taoiseach (Irish PM) Micheál Martin has apologised to his party after Fianna Fáil’s Irish presidential candidate Jim Gavin withdrew from the race.

The Fianna Fáil party was thrown into chaos when Gavin withdrew on Sunday night after it emerged he owed a previous tenant rent of €3,300 (£2,870) which was mistakenly overpaid.

The former tenant who raised the issue during the election campaign was Niall Donald, the deputy editor of the Sunday World Newspaper.

On Wednesday evening, the taoiseach apologised to party ministers, TDs and senators and said he was “devastated” by Gavin’s withdrawal from the race.

Martin also said he “fully understood the enormity and disappointment” of many party members.

Martin has now proposed new rules by which Fianna Fáil may select a presidential candidate in future presidential elections.

The proposal would give members a say and will mean each party member will have one vote.

Previously, only the parliamentary party could vote by secret ballot in selecting a candidate and ordinary members did not have a say.

The Taoiseach also laid out the timeline and the process undertaken by the party in selecting presidential hopefuls over the summer.

He also spoke about the preparations and “due diligence” which was carried out with Gavin, a source said.

Mr Donald has spoken publicly about the controversy on the Sunday World Crime World podcast he co-hosts, and explained details about the “complicated” financial dispute which happened 16 years ago.

He said he should have received the money after overpayments were transferred to the landlord in error from his bank account.

“If you’ve ever been in those circumstances where you know, you feel that you’ve been ripped off, like it gives you this feeling of being powerless, and you know, I was really struggling financially. That’s the truth of it,” he said.

A legal representative, acting on behalf of Gavin, has now indicated the money will be paid back.

In a statement to the Irish broadcaster RTÉ, the legal firm said: “We have reached out to Mr Donald and explained to him that we have been instructed to make the payment of €3,300 to him subject to clarifying two issues.

“We await hearing back from Mr Donald and once those two issues are clarified, we can then proceed to close out on the matter.”

During his interview on the podcast, Mr Donald reflected on Gavin’s sensational withdrawal from the presidential campaign.

“Does the punishment fit the crime? Probably not. I kind of feel sorry for him that he wasn’t handled better.”

But he said Gavin’s nominating party, Fianna Fáil, may not have been aware of all the information.

Explaining the background to the dispute, Mr Donald stated he stayed in the rented apartment owned by Gavin for about two-and-a-half years, and moved out at the beginning of May 2009.

He said he cancelled one of the standing orders, but failed to cancel a secondary one.

Mr Donald said he subsequently made numerous unsuccessful efforts to retrieve the money from Gavin and had been unable to get a response from his former landlord on many occasions.

Mr Donald said “loads of people” knew about his dispute with Gavin, who previously managed the Dublin men’s Gaelic football team.

However, he acknowledged the difficulties the controversy caused Gavin in the campaign, including an appearance on a television debate on Sunday when he was repeatedly questioned about the matter.

“I mean, I’m not going to overdo it, but I felt sorry for him because he’s under pressure. People make mistakes.”

Mr Donald also outlined in detail how the events around his overpayment to his former landlord unfolded.

“That was the full extent of my savings. Let’s put it that way. I mean, I didn’t have anything else.”

He said he contacted Gavin immediately to ask for his money back through phone calls, emails and text messages, but he stopped answering.

He subsequently sent a solicitor’s letter to Gavin requesting his money back, and eventually visited the Dubliner’s parents’ home to deliver a letter.

Mr Donald said he phoned him afterwards and accepted he owed him the money.

“And the money just never arrived.”