CIARÁN HANCOCK, Business Affairs Correspondent - Irishtimes.com
COMMERCIAL TENANTS are set to get greater scope to renegotiate their leases with landlords from a new Bill that the Government is expected to publish in the next four to eight weeks.
The Irish Times has learned that the Government is preparing to give tenants the right to seek a review of commercial rental agreements from their landlords.
This would be a first for tenants in commercial properties.
When a tenant seeks a rent review, a 28-day consultation period would follow and, if no remedy is agreed, a compulsory mediation process would commence.
This would involve accredited third-party mediators who would seek to strike an agreement between the two parties.
If this process failed to deliver an outcome, an application could then be made to the Circuit Court for a determination from a judge.
Qualifying tenants would have to pass three tests to enter this process.
They would have to prove that their rent is in excess of market rates; that the Irish company is vulnerable; and that a lower rent would enhance the chances of the business continuing to trade.
Both sides would have to make extensive financial disclosures.
It is understood that the Government will include a so-called “sunset clause” that would result in the legislation expiring after five years, although the minister for justice at that time would be entitled to renew the law.
This clause is being considered as a means of diffusing potential claims against the constitutionality of amending property rights. This has been a key complaint of those opposing such legislation.
The Department of Justice is currently consulting with the Attorney General’s office in relation to technical issues in the Bill before putting it before the Dáil.
The proposed legislation in the Landlord and Tenant (Business Leases Review Bill) would apply to leases signed before December 2009, when the last government abolished upward-only rent reviews for new leases.
Since then, a two-tier market has been in effect, with most of those tied into pre-2009 leases paying higher rents.
Scrapping upward-only rent reviews was a key commitment in the programme for government.
Ciarán Lynch, the Labour Party’s spokesman on local government who has tracked this issue closely, said the legislation was “critical” to protecting employment, particularly in retail.
“We have to ensure that the economy recovers and a critical aspect of that is a return to a normal rental market,” he said.
David Fitzsimons, chief executive of Retail Excellence Ireland, said he would welcome such legislation.
“We want a fair rent to be paid by all – the market needs to be fixed,” he said yesterday.
In May, a Retail Excellence Ireland survey of 342 companies found that 7,791 jobs deemed vulnerable would be retained if upward-only rent reviews were abolished, while an additional 5,072 jobs could be created over the next three years.
Frank O’Dwyer, chief executive of the Irish Association of Investment Managers, which represents pensions funds, said it was important for the uncertainty to be removed.
Mr O’Dwyer noted that – excluding Google’s purchase of its Barrow Street offices – just €9 million worth of commercial transactions took place in the first half of this year.
“The market is stagnant because overseas investors are uncertain about what rental agreements will be in place,” he said.