Dermot Ahern (Louth, Fianna Fail)

I move amendment No. 38:

In page 78, between lines 18 and 19, to insert the following:

130.—In this Part, "business" and "lease" have the same meanings as they have in the Landlord and Tenant (Amendment) Act 1980.".

In recent months, considerable attention has focused on the difficulties being encountered by the retail sector, particularly as a result of current economic circumstances. One element of these difficulties is the level of rents payable arising out of a rigid adherence to upward-only rent reviews. I said some months ago that no legislation is in place which mandates the operation of such clauses. Parties are perfectly entitled to agree that more neutral review clauses be included in their leases. Even where upward-only clauses are present, the parties are free to agree that a flexible approach should be taken both as to the amount of rent payable and as to the way in which that rent is to be paid.

The advice I have received suggests it would be problematic if not impossible to interfere with existing leases. There is a presumption that these agreements have been fully and willingly entered into and that wholesale interference into such agreements inevitably carries with it the risk of acting in an unfair and disproportionate manner. Having given careful consideration to this matter, I have decided that the best and safest way forward is to deal with rent reviews in the context of future leases. Accordingly, subsection (2) makes clear that leases entered into prior to the commencement of the section, or agreements for such leases, will not be subject to the new regime.

The point in regard to agreement for leases is the subject of a Fine Gael amendment. I hope the text I am putting forward will address the concerns which underlie that amendment. The amendment will mean that, in practice, upward-only rent review clauses will no longer be possible in respect of such leases. All future rent review clauses will be subject to the construction that the rent payable on review may be fixed at an amount which is less than, greater than or the same as the amount payable immediately prior to the date on which the rent falls to be reviewed. This applies even if such a clause were to be couched in terms of upward-only movement. This will mean that when the rent becomes subject to review, full account can be taken of the prevailing realities as they affect the individual lease agreement. There will be a neutral starting point for negotiations as to the new rent which is properly payable. There will no longer be a presumption that the rent can only go in one direction.

I am aware that my proposal does not deal with some of the difficult cases that have arisen. However, I am strongly of the view that I have moved as far as is legally and practically possible at this time. I hope that the effective prohibition on upward-only rent review clauses in future leases will have a persuasive influence on current market behaviour. This amendment gives a clear signal to economic operators that a change in practice should seriously be contemplated. I once again urge that a rational and balanced approach be taken in regard to rent negotiations within the retail sector. I have already referred to the Fine Gael amendment. As I said, I spent considerable time discussing this proposal with my officials and with personnel in the Office of the Attorney General. For strong legal reasons, we cannot interfere with existing agreements which were validly entered into and in respect of which people took legal advice. However, we will be on much sounder constitutional and legal ground when this provision is enacted, ensuring that all future leases can contain downward or no-change rent reviews as well upward reviews

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