Dermot Ahern (Louth, Fianna Fail)

Deputy Flanagan put his finger on it when he said that while there might be sympathy around the House for the plight of people in existing contractual arrangements, sympathy does not put bread on the table. While Deputies can say we could have another look at it, the reality is that I have received no advice at all that would suggest I can in any way interfere with contractual arrangements validly entered into without any question of fraud or coercion where people have taken legal advice. The Labour Party is trying to give retrospective effect to this. While we have sympathy, we have to deal with the reality. We cannot hoodwink people and bring in a law which would clearly be open to challenge and would probably leave the situation in worse flux than it is for those people who were led up a garden path.

We are dealing with rent on commercial premises. Some people referred to multi-unit developments, but multi-unit development legislation only refers to residential property. There may be an issue regarding mixed use, but that is something that can be arranged in the context of the agreements that are made subsequent to the passing of this legislation and which refers to commercial or residential. For the purposes of what we are talking about here, "property" is commercial property. No more than non-commercial property, it is subject to the Constitution and its rights and protections. It is also subject to the European Convention on Human Rights. Both the convention and the Constitution give strong protections on the right to private property and property ownership. My advice is that there is a real constitutional difficulty with legislative restrictions that affect property rights retrospectively, especially where it has an impact on completed legal transactions.

I have not received any legal advice to the effect that it would be safe to apply my proposed rent review provisions to existing leases. The Oireachtas has a duty to proceed with caution and to act within the parameters set down by the law. I have strong advice to the effect that the wholesale interference with existing leases along the lines contemplated by the Labour Party amendment is simply not feasible. It would not be possible to take on these matters any further.

We have looked at the Labour Party Private Members' Bill, which purports to address the issue of retrospection. That Bill is deeply flawed, both from a legal and a practical perspective. It avoids dealing with the difficult issues which retrospection creates by simply assigning to the Government, on the basis of an opinion as to the fairness or otherwise of existing rent levels in the commercial sector, a sweeping power to freeze rents at market values. In effect, this is tantamount to rule by decree by the Government and it amounts to an attempt to capitalise on what is undoubtedly a very serious problem for some within the retail sector. The Bill offers the illusion of hope, but the reality of legislating in this area is virtually impossible when it comes to the issue of retrospection.

Deputy Flanagan raised the issue of land that is subject to mixed use. It is possible for the parties, after the passing of this Bill, to enter into a rent review agreement which would take care of the situation. I accept the point made by the Deputy on future investments and the possible adverse effect that neutralising the rent review would have on commercial decisions that are being contemplated or are being made as we speak. I have decided that it would be prudent to allow a period of time to elapse before bringing in this particular section. We have to bring it in subject to a commencement order, so I will be allowing a period of time so that people are on valid notice as to how future clauses can be drafted in order to accommodate their individual means.

The attachment to upward-only clauses has been extraordinarily pervasive. It is one that seems to have crept in very much in recent years. Tenants have gone along with it and some people would say that they had no option. They had to get into the premises, so they had to accept this clause, even though they were advised that the rent would go up all the time. There is a need to educate people, both landlords and tenants, that this is something coming down the line and that it would be unfair to bring it in immediately. We need to leave a time lag to allow people to adjust so that they can make the necessary changes and factor them into their future leases, but also into their future investment decisions. Parties would be put on notice that a change in the law was imminent, so it would be up to them to decide how best to order their affairs. They would have to factor this into their ongoing investigations.

As I indicated earlier, I sought advice from the Office of the Attorney General in regard to retrospection and it causes considerable difficulties. All of us have great sympathy for the existing people but I do not believe we should try to suggest that we can wave a magic wand and pass a law which would circumvent and strike down a contractual arrangement freely entered into. The point was made that perhaps there can be no review for 24 years but that is the reality of the leasing arrangements into which people have entered.

The reason I brought this forward is that I am aware from my own knowledge and the knowledge of people who have made representations to me in my constituency in regard to what is going on in the rental market that people are being put under considerable pressure by landlords who, in turn, are being put under pressure by perhaps the investors in their operation. There is a chain of people putting those lower than them on the chain under considerable pressure.

There are tenants in commercial properties who are finding it extremely difficult to meet a rent agreed at the top of the market. It is easy for us to say landlords should accept a lower rent on existing leases on the basis that half the rent is better than no rent and that one should not turn these people out. Equally, if one goes further up the chain, one will find that the landlord is subject to an arrangement with somebody up the line who has invested on the basis of a particular understanding and expectation that there would be a rate of return out of it. He or she may well have borrowed on that basis. It is not an easy issue in which to try to intervene from a legislative point of view.

I believe it is accepted that it is better to have a neutral position in regard to rent reviews for the future. However, we need to give some time to allow that to enter into the psyche of the tenant and landlord market and the equity funds and pension funds market as well so that they understand the scenario once this is put in place.

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