Dermot Ahern (Louth, Fianna Fail)

The issue of upward only rent review clauses, and the difficulties which rigid adherence to such clauses is causing for the retail sector in current economic circumstances, has been raised with me by various retail and tenant groups. I have been very consistent in espousing the view that there is a need for a flexible and pragmatic approach to rent review negotiations arising in the context of existing contractual arrangements. It is self-evident that it is not in anyone's interest that vacancy rates increase to an unacceptable level because of a reluctance to offer sensible concessions to traders who are in difficulty.

The Deputy will be aware that I have legislated to prohibit upward only rent reviews in leases entered into on or after 28 February of this year by way of section 132 of the Land and Conveyancing Law Reform Act 2009. Similar action in relation to existing leases was not possible for legal and constitutional reasons. There are indications that the commencement of that section has had some persuasive effect in relation to those lease arrangements, although I am sure that there is further scope for additional flexibility in this area.

In March of this year I established a working group to look at certain issues around the arbitration process and the adequacy of the information available to all parties in the context of rent reviews. The report of the working group was published on 17 August last. The group recommended the establishment of a public database containing relevant details of letting arrangements and rent reviews in the commercial property market. An appropriate amendment is being developed within my Department for inclusion in the Property Services (Regulation) Bill 2009 which would see the property services regulatory authority being given responsibility for the management of the database. The precise operational details pertaining to the database are in the course of finalisation.

Also among the group's recommendations is the adoption, by landlords and tenants alike, of the rent review arbitration code which was appended to their report and which is intended to achieve a uniform and transparent procedure for the resolution of disputes in the sector. I have publicly endorsed the group's recommendation in this area and have been in contact with bodies which were represented on the group to encourage them to commit to the code.

During the course of its deliberations, the group noted the potentially distorting effect which agreements made between landlords and tenants which are outside the terms of the lease may have on the letting market. These so-called side agreements can include matters such as rent free periods and contributions to fit out costs. In certain cases, such agreements can mean that the true value of the rent agreed may, in reality, be less than that appearing on the face of the lease. The need to ensure that the parties to a rent review have access to all relevant information was a key motivating factor in the recommendation for the establishment of a database, which I am fully committed to implementing.

I am satisfied that concerns in this area are being addressed as far as possible. While I can say that the operation of the law will continue to be reviewed in my Department, I do not think that criminal sanctions of the kind referred to by the Deputy are necessary or feasible.

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