Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

I thank the Deputies for raising this issue, which has received a lot of publicity over the past few years and especially since the publication of the High Court judgment of Mr. Justice Peter Charleton yesterday. As Deputies will know, the issue of upward-only rent reviews has been raised on a number of occasions in this House. I did so on various occasions when in opposition, as Deputy Calleary correctly stated. I welcome the opportunity to clarify the position.

As Deputy Calleary admitted before straying from the subject, it is absolutely clear on reading the detailed judgment delivered in yesterday’s case that it was determined in the context of the specific wording of clauses in the relevant commercial lease. There is, of course, a possibility that the case could be appealed to the Supreme Court and I shall, of course, keep all aspects of developments on this issue under ongoing review. As it stands, the judgment in the case is of relevance only to leases that have similar or identical terms, and it does not address the constitutional issue.

On the need for constitutional change concerning upward-only rent review clauses in commercial leases, the constitutional issue arises because of the protection afforded by the Constitution to private property. In this regard, rent from commercial premises is a property right for the purpose of the Constitution. Article 40 of the Constitution provides that the State will vindicate the properly rights of every citizen. It is necessary to bear in mind that the right to private property is an important protection enshrined in the Constitution for the benefit of all citizens. The State guarantees not to enact laws to abolish these rights. That guarantee is tempered, however, by Article 43, which provides that the right to private property ought to be regulated by the principles of social justice. Essentially, the Oireachtas may pass laws limiting the right to private property in the interest of the common good. However, where such a law is enacted, the advice is that compensation for the restriction of property rights may be required. In that context, there are also issues of compatibility with the European Convention on Human Rights.

If the suggestion is that the Constitution be amended so that rent from commercial property should no longer be regarded as a right to be protected under the Constitution, then an obvious question flows from that line of thought, namely, the question of where the picking apart of rights enshrined under the Constitution stops. Even in the context of upward-only rent review clauses, the abolition of private property rights could be considered to be a blunt instrument as many commercial tenants are complying with the terms of their leases and do not need the benefit which it would provide.

The common practice of including upward-only rent review clauses in commercial leases has not arisen because of any legislative requirement. The nature and application of a commercial lease is a matter for the parties to that lease, and parties have always been free to agree that review clauses, other than those based upon the upward-only model, be included in their leases. Furthermore, even where upward-only clauses are present, the parties have always been able to agree that a flexible approach should be taken both as to the amount of rent payable and the way in which that rent is to be paid. In this context, the Government has repeatedly urged that a pragmatic approach be taken by those involved in lease renegotiation.

Section 132 of the Land and Conveyancing Law Reform Act 2009 has the effect of providing that, in practice, upward-only rent review clauses would no longer be possible in regard to leases entered into after the commencement of that Act. This means that such rent review clauses are subject to the construction that the rent payable on review may be fixed at an amount that 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.

As Deputy Calleary well knows, Fianna Fáil, when in government, did not address the issue of upward-only rent clauses in leases concluded prior to the coming into force of that legislation. That is essentially the area of difficulty. I can confirm that, on entering government, I was directly involved in drafting heads of legislation to address this issue to facilitate the reopening of commercial leases in circumstances where the only provision was for upward-only rent reviews. I shared the view that it was unsatisfactory and unfair that some individuals were tied into commercial leases that contained upward-only rent reviews while this was not the position if one was entering a new lease arrangement.

I can confirm that my Department sought advice from the Office of the Attorney General on the issue of retrospection in the enactment of legislation. We proposed a number of ways of dealing with it. In the context of all the proposals, we were advised that there would be major constitutional difficulties as any of the proposed methodologies for addressing this would have an impact on the property rights of persons under the Constitution. Accordingly, that is why it has not proved possible to address this issue in legislation. Unfortunately, the very interesting judgment from yesterday does not shed any further light on this in the context of the constitutional issues.

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