Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

Question 29: To ask the Minister for Justice and Law Reform if he has received the report on the working group to look at the issue of commercial rent reviews; if he will report on the main findings of the group; when he intends to publish this report; and if he will make a statement on the matter. [28664/10]

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

The working group to which the Deputy refers was established by me in March of this year. Its terms of reference were as follows:

To consider the operation of the current system for determining the rent payable on foot of a rent review clause, with particular emphasis on the arbitration process and the adequacy of the information available to all parties and, if necessary, to make such recommendations for change as may seem appropriate.

When I established the group, I was concerned to ensure its membership was such that any recommendations it might bring forward would be reflective of the broad spectrum of opinion in this area. Thus, in addition to other participants, the membership of the group is drawn from key stakeholders in the retail and commercial property area. It includes representatives from the Irish Business and Employers Confederation, the Irish Small Firms Association, the Irish Small and Medium Enterprises Association, and Retail Excellence Ireland. It also includes representatives from the Irish Association of Investment Managers, the Irish Association of Pension Funds, the Irish Auctioneers and Valuers Institute and the Society of Chartered Surveyors.

The problems which confront the retail sector at the moment are not in dispute. I have met members of that sector and listened very carefully to what they have had to say about the difficulties which they are experiencing regarding the rent issue in general. In the legislative area, I moved very quickly last July to introduce a provision to prohibit upward-only rent review clauses in leases entered into as and from a particular date. The date for the commencement was eventually fixed at 28 February 2010. Action on pre-existing leases was precluded for legal and constitutional reasons.

In establishing the group, I was conscious that concerns had been expressed to me about areas other than upward-only rent review clauses. Specifically, there were concerns about the arbitration process and about the lack of transparency attaching to the provision of information. Again, I wished to move quickly in an attempt to see if workable solutions could be devised to address these concerns. Accordingly, I asked the group to report to me by the end of June and I am hopeful it will adhere to this deadline. However, while the group is close to finalising its report, I understand that it will need a little more time in order to conclude its deliberations. I have agreed that some additional time will be made available to the group to enable it to bring matters to a speedy conclusion. I expect that the report will be finalised during the month of July. It will, of course, be put into the public domain once it is presented to me.

Séamus Kirk (Louth, Ceann Comhairle)
Link to this: Individually | In context

Before I call Deputy Rabbitte, I wish to say that time for each priority question is limited to six minutes. We will try to keep within that timeframe.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

If that is the target, we have not done very well so far.

Séamus Kirk (Louth, Ceann Comhairle)
Link to this: Individually | In context

There was some slippage on the first priority question.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

Please do not take the injury time out on me, a Cheann Comhairle.

When he announced this group, the Minister said it would report by the end of June. I take it from what he has now said that it will not do so. Is he aware that he made this announcement on the same day that my party introduced a Bill, given the emergency nature of the crisis in the retail sector to deal with the issue of upward-only reviews of rent? On the same day that we published that Bill, in a knee-jerk action, the Minister set up this working group. I have information from significant individual retailers to the effect that the working group is no more than window dressing because it is not addressing the inadequacies of the rent review system. Will the group provide a register of lease interests? Will it provide a definition of market rent? These are just two of the critical issues involved in a sector that is the single biggest employer in the private sector, where 30,000 jobs were lost last year, a great many of them because of the inability of retailers to negotiate rents in line with trends in the market. The reason it cannot negotiate rents in line with the collapsing market is because of conditions that provide only for upward review of rents.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

As I said, the working group was expected to report by the end of June. It has asked for some additional time and its report will be published some time in July. I do not accept it was a knee-jerk reaction. It was a reaction by me to try to address some of the issues, such as the disquiet to which some people have referred regarding what they feel is a lack of transparency in the arbitration process and also the suggestion that some partial and misleading information is tendered regarding the rent review situation.

I know the Deputy said he spoke to some of his friends in the Law Library who had some query about the gangland legislation. I wonder whether he asked some of his friends in the Law Library about his party's proposed legislation on this matter, which was basically a sop that was not constitutionally or legally sound. We are all in the same page in having sympathy and understanding of the difficulties in the commercial sector but we can only pass legislation that is constitutionally sound. This Government banned upward only rent for leases, albeit from a particular date into the future.

We have clear legal advice on this from the Attorney General, and I hazard a guess that the Labour Party also has clear legal advice because its own Bill implicitly acknowledged that there was a significant problem in retrospective action for previous leases entered into freely by two parties. The State and the Oireachtas cannot by legislation intervene and rewrite contracts that were validly entered into by two individual third parties who no doubt were legally advised on entering those contracts.

The elephant in the room is that if the State and Oireachtas were allowed by legislation to intervene to change contracts, this could only be done on the basis of substantial compensation being paid to those disadvantaged by such action. The Labour Party did not in its Bill suggest that landlords as a group should be either collectively or individually recompensed for any loss arising from legislation brought forward by the Oireachtas. In the legislation it sponsored it proposed to give the Minister a regulation-making power without any indication as to how these regulations could be constitutionally sound.

I made it clear that we can deal with leases that will be entered into in future. I did this knowing full well that there would not be a significant effect on existing leases but it would send out a very strong signal to landlords that they should enter into renegotiation with tenants where there is difficulty. I have anecdotal evidence from around the country - although not necessarily from Dublin city centre - indicating that landlords have adopted a realistic approach on the basis that half a loaf is better than none. Instead of putting someone out of business, it is far better for such landlords to renegotiate the rent. We can only do so much in the Legislature and we should not mislead people.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

The Minister is correct in that we sought expert legal opinion in working on our Bill and my colleague, Deputy Ciarán Lynch, set that out when he introduced it. We received further legal advice to the effect that the measures taken by the Minister, which only relate to the future, will have no impact on the economic crisis I am talking about in the retail sector currently, where 30,000 jobs have been lost and the normal rules of supply and demand do not operate.

For example, when a code emerges - if it does - from the working group, will it be mandatory or voluntary? When the Minister said he was sending a signal and some developers who owned premises have responded, it does not concur with the feedback I have. He said that did not necessarily apply to the heart of Dublin and it does not, to the best of my information. Our concern in this issue is one of employment, as there are retailers of long standing being put out of business because of the inability to negotiate market rents in line with present circumstances due to the upward only rent review provisions that the Minister is seeking to protect. He is appealing to the constitutional provisions of private property in order to hide behind the skirts of the Constitution so as to not intervene, effectively, to preserve employment.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

There is no hiding behind the Constitution and we can only act under the Constitution. We can only act under the aegis of the law as we ourselves pass it and it is imperative, under contract law, that if two parties enter into a contract freely with legal and other advice, the Oireachtas cannot pass a law to change that.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

We are only asking that the veto be removed on the renegotiation of a contract when market conditions have dramatically changed.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

We are on the same page with regard to having difficulty with the circumstances of certain people who entered into rents at the peak of the Celtic tiger era. We cannot pass a law here that would rewrite that contract unless both parties are willing to do it. In many cases landlords are renegotiating and in some cases they are not. It may very well be that a landlord or a body which provided a party with finance in order to produce a development is insisting on these circumstances and ensuring they get what is in the contract.

We changed the law for future leases and there is information that this will have and already has had an effect. With new leases, the market has dampened significantly and not just because of economic circumstances. New leases not having upward only rent reviews is having a significant effect on the type of rent being sought. It is providing certainty not only to landlords but to the tenants. We have looked at this high up and low down and we want to be helpful to people finding themselves in difficulty. We can only act in a way that is legally possible.

I will go back to what I said on retrospective action on Committee Stage of the legislation we discussed yesterday. The fact is we cannot pass a law today that would rewrite contracts entered into freely by people. I know instances have been indicated by some people who say we can-----

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

Our advice was on the basis of an emergency.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

None of those instances is relevant with regard to this issue, which boils down to the elephant in the corner which nobody is mentioning. If we were to intervene and change contracts that were validly entered into without the consent of the two parties involved and where one is objecting, we would have to provide compensation. The taxpayer would have to provide this to people disadvantaged as a result of us passing such a law. What the Labour Party and Fine Gael are not saying is that the taxpayers, in effect, would have to put a hand in their pocket because of a law we passed and give money to landlords in order to compensate them for the loss of property right.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

The Government is only being asked to facilitate contracting parties in making whatever changes they agree as appropriate.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

The parties are ideally placed to enter into a renegotiation provided both are willing to do so.

Charles Flanagan (Laois-Offaly, Fine Gael)
Link to this: Individually | In context

They are not.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

They do not need facilitation and can do it themselves. The facilitation is already there.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

What if the developer will not do a deal?

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

The Deputy is indicating we should bring in a law mandating one of the parties, against its wishes, to accept something less than was originally contracted for.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

I am arguing that the contracting parties ought to be facilitated in renegotiation.

Séamus Kirk (Louth, Ceann Comhairle)
Link to this: Individually | In context

We must move on.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

They are facilitated.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

What if the developer does not deal with the other party?

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

That is the problem.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

Yes.

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

If there is a willingness on both sides the State does not need to intervene.

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

Is there no public interest?

Dermot Ahern (Louth, Fianna Fail)
Link to this: Individually | In context

It can be done among the parties. There is a public interest but we cannot pass laws in the Oireachtas against our Constitution or contract law on the basis of public interest without providing compensation.

The Deputy does not address this and neither does the Labour Party Bill.