Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank the Ceann Comhairle for allowing us to raise this issue which follows a very significant court judgment yesterday on the lease for Bewley's café on Grafton Street. I recognise there is a specific component in that lease, at which people are looking. However, for the first time, the issue of protection and property rights has been challenged in the courts. This is a chance for us to bring the issue back to the Dáil.

The retail sector has been facing a very significant challenge for the past five years, with which the Minister of State, Deputy John Perry, has been trying to deal. The one area with which many retailers cannot deal is rental costs because of these old-style leases which provide for upward-only rent reviews. That no longer applies to new leases and, in some cases, rents have been negotiated downwards. However, in the majority of cases, that has not been possible. If one takes a walk down any street in any town or city, one will see the consequences of this.

Yesterday Mr. Justice Charleton gave us the opportunity to take action on this issue. What are the Government's plans in this regard? There is a commitment in the programme for Government to address the issue. Before entering government, the Government parties were advised that it was constitutional, but now that they are in government, they have been advised that they cannot proceed because of constitutional issues. The Minister now has the chance to stop hiding behind the constitutional defence. We are due to have referendums-----

Alan Shatter (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Do me a favour. When the Deputy's party was in government, it did not address the issue.

Catherine Byrne (Dublin South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am sorry, but Deputy Dara Calleary has the floor.

Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

We did, actually. We brought forward the legislation. The Minister was very vocal in opposition on so many issues, including this one. He is now in government and had the chance for two years to do something about it, but he has sat on his tail and the retail industry has been left like so many other groups he courted. On this occasion he should be conscious that it is not only me who is raising this issue but also his party chairman and a Deputy of the party with which he is in government.

Michael McNamara (Clare, Labour)
Link to this: Individually | In context | Oireachtas source

I also wish to address the issue of upward-only rent reviews. Fine Gael and the Labour Party, in their pre-election manifestos, promised to tackle this issue, but they were unable to proceed with the envisaged Bill on the advice of the Attorney General. Contrary to what Deputy Dara Calleary said, Mr. Justice Charleton's decision of yesterday which I suggest he read does not question the general principle that banning upward-only rent reviews retrospectively would be unlawful. It deals with a very specific contract, as Mr. Justice Charleton makes very clear. Nevertheless, the difficulty in respect of upward-only rent reviews prevails. Everybody in this Chamber has been canvassing in Meath East. One only has to walk down any high street in Ireland, whether in Kilrush, Ennis or any town in Meath East, to see that many shops are closing. Mr. Justice Charleton specifically deals with the fact that he is not in a position to put himself in the place of the parties and negotiate a better deal for one party, even if that is what should have been negotiated at the time and even if it leads to liquidation, which is the difficulty. Businesses are being liquidated on the basis that they cannot pay their rent. However, after they have been liquidated, somebody else rents the premises and will perhaps pay 50% less. Those located beside that person must compete with somebody else who is paying 50% less. The problem prevails and I urge the Minister for Justice and Equality to consider holding a referendum on the issue. If we can hold a referendum to reduce the pay of judges and abolish the Upper House, I do not see why we cannot hold one to clarify whether we can abolish upward-only rent reviews, even if they have been agreed to before the referendum. I look forward to the Minister's response.

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

I wish to raise two points. I am not sure I would go down the referendum route. We have discussed this matter on numerous occasions in recent years. However, a case could be made to revisit the issue in the context of Mr. Justice Charleton's judgment yesterday. The current position is unsatisfactory and unfair. We have a two-tier system covering pre-2010 leases which cannot be reviewed and leases post-2010 which cannot contain an upward-only rent review clause. That is unjust and unsatisfactory.

We must recall the fact that upward-only rent reviews were originally designed to ensure rent kept pace with inflation. This concept is long since outdated and obsolete considering that thousands of rents in this city and beyond are artificially set at rates many multiples of what the rate of inflation would determine. This is unsustainable and unjust. It contrasts with the fact that Government and banks are spending time and energy seeking solutions to help householders who are unable to meet mortgage repayments agreed at the height of the boom at prices that bear no relation to reality. Similar solutions must be sought and found in the commercial rental sector, where it is estimated that thousands of jobs have been lost since the crash. We must examine the trend whereby some of our more famous brands, such as B&Q, HMV and Monsoon, are on a weekly basis going into either examinership or liquidation. We are told by them that they are citing as the principal reason enormous rents that bear no relation to reality. It is timely for the Minister to meet the Attorney General to review the law on upward-only rent reviews, both in the context of yesterday's Bewley's case and also the recent IBRC legislation, which saw the suspension of certain property rights in the overall common good.

It is timely to have the commercial database. I welcome the fact the Minister is in a position to report progress on that. It is long overdue and we need it. It is important that investors have certainty and that landlords and tenants be on a proper footing when negotiating.

Alan Shatter (Dublin South, Fine Gael)
Link to this: Individually | In context | 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.

Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

The judgment yesterday gives us the opportunity to discuss this matter today. I must clarify for Deputy McNamara that I did not make a direct link. Unfortunately, the Minister did not get a chance to address the work of NAMA. Can it be confirmed that any NAMA rent deal will be entered into the new property leases database? Will the Minister give us an idea as to when that database will be available to the public? I acknowledge he hopes to have it online pretty soon.

Retailers who were given assurances, not just in manifestoes but also in the programme for Government, will question why the advice received before the election was so different from that received after the election. Legal professionals were involved and suddenly circumstances changed when the Government changed. The retailers are entitled to an answer.

Michael McNamara (Clare, Labour)
Link to this: Individually | In context | Oireachtas source

I thank the Minister very much for his reply although I do not believe it added a lot to what we already knew. We were aware that there are constitutional difficulties.

In his reply, the Minister stated he was afraid of the picking apart of rights enshrined in the Constitution and he questioned where this would stop. We have already re-examined the contours of rights in the Constitution. The right to liberty was re-examined when there was a constitutional referendum on bail, and the right to citizenship of every child born in the State was re-examined and narrowed such that it would apply only to every child born in the State to parents legally resident here. At this stage, in 2013, the Labour Party is not talking about the abolition of private property. I do not believe even Deputies Brian Stanley or Catherine Murphy would like to abolish private property at the stage. We are merely saying that the right to private property should be narrowed-----

Brian Stanley (Laois-Offaly, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

We are all socialists like the Deputy and Bertie Ahern.

Michael McNamara (Clare, Labour)
Link to this: Individually | In context | Oireachtas source

I am glad to hear it but I am not so glad to hear Deputy Stanley compare himself to former Deputy Ahern-----

Catherine Byrne (Dublin South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I call Deputy Charles Flanagan.

Michael McNamara (Clare, Labour)
Link to this: Individually | In context | Oireachtas source

What we are talking about is a narrow change to the contours of the right to private property such that upward-only rent reviews would be deemed contrary to public policy and, therefore, unenforceable by the courts. The retail sector has the potential to provide 15,000 jobs. This was the Labour Party's assessment in advance of the last election, and that has not changed. This is still an issue that needs to be addressed, even if it requires a referendum.

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

I note the Minister has read the judgment, which is certainly welcome. One word used by Mr. Justice Charleton was "unreal". He stated that to proceed towards ever-increasing sums every five years in spite of deflation was to give an unreal figure for rent.

We are in an unreal situation. Perhaps in light of yesterday's judgment the Minister might revisit the issue with the Attorney General, whose advice he took earlier in the lifetime of this Government on the matter of a referendum on legislation.

Alan Shatter (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In response to Deputy Flanagan, I have no difficulty raising the matter again with the Attorney General, but I am not optimistic of getting a different answer. Also, I do not believe yesterday's judgment prescribes any roadmap that would indicate the answer would be different.

Reference was made by Deputy Calleary to NAMA. When it proved impossible for us to progress the legislation on this issue, NAMA agreed to play a role in dealing with problems caused by upward-only rent reviews applying to properties held by it. This role applies where tenants of NAMA debtors can show that the rents they are paying are in excess of current market levels and consequently the viability of their businesses is threatened. In such circumstances, tenants can seek NAMA's approval for rent reductions. I have been advised that by the end of 2012 the agency had granted 212 applications for rent abatement, with an aggregate annual value of €13.5 million. A further 56 applications are currently under review. Of the 276 eligible applications received to date, only eight have been refused, representing a 97% approval rate by NAMA. This initiative, taken by the current Government, has been effective in dealing with NAMA-related properties.

One of the difficulties with rent reviews is the absence of readily accessible accurate information to determine the market rent payable in respect of comparable commercial properties. The Property Services (Regulation) Act 2011 addresses this issue by providing for the establishment and maintenance of a commercial leases database by the Property Services Regulatory Authority. Such a database has already been provided in respect of family homes. Work is under way to ensure that this database will be operational at an early date. I do not have a definitive date for when it will be operational-----

Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Will it be this year?

Alan Shatter (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

-----but I am happy to communicate with Deputy Calleary in that regard.

I draw the attention of the House to the existence of a rent review arbitration code, to be found on the Department of Justice and Equality website, which was developed by an expert group whose membership was drawn from all relevant stakeholders and which provides a mechanism to deal with the resolution of rent review disputes in the commercial property sector. The code contains detailed provisions concerning the production of comparative evidence relating to property transactions and places a firm duty on all parties to disclose all relevant information in their possession. As matters stand, parties are free to specify that this code should apply to rent review arbitrations and all parties are encouraged to make use of its provisions. The effectiveness of the code and the extent to which it is utilised by stakeholders will be reviewed over the coming months.

Catherine Byrne (Dublin South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Thank you, Minister.

Alan Shatter (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I share the concern expressed by the Deputies. I wish we had been in a position to enact the legislation. I heard what Deputy McNamara said. I must abide by the advice of the Attorney General. There is a constitutional obligation on the Government, when bringing legislation before this House, to ensure it is compatible with the Constitution.

Catherine Byrne (Dublin South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Thank you, Minister.

Alan Shatter (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

When I was a Member of the Opposition there was disparate advice available with regard to this matter and how it might be addressed in a manner that was compatible with the Constitution. Ultimately, the Government must abide by the advice received.

Like every other Member of this House, I urge landlords of commercial properties to deal in a pragmatic and reasonable way with tenants. It is in the interests of landlords and tenants, in the context of rent reviews on commercial leases, that the rents agreed are realistic and enable tenants to continue to run viable businesses. That is to the benefit of landlords. To insist on an unrealistic rent would result in vacant premises, in respect of which the landlord would ultimately receive only the lesser reasonable rent that he or she could have made available to the original tenant.