Feargal Quinn (Independent) | Oireachtas source

I welcome the Minister of State, Deputy Tom Hayes, and his officials. We are getting to know the Minister of State quite well again. He was, of course, a Member of this House some years ago. I was delighted when he was appointed to his current position.

I have been concerned about the matter with which the Bill deals for some time and I had understood that Government legislation was to be introduced in respect of it. That is why I waited until now to bring forward the Bill, which is worthy of consideration. The problems posed by upward only rent reviews for businesses, particularly small businesses, are well known. The reality is that many businesses are trapped in certain kinds of leasing arrangements. The rents attaching to their properties are more reflective of the fact that land and property were massively overvalued in 2006 than they are of the position which obtains in 2013. The situation is exacerbated by the fact that consumer spending and economic activity are at an all-time low. With no way out, many businesses feel that they have no option but to close down, leading to job losses for those they employ. This can push people over that very thin line between economic survival and poverty. There is a huge difference between a business which is facing the difficulties presented by normal rent arrangements and one which is obliged to pay excessive rent. The first will survive and thrive, while the second probably will not. If we can manage to find a solution to this problem, it will make a world of difference in terms of job creation.

Upward only rent review clauses in pre-2010 leases are artificially propping up the rents achievable by landlords in respect of commercial premises. According to a report authored by Colm McCarthy, new lettings for commercial properties in Dublin have been commanding rents of €30 to €35 per square foot. At the height of the boom, these properties would have commanded rents of €60 or more per square foot. The reality is that if we had killed off these upward only rent review clauses, commercial property rents would have fallen as quickly as they did in the residential sector. Upward only rent clauses have ensured that the rents payable for the buildings to which I refer bear absolutely no relation to the current value of those properties.

The Bill is the fifth item of legislation aimed at tackling this issue. It will address the most significant factor which has led to the collapse of many small businesses and the loss of thousands jobs. The continued failure of the Government to tackle this problem head on will result in further closures and job losses. Those businesses which struggle to survive while paying exorbitant rent have little prospect of being able to expand and flourish. If we are serious about getting the economy back on its feet, we must consider how we might create new jobs and foster the establishment of new businesses. The House engaged in a very interesting discussion earlier today about small and medium enterprises, SMEs, etc. It is crucial that we consider how to safeguard existing jobs and businesses. We must examine ways in which those such businesses can be encouraged to grow and expand.

The Bill before the House is entirely compatible with the Constitution. I will now address its constitutionality under various headings. The first of this relates to the fact that the State's duty to protect property rights is not absolute. The wording of Article 40.3.2o of the Constitution makes this clear.

In Moynihan v. Greensmyththe Supreme Court noted:

... that the guarantee of protection given by Article 40.3.2^oof the Constitution is qualified by the words 'as best it may'. This implies circumstances in which the State may have to balance its protection of the right as against other obligations arising from regard for the common good.

According to Gerard Hogan, SC, the State's leading constitutional lawyer and now a judge of the High Court, "it follows that the State is entitled to balance the protection of property rights against other considerations".

The legislation will apply generally to all commercial leases and will ensure that rents reflect the impact of deflation in the economy. In effect, therefore, the Oireachtas would be removing an impediment to the market finding its true levels of rent. It is true that this Bill would be depriving individuals and companies of an important contractual right without compensation, but this is very often a consequence of regular and ordinary legislative activity. This point has been made by Mr. Justice Costello in Cafolla v.the Attorney General in 1986.

The approach taken in this legislation is anything but arbitrary or discriminatory. The reason this Bill targets upward only clauses in the commercial sector is because of the damage which has been done to that sector by the existence of such clauses. This Bill does not seek to impose any burden on landlords as a class, it merely seeks to allow market rents to prevail.

I wish to deal with the interference in private contracts as that is always a concern. Legislation often impacts on contracts which have been executed between private parties, the Competition Act 1991 is just one example. Interference in a private contract is done in the interests of the wider common good. One has to look no further than the Financial Emergency Provisions in the Public Interest Act 2009, which allowed the State to unilaterally reduce the amount which it would pay to service providers, in spite of the fact that the rates payable were set down in pre-existing contracts. What is being proposed in this Bill is no different from that.

The question of the absence of compensation comes into play. Where legislation interferes with or removes an existing right, it does not automatically follow that the persons affected must be compensated. In the Private Motorist Provident Society v. Attorney General in 1984, the Supreme Court upheld the constitutionality of legislation which, without compensation, prohibited an industrial and provident society from operating a banking business because it was desirable in the public interest. This is a very important part. The retrospective nature of this Bill forms part of that carefully balanced exercise. The full retrospective interference with a person's right may in certain circumstances be justified. This point is supported by the comments of Mr. Justice Henchy in Hamilton v. Hamilton in 1982.

According to economist Colm McCarthy, the level of deflation of wages and prices has never arisen before, certainly we have not seen it happen in our lifetime, and was not envisioned when legacy leases were entered into. The State is entitled to have regard to present economic conditions which address the extent of its duty to protect property rights. This point was made by Mr. Justice J. McMahon in JJ Haire & Co. Ltd. v. Minister for Health and Children in 2009 where he said that "economic realities must inform the interpretation of the constitutional phrases in assessing what the State can do ...".

I wish to deal with the issue of proportionality. The critical question is not so much whether a contractual right will be interfered with without compensation, but rather whether the end result is proportionate and objectively justifiable. This Bill satisfies the test of proportionality in that it does not constitute a disproportionate interference with property rights. It is minimal in terms of how it seeks to achieve its objectives and those objectives are wholly driven by the exigencies of the common good. It is undeniable that the exigencies of the common good lie in favour of a legislative measure such as this which carefully balances the rights of small business as against the rights of banks and institutional investors so as to ease the burden on small businesses. This is a balancing exercise with the very survival of small businesses at its heart. The banks and institutional investors on the other side of the equation are not faced with the prospect of closure or collapse if this Bill is enacted. For many small businesses, the enactment of this Bill will mean the difference between survival and closure; it will mean the difference between staying alive and thriving in the future. For those employed in the small business sector this Bill could mean the difference between working this week or joining the unemployment line next week. I found this quite an interesting challenge to have and it is worthy of consideration to a very large extent. The problems posed by upward only rent are very real for small businesses. Because of the long-term nature of leases entered into during the boom, this problem is not going to go away anytime soon. I urge the Minister of State in the strongest possible terms to support this Bill.
I found it very interesting to go into the details of this legislation and the Minister of State will realise that it is not an area in which I had a great deal of experience and, therefore, I have had some help. However, I had the opportunity, probably long before he was born in 1971, of ending up not only in the District Court and High Court but in the Supreme Court and I won a case in the Supreme Court back then. I feel very proud of that achievement because I was only a young fellow at the time. I have had to learn a good deal about legislation but I have learned a great deal more in the past few months in examining this issue. This Bill is one that is worthy of consideration, it is one this House should pass tonight and I urge the Minister of State to give it every consideration.