Wednesday, 26 February 2014
Upward Only Rent (Clauses and Reviews) Bill 2013: Committee and Remaining Stages
I thank Senator Quinn for the work he has done in bringing the legislation to this stage. Out of respect for the House and its Members, it is important to set out clearly the Government's position on these amendments and on the Bill. It will be recalled that in 2011, the Government announced that it had decided not to proceed with legislation to abolish upward-only rent reviews. In that situation, proposed Government legislation which targeted tenants whose businesses might otherwise be viable were it not for the fact that the rent they were paying was significantly above market levels, was judged by the Attorney General to be unlikely to pass muster constitutionally.
Last October the Government took the decision to oppose Senator Quinn's Bill because of the legal and practical issues contained in it. The Senator is now proposing certain amendments and it is only fair to acknowledge that they appear to draw inspiration from some of the observations made when the Bill was last debated. However, the Bill, from the perspective of the Government, remains deeply flawed and, therefore, it has no choice but to maintain its opposition to it. The proposal put forward by Senator Quinn inevitably involves the property rights of a landlord under Article 43 of the Constitution. It retrospectively alters a contractual right - the right to receive and to have that rent varied by the operation of a particular rent review clause - and it has the potential to deprive landlords of a significant benefit which was freely negotiated. This would not be the case where the State intervened to create a certain level of rent. It is the case when the parties themselves reach a private agreement, in most cases with the benefit of appropriate legal advice. They are the constitutional issues pointed out to us by the Attorney General.
The new limitations being introduced on Committee Stage are presumably intended to confine the disapplication of upward-only rent review clauses in specific leases to certain types of tenants but that, in itself, creates new problems as the only landlords affected would be those with tenants who meet the criteria set out in the new section 2 or the new section 3. There are no criteria which take account of the circumstances particular to individual landlords who may themselves be reliant on the income stream represented by the disputed rent to meet particular financial obligations. This has the effect of singling out a specific group of landlords to solve what is undeniably a very real problem for some in the retail sector. This targeting inevitably has the potential to create arbitrary and discriminatory effects which are likely to impact significantly on the ability of the Bill to withstand constitutional challenge.
There is a further point which is that the advice received from the Attorney General has always made it clear that a compensatory element is critical in terms of Constitution-proofing any legislative proposal which seeks to introduce a retrospective restriction on property risks. The European Convention on Human Rights is applicable here also. While our economy is clearly showing very encouraging signs of recovery, it is simply inconceivable that a compensation scheme, which carries with it no guarantees in terms of the Bill's ultimate constitutional compliance, should be introduced for affected landlords. In any event, this Bill contains no such scheme.
There are still a number of practical difficulties associated with the workability of the Bill which could inevitably have an unforeseen impact on the commercial property market in view of the uncertainties that would thereby be engendered. Our economy needs stability if it is to prosper. There are things a Government can do to aid recovery in the retail trade and things which it cannot do. Ministers across a range of Departments are working to create a business-focused environment and to reduce the cost of doing business. Under the Companies (Miscellaneous Provisions) Act 2013, amendments have been introduced to facilitate access by small private companies to the examinership process which can be a valuable tool in terms of restoring viability to a company. A commercial leases database is now operational, which over time should introduce much-needed transparency into the commercial property market. Up to the end of last year, NAMA had approved rent abatements with an aggregate value of €18 million, representing an approval rating of 97%.
I stress the Government's commitment to ensuring we have a thriving retail sector and to providing support to that sector in all areas where such support is feasible. On behalf of the Government, I take the opportunity to commend those landlords who have shown flexibility in regard to rent review negotiations and I urge those who have yet to show such flexibility to do so in the future.
I urge those who have yet to do so to show such flexibility in the future. The Government is willing to work with all sides of the House to improve the quality of legislation before us. However, as our attempt to craft legislation in the area shows, the task of dealing with upward-only rent reviews in legacy leases is not an easy one and is beset by many constitutional difficulties. The amended Bill put forward by Senator Quinn is not a solution to the problem. The Government is maintaining its opposition to it and we will oppose it on Final Stage. We are not shutting down debate until Final Stage.