Seanad debates

Wednesday, 26 February 2014

Upward Only Rent (Clauses and Reviews) Bill 2013: Committee and Remaining Stages

 

Section 1 agreed to.

NEW SECTION

2:15 pm

Photo of Jillian van TurnhoutJillian van Turnhout (Independent)
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Amendments Nos. 1 and 2 are related and may be discussed together. Is that agreed? Agreed.

Photo of Feargal QuinnFeargal Quinn (Independent)
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I move amendment No. 1:


In page 3, between lines 21 and 22, to insert the following:
“Disapplication of certain clauses
2.(1) A clause which is contained in a relevant lease and which purports to set the amount of rent payable in respect of that land at a level which is
greater than the amount of the prevailing market rent for that tenancy at that time may be disapplied by an arbitrator during the course of a review
where the considerations set out in subsection (4) are satisfied.
(2) A tenant who is subject to a relevant lease may give notice of his or her intention to invoke a review under this section.
(3) (a) A review under this section shall be conducted by an arbitrator appointed by the Chartered Institute of Arbitrators Ireland whose determination
shall be final and binding.
(b) An arbitrator's determination may⁠—
(i) direct that the current level of rent remain in place, or
(ii) direct the payment of a reduced level of rent.
(4) In conducting a review under this section, the arbitrator shall have regard to whether⁠—
(a) due to the external economic environment the business is currently, or is imminently in danger of, experiencing financial distress,
(b) the level of rent currently payable represents a threat to the continued viability of the business,
(c) a reduction in the level of rent will enhance the viability of the business, and
(d) a reduction in the level of rent will preserve existing levels of employment.
(5) This section shall not be used to confer the benefit of reduced rent payments on a business whose financial distress has been shown to have
been principally caused by inadequate or ineffective management.
(6) A review under this section may only be invoked once during the term of the relevant lease.”.
I welcome the Minister of State and thank him for attending. We had a very good debate on this issue on Second Stage so I do not intend to go back over it. I listened very carefully to the words of the Minister of State and these three amendments should solve the problems in this area. Rather than speak on them, they will speak for themselves.

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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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.

2:25 pm

Photo of Feargal QuinnFeargal Quinn (Independent)
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I said all I have to say on Second Stage. This was aimed at overcoming the problems expressed on Second Stage on behalf of the Minister.

Photo of Aideen HaydenAideen Hayden (Labour)
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Will section 2 be deleted? I understood the amendment inserted a section.

Photo of Jillian van TurnhoutJillian van Turnhout (Independent)
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Yes, deletion arises from the amendment. The consequence of acceptance of the amendment is the deletion of section 2.

Amendment agreed to.

Section 2 deleted.

NEW SECTION

Photo of Feargal QuinnFeargal Quinn (Independent)
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I move amendment No. 2:


In page 3, between lines 25 and 26, to insert the following:“Abatement of rent under certain review processes
3. (1) A review process which is provided for under the terms of a relevant lease shall not be bound to determine that the amount of rent payable in respect of that land may only be set at a level which is greater than the amount of the prevailing market rent for that tenancy provided that the considerations set out in subsection (2) are satisfied.
(2) Where a review process referred to in subsection (1) is being conducted under a relevant lease the following matters shall be taken into consideration by the reviewer, namely whether—
(a) due to the external economic environment the business is currently, or is imminently in danger of, experiencing financial distress,
(b) the level of rent currently payable represents a threat to the continued viability of the business,
(c) a reduction in the level of rent will enhance the viability of the business, and
(d) a reduction in the level of rent will preserve existing levels of employment.
(3) Where the considerations set out in subsection (2) are satisfied, the reviewer may—
(a) direct that the current level of rent remain in place, or
(b) direct the payment of a reduced level of rent.
(4) This section shall not be used to confer the benefit of reduced rent payments on a business whose financial distress has been shown to have been principally caused by inadequate or ineffective management.
(5) In this section “reviewer” means the arbitrator or other person charged with leading or otherwise adjudicating upon a review process which is provided for in a relevant lease.”.

Amendment agreed to.

Section 3 deleted.

Section 4 agreed to.

SECTION 5

Photo of Feargal QuinnFeargal Quinn (Independent)
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I move amendment No. 3:


In page 4, after line 9, to insert the following:“(3) (a) This Act shall cease to operate five years after the date of its commencement and shall thereat stand repealed.
(b) The repeal of this Act shall not serve to affect the duration or effectiveness of—
(i) a determination made under section 2, or
(ii) a review process decision made under section 3, prior to its repeal.”.

Amendment agreed to.

Section 5, as amended, agreed to.

Title agreed to.

Bill reported with amendments and received for final consideration.

Question put: "That the Bill do now pass."

The Seanad divided by electronic means.

2:30 pm

Photo of Paddy BurkePaddy Burke (Cathaoirleach of Seanad; Fine Gael)
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The result of the vote is Tá, 22; Níl, 22. There is an equality of votes. Therefore, pursuant to Article 15.11.2° of the Constitution I must exercise my casting vote. I vote against the question in this case.

Photo of David NorrisDavid Norris (Independent)
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Do not allow the Constitution to tell you how to vote.

Photo of Paddy BurkePaddy Burke (Cathaoirleach of Seanad; Fine Gael)
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The amended result is Tá, 22; Níl, 23. The question is defeated.

Photo of Feargal QuinnFeargal Quinn (Independent)
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Under Standing Order 62(3)(b) I request that the division be taken again other than by electronic means.

Question put:

The Seanad divided: Tá, 23; Níl, 22.

Tellers: Tá, Senators Sean D. Barrett and Feargal Quinn; Níl, Senators Paul Coghlan and Aideen Hayden.

Question declared carried.

Sitting suspended at 3.35 p.m. and resumed at 4 p.m.