Written answers

Thursday, 14 February 2013

Department of Jobs, Enterprise and Innovation

Upward Only Rent Reviews

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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To ask the Minister for Jobs, Enterprise and Innovation the steps he is taking to address the competitive disadvantage of businesses locked into pre 2010 leases that continue to include upward only rent clauses; and if he will make a statement on the matter. [7815/13]

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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The Land Conveyancing and Law Reform Act, 2009, abolished upward-only rent reviews for all new leases signed on or after 28th February 2010. When the Government came into office, it gave extensive consideration to abolishing upward-only rent reviews in leases signed before 28th February 2010.

The advice received by the Government was that it was not possible to develop a scheme to tackle this issue that would not be vulnerable to a Constitutional challenge or compensation claims from landlords. On the basis of this advice, the Government concluded that it was not feasible to legislate to abolish upward only rent reviews.

However, the Government has taken steps to address the issue where possible. In the Action Plan for Jobs 2012, the Government undertook to place downward pressure on commercial rents where the National Asset Management Agency (NAMA) had acquired the loan on the underlying property. NAMA approves requests for rent easement or abatement from its debtors where a tenant demonstrates that the rent payable under the lease is in excess of current market levels and that the viability of a business is, as a consequence, threatened.

I understand that by the end of 2012, NAMA had received 276 eligible applications and had granted 212 applications for rent abatement with an aggregate annual value of €13.5 million. A further 56 applications were under review. Of the 276 eligible applications received, only 8 were refused, representing a 97% approval rate by NAMA. NAMA’s Guidance Note on upward only commercial leases is available on the agency’s website, www.nama.ie. The agency engages with industry representative bodies in the retail sector to promote understanding of the Guidance Note and its applicability.

In addition, the Property Services (Regulation) Act, 2011, provides for the establishment and maintenance of a Commercial Leases Database by the Property Services Regulatory Authority, which is expected to capture information in relation to the rent agreed and other clauses within commercial leases agreed in the future. I understand that work is under way to ensure that the database will be operational at an early date. The database will go toward enhancing transparency in the commercial property market.

Businesses can, of course, seek to negotiate a rent reduction directly with their landlord, even where upward only rent reviews exist in leases. There are a number of instances where businesses have secured rent reductions through negotiations of this nature.

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