LOBBY group Retail Ireland has called on the government to provide a commercial rent assessment board with statutory powers to mediate between commercial landlords and tenants where disputes arise over rent. Such a move should accompany a review by the new Attorney General of upward-only rent legislation, it said this week.
The lobby group claims that high commercial rents are crippling businesses and costing jobs.
“Legislation to end upward-only rent reviews for existing leases is needed urgently. This should be accompanied by the establishment of a commercial rents assessment board, chaired by a high court judge and with statutory powers, where tenants could seek rent reductions to reflect economic circumstances,” Retail Ireland director Torlach Denihan said.
He said that the current high cost of rent bears no relationship to current economic realities.
“As it stands, there is no self correcting mechanism available for inflated commercial rents. Over the last decade rent as a percentage of turnover has doubled from 10pc to 20pc for retailers. Upward-only rent reviews have not only contributed to this inflation, but have contributed significantly to the loss of over 50,000 jobs in the retail sector since 2008,” said Mr Denihan.
“The previous government would not remove upward-only rent review clauses from existing leases because their Attorney General said to do so would be unconstitutional. The new Attorney General should, as an immediate priority, review this decision, with a view to introducing new legislation to remove these clauses from existing leases,” he added.
Apologists for upward only rent reviews are unwilling to contemplate solutions, he claimed.
“They fail to grasp that Ireland’s economy would be best served by managed rent reductions rather than the closure of perfectly good retail businesses with the consequent unemployment for staff, bankruptcies of owners and losses for creditors.
“A major adjustment is underway throughout the economy; prices, pay rates and even social welfare payments have been cut in a painful process. Landlords should participate in this adjustment too. Unless this is done, jobs will be lost and otherwise viable businesses will have to close,” concluded Mr Denihan.
The property investment industry said that it believes that up banning upward only rent reviews would be catastrophic for the sector. Property consultants CB Richard Ellis last week confirmed that there were only two investment transactions completed in the Irish property market in the first quarter of 2011, a factor they directly attribute to plans by the new government to retrospectively review rent provisions in existing business leases. This follows a year in which 29 transactions with a combined value of almost €242 million were completed in the Irish market, with approximately 30pc of this value being attributed to non-Irish buyers.
