Retail Excellence Ireland, which represents around 580 retail companies, is putting its weight behind a campaign to suspend upwards-only rent reviews
A LOBBY group representing independent retailers has launched a campaign to persuade TDs to support a private members bill allowing the Government to temporarily suspend upwards-only clauses in rent reviews.
The move comes as an increasing number of traders are seeking rent reductions because of a fall-off in consumer spending.
Retail Excellence Ireland, which represents around 580 retail companies, has written to TDs seeking support for the bill tabled by Cork Labour TD Ciaran Lynch who says that leases providing for rent increases only are a threat to the viability of many businesses.
Jack Devlin, property adviser to Retail Excellence, says that in quite a few cases shopping centres have been cutting rents by between 25 and 35 per cent to allow traders to survive in the present difficult market. Otherwise, landlords would be faced not only with the loss of the rent but also service charges and insurance costs.
Fashion, footwear, giftwear as well as the travel trade were worst affected by the fall-off in spending, he said.
The issue of retail rents first surfaced in April when traders on Dublin’s Grafton Street launched a campaign for an end to upwards-only rent reviews. There is a general acceptance that some of the rents settled in the last four years on Grafton Street are between 20 and 30 per cent above the rate likely to be set in new lettings this autumn.
Businessman John Corcoran, who has been running Korky’s footwear store on the street for the past 14 years, has failed to sell the lease of his shop, after offering a reverse premium of at least €300,000 as an incentive to a new business.
Corcoran says his shop is losing at least €200,000 a year because of the rent of €445,000 charged by his landlord, Canada Life.
Corcoran said that the introduction of the Labour Party bill would put the matter on the Oireachtas agenda and would flush out the other parties into either supporting or opposing it.
More likely it would result in the bill going to committee stage for discussion and amendment, and then back to the Dáil to be passed into law.
The Society of Chartered Surveyors has warned that any interference is existing rental contracts could give rise to legal difficulties. “The ultimate arbiter of the enforcement of any provision of a lease, including the rent review clause, can only be decided by a court.”
Michael Harrington, a director of agent HWBC, said the upwards-only rent review provisions were the property equivalent to a fixed rate mortgage. They were really only an issue for tenants if the market moved against them and market rates dropped below the rent they originally contracted to pay.
When rents rose above the passing levels and substantial leasehold premiums changed hands, none of that profit made its way to the landlords.
“The current tenant lobby needs to realise that their lease commitments in many cases form the basis of landlords’ banking commitments and that a lease is for the full term – not just the good days.
“It may be that tenants will be more reluctant to accept upwards-only reviews in the future and that is a matter for negotiation. However, existing upwards-only reviews are a matter of contract between the parties and there is no place for legislative intervention. This is a free market after all – not China.”
