Upward-Only Rent Reviews in Ireland
Posted by:
FSPRetail ,
06 December 2011
The Justice Minister Alan Shatter is expected to make an announcement on the rents issue this week. It is not clear whether this will include set proposals or merely outline a timeframe for the launch of rent reform plans next year.
Recent research conducted by Retail Excellence Ireland with 1,418 leasehold retail stores nationwide found that between 2009 and 2011, rents were reduced by an average of 3.83%, while over the same period retail industry sales decreased by 30% and around 50,000 jobs in the sector were lost. Average rents decreased by 3.16% in 2009, 4.39% in 2010 and 4.4% in 2011.
According to REI chief executive David Fitzsimons, the study “is clear proof that the vast majority of commercial landlords have no intention of adjusting rents and are desperately holding on to Celtic Tiger lease agreements. Every other cost faced by retailers has decreased over the past three year with the exception of rents. What is most concerning is the fact that new market entrants can command rent at rates 50% lower that legacy tenants, thus many long-established professional retailers are being forced out of business. However, rent is only one element of occupancy costs – new tenants will have to invest in shopfitting whereas established tenants have already invested in their units.
Unfortunately, there are doubts over the constitutionality of the Government’s planned Landlord and Tenant (Business Leases Rent Review) Bill 2011. The potential difficulties revolve around:
1. The lack of a provision governing compensation to landlords in the event that tenants are unable to afford a court-determined rent agreement
2. A planned provision that directs landlords to pay compensation to tenants that have made improvements to their property could also be subject to a constitutional challenge
Tags:
RETAIL PROPERTY, RETAIL STATISTICS, IRELAND