In terms of top prize for political incompetence in 2011, you’d be hard-pressed to find a better example than the farce that has surrounded the issue of Upward Only Rent Reviews (UORR) in commercial leases; remember both Labour and Fine Gael had promised to abolish UORR terms in existing commercial leases so that tenants would no longer have to pay rents which were set in better economic times, and particularly at the peak of the Celtic Tiger when commercial rents were twice today’s levels.
The commitment stymied the commercial property market where transactions dried up as neither buyer nor seller knew what rental terms would apply after the Government’s intervention. And Minister for Justice, Equality and Defence Alan Shatter issued frequent updates where he re-affirmed the commitment, and for many months the stock response to requests for updates from the justice ministry was that a bill would be brought before the Oireachtas before Christmas 2011. And a framework including detailed legislative provisions went to the Attorney General in October 2011.
Then on 6th December, 2011 it was Minister for Finance, Michael Noonan who announced the Government was abandoning the proposed changes. Minister Shatter skulked around the Oireachtas avoiding the justified criticism of what looks like legal amateurism. So UORRs in pre-February 2010 commercial leases look set to remain, though there is a Supreme Court case, Kidney v Charlton, which is set to be heard on 27th January 2012 in which the constitutionality of UORR provisions in older leases is set to be tested.
Commercial tenants are not happy; Retail Excellence Ireland issued a particularly bad-tempered criticism of the Government’s decision. And today, a new banner has been unveiled atop Korkys shoe shop on Dublin’s Grafton Street. The new banner (old version can be seen here) is self-explanatory and givenGrafton Street is only a couple of blocks from the Dail, it is likely to be seen by many politicians including those who made the ill-fated commitment earlier this year.
UPDATE: 22nd December, 2011. Tenants on Grafton Street have produced a video to accompany the launch of the new banner.
Second prize with 3,000,000,000 coming at ya.
Willing lenders willing borrowers and a supine minister.
“Has Ireland’s finance minister Michael Noonan been stung into action by criticism that he is too weak in Europe?
He has just announced in Washington that he is now looking to impose losses on senior bondholders in Anglo Irish Bank and the Irish Nationwide Building Society (INBS).
“We don’t think the Irish taxpayer should have to redeem what has become speculative investment. I don’t think it should be redeemed at par,” Noonan told Irish state broadcaster RTE from Washington, where he met officials from the IMF.”
http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/jun/15/ireland
http://www.google.com/url?url=http://www.youtube.com/watch%3Fv%3Dyjhxp-JJqDo&rct=j&sa=X&ei=LEjzTu7BG6rXiAKul9zCDg&ved=0CC8QuAIwAA&q=noonan+on+paying+bondholders&usg=AFQjCNEvJYwHXUA-KxqwOgckcb-H06twHw
Looks like an own goal for the Government. Enterprise Ireland are throwing money at start up companies employing two and three people and here we see the Government happy to close down companies which have been paying tax for many years and employing hundreds of people. The country is being run by Civil Servants and speculators. Business people will have to move elsewhere. A total denial of democracy. Both parties campaigned on this issue and caved to the property lobbyiests Nama, Institutional Investment companies, developers and Society of Chartered Surveyors.
http://www.irishtimes.com/newspaper/ireland/2011/0217/1224290025106.html
Apologies if I’m out of line but I had regarded this as the one of the better economic commentary sites in Ireland.
But as the criticism of the government, some justified and some not, have become more common and more pointed I think it is losing much of its objectivity.
Well, Shock! Horror! Who would have thunk it? Politicians tell lies?….. Never!
As I understand it, the reason the government gave for not implementing this policy was that they received legal advice saying that they couldn’t. If that is the case, it hardly makes them liars does it?
The tone of the criticism from the retailers and followed up by some of the comments here is that the government changed its view on this matter after lobbying from property owners rather than advice saying the legislation was unconstitutional. Does anyone have evidence that is the case?
If they don’t know the law, they should not be legislators. And they certainly should not be making promises that offend the law.
If you say in your program for government that you are going to do something after extensive legal advice and your Minister for Justice Alan Shatter later repeats on television that he will be bringing in legislation shortly and then you do not do it , in anybodys book that makes you a liar. Of course a good liar/lawyer will come up with more lies to cover their tracks.
I would be reluctant to consider politicians as liars, even if they do lie at times.
However both FG and Labour should have known better than to indulge in auction politics prior to the election. It was very evident that these promises (no tax rises, no cuts in social welfare or education etc) could not be delivered on post election.
Auction / populist politics undermines peoples faith in our democratic process in this country. Politicians do not understand that they must “up their game” and act more professionally now that the stakes are so high for Ireland.
There was a possibility of an overall FG majority so Labour and FG decided to go down the traditional route of promising the impossible so the public was promised:
overturn UORR
no income tax increases
no welfare cuts
no increase in 3rd level fees or charges
free GP for all
not another red cent to anglo irish
burn bondholders
Labour’s way not Frankfurt’s way
massive NewERA investment program
Strategic Investment Bank
end to patronage in state appointments
and so on and so on.
The public will eat the government but Gilmore, Kenny, Hogan, Bruton will all be at retirement age by next election.
The election was all a ball of smoke say anything, do anything just keep your eyes on the main prize. Put these 5 points down for Enda and just keep drilling it in. After that, we can revert to business as usual. This idea that there is a law that cannot be disobeyed in Ireland is nonsense the only law that rules supreme is European Law (which is dominated by what is necessary for Euro preservation) but that is so remote and hard to access that our own bag of tricks is what we go by.
The Supreme court are deferential to the Executive, they are part and parcel of the system and will do nothing to rock the boat. I spoke to a SC the other day he looked a bit frazzled as he said they are all in it together judges, politicians sitting around tables telling each other not enough repossessions to many bankruptcies or not enough to keep the money flowing in from the MOU better tweak this and that a bit more to keep the show on he road. Did you only find that our now I queried?
When enough businesses put up the “Closed” sign and the English retailers pull back to higher ground in the UK they will revisit this issue. If the government wanted the supreme court to find UORR unconstitutional then they would! It is politics that determines what goes on in our courts and what “judgments” are made. In short, I am saying there is very little separation of the legal hegemony and the political hegemony. A union B is probabaly 70% to 80%.
I m very disappointed by both the actions and inaction of this puppet government to date…..I applaud the courage of the owner of Korky s…..That banner,while strong, would express the feelings of many…There could be similar banners on other buildings…Roscommon Hospital should have one as should Anglo Irish headquarters, to mention just two….Perhaps red “LIAR” posters will become a trend?….
I have no idea if you are celebrating christmas Namawinelake…. personally I am not…. but in case you are, I wish you a peaceful time, and thank you for being an honest voice in the swamp of deception and lies. Your intentions are crystal clear!
Best
Georg
“All that is necessary for evil to prevail is for good men to do nothing”. Well done to John Corcoran for standing up for what he believes. In doing so he is giving people who are paying mad rents all over the country hope. If this man had been in the Dáil on the night of the guarantee we would not be in the mess we are in. Vested interests prevailed that night and they do so again with this issue. It is time the elected representatives of the people stood up for democracy. Both parties campaigned on this issue and both leaders should stand aside if they cannot deliver.
This is without doubt the wrong thread to post Christmas wishes on… But to NWL, a sincere “Happy Christmas”. You undoubtably host the finest website on the Irish economy and the NAMA experiment. It is one that will be trawled by every historian who wants to chronicle these times and events. If ever a blog was deserving of the title “blog of the year” – this is it. To all the commenters on the site who make it so lively, informative, challenging and entertaining, a sincere “thank you”.. even to those with whom I cross swords – that means you Brian :-)
I send my very best wishes for peace, health and happiness to all the contributors and to the friends that I’ve made on this website over the past year, wherever your spending your Christmas (that’s you, John & sf ca writer).
“Nollaig Shona Dhaoibh”
My father spoke only Gaelic until he was sixteen but unfortunately I never learnt a word of it! I think I might well be an early product of Globilisation. A pity really… how we lose our culture and the past generations so easily. Unless you’re a fan of the new Merkel / Sarkozy coup, of course.
@wstt
Happy holiday wstt. You mentioned Fathers, mine left school at 12. He built and ran a successful business through at least two recessions. I try to learn from the people around me and from him I learned (among other things)
a healthy disrespect for mouthy politicians,
the value of philosophy,
and never, never rule out the human factor.
Good advice I think
I can help you out if your travels take you to Northern California in 2012, all the best.
Unfortunately it’s catch 22 for the government. They can’t say they are not liars ,otherwise they would be telling more lies.
People who tell the truth are highly dangerous for this government.
@NWL also sincere thank you,fantastic writing and congrats for elevating the debate,personal favs. were Trainspotting and Yosser Hughes,Pulitzer quality.
@WSTT regarding my “location” for tax purposes it’s Malta,oops that’s not me,actually it’s a golf course in Portugal,eh no.
SF thanks for the heads up on no snow even Bent Dunne,could find “snow” in Florida but there is none in Lake Tahoe.
Dear Santa,please stop them paying the bondholders,”scorn not their simplicity,rather pity them”, thanks regarding Sean Garland.
Wishing you all prosperous new year,wstt it’s “happy holidays” over here!!!!
There is 3Billion yep 3,000,0000,0000 unsecured incoming,perhaps channel some of the energy from resisting the property taxes in this direction.
Finally,my wish for next year is that Peter Sutherland after the LSE fiasco with Gadaffi money,RBS and cajoling the paddies to pay bondholders sulks off somewhere,has a large G and T and we never ever hear from him again.
@JG
no snow this year it is true. I’m not a skier, I like evergreens.
If you’re around the City or Peninsula I’m home the whole holiday,
and maybe we can impose on NWL to share our details. Lots to see here, you like trees?
Happy holidays.
Happy holidays to WSTT and JG and hope you enjoy a well earned rest. I like your wish for next year JG but there is a good chance knowing how easily impressed the RTE crew are by a long name, that your nemesis will be ringing in the new year with tubs or Marian Finucane.
The Minister for Justice and the Minister for Finance had in their possession an opinion from the esteemed former senior counsel and constitutional expert Gerard Hogan clearly stating the government can interfere in these contracts.
Clearly the Fine Gael landlords Association won the power play.
As the biggest landlord in the state,perhaps NAMA was preparing a challenge !
According to today’s Indo,out of 11,000 loans 78% are delinquent,can not understand how UORR was going
to negatively impact that amount of garbage by 2 Billion.
Almost impossible to achieve that level of incompetence,you make 11,000 decisions and 78% are wrong staggering really.
The decision during the budget speech not to proceed with the manifesto and program for government pledge to ban upward-only rent reviews in existing leases and to allow all commercial tenants a rent review in 2011, was a spectacular own goal and a cynical betrayal of the citizens, the electorate,all commercial tenants, their employees and the country. It will futher damage our bankrupt country and will hobble our economy with a two-tier rental market which will prevent any hope of a recovery of the economy or the commercial property market. It will reduce retail tenants to servitude for a generation and degrade their lives and those of their employees and will destroy thousands more of sustainable Irish businesses and jobs. This ruinous lease law played a substantial role in the property crash since our reckless banks lent tens of billions against these ruinous leases not against the properties. In 2008 Grafton Street became the fifth highest rented street in the world. High rents are the symptom ,ruinous Irish commercial lease law is the disease. Ireland has the most anti-tenant commercial lease law in the world i.e upward-only rent reviews tied to long leases with no break clauses. No other member country of the eurozone would ever tolerate this ruinous lease law. The large institutional landlords /pension funds introduced this feudal lease law into our country in the sixties and our government by endorsing it,copperfastened it for all commercial tenants and wasted hundreds of millions of its citizens money. These pension funds just didn’t over-rent their commercial tenants they overcharged their pensioners and were the worst performing pension funds in europe. I refer you to an opinion piece by John McManus in the Irish Times 18th April 2011 entitled “Upward-only rent review will tell a lot about reform hopes” He explains ” Is is showing all the characterists of a battle between a small but powerful vested interest and a Government endeavering to act in the wider public interest. Normally in Ireland the vested interests wins such contests.” ” It is a simple case of the greater good, which is the basic organising principle of our society” Your Government has capitulated to the vested interests who were responsible for the greatest bank and property crash in the history of mankind which banrupted our country, and are now trying to prevent it’s recovery. Allowing this ruinous lease law to prevail is ” a suicidal form of self sabotage”. Economists know that a healthy commercial property market is a function of a healthy economy not of ruinous lease law. You have a report from Irish economist Colm McCarthy which supports the policy of Government intervention in current leases and you have the opinion of the esteemed former senior counsel Gerard Hogan which supports the constutional right to intervene in the “exigencies of the common good” which opinion is also shared by the Profesor of Law at UCC Professor David Gwyn Morgan. I earnestly urge Government to reconsider this decision and implement your manifesto pledge of a rent review for all commercial tenants in 2011. I sincerely believe this is the optimum solution and in the best interests of the Irish economy.
@Will Baxter. Give it a rest, John. You are “flogging a dead horse”. In a democratic society, the government cannot interfere retrospectively with private contracts.
@wstt There is an argument that by allowing rents to fall to market value at a future rent review you are not interfering with a contract retrospectively.
In any event it is a mute point as the government are going to realise very quickly in the new year that they will have to act as the country will be falling down around them and whether the losses in NAMA are appearing as ten billion or twelve will be totally immaterial. Though as JG said, how NAMA calculated that it would impact to the tune of 2 billion is unbelievable. In any event tenants are hopeful that the courts may throw these leases out as being contrary to public policy. If I was an investor or NAMA or a professional advisor I would consider it negligent if I was not allowing for future losses on the termination of UORRS one way or the other.
The Fine Gael landlord and Property Speculators Association,are governing this country and the Labour Party will do their bidding. Gerard Hogan’s opinion will not interfere with this Association’s power.
Long time reader, first time poster. Excellent website btw.
As a barrister practising in the insolvency areas and also as a person with eyes in my head and what I hope is the ability to spot “Groupthink” I would like to offer my tuppence worth on Minister Shatter’s abandonment of his promises re UORR’s.
It has become the accepted wisdom of property industry professionals and speculators that abolishing UORR’s will constitute an unconstitutional attack on property rights. WSTT offers many fascinating insights into the property market in his posts on this blog but his mantra that abolishing UORR’s would be unconstitutional requires some analysis. Has he actually researched the topic or seen counsel’s opinion on the issue?
If framed in a statute proclaiming that UORR clauses to be void as contrary to public policy I do not see any constitutional issues. If a clause is contrary to public policy then it would also be contrary to public policy to award compensation for the removal of the right to rely on the clause. Public policy is something which evolves over time – e.g. permissible restraints of trade – and amendment by statute would be no different to the Competition Act 1991 saying that cartels are illegal and void. No-one could sue the State for the prospective loss of market rigged cartel profits.
In any event, any Bill could be referred to the Supreme Court for a ruling on its constitutionality (as happened with the Nursing Home Charges Bill) to rule – in advance of any private challenges – on whether it was lawful. Thus avoiding the appalling vista of unforeseen damages claims.
In choosing not to attempt to amend this aspect of our property law Minister Shatter & the FG government have let down a great many people. He has the courage to take on the legal profession and its restrictive practices but he seems to lack the courage to take on the property classes and NAMA.
@L’Eagle. “WSTT offers many fascinating insights into the property market in his posts on this blog but his mantra that abolishing UORR’s would be unconstitutional requires some analysis. Has he actually researched the topic or seen counsel’s opinion on the issue?”
The answer is – Yes, I have obtained senior counsel’s opinion on the matter. It would be irresponsible to be in the property business in Ireland and not to do so.
Reference has been made above to the extent of NAMA’s losses if the UORR legislation was enacted. It is sometimes conveniently forgotten that it is not only NAMA that will suffer losses. Indeed, as a result of the abysmal quality of the majority of investment property that it acquired, it is likely that NAMA’s losses are minimal compared to the overall losses that would be suffered by the non-Irish banks and investment, insurance and pension funds.
Most of NAMA’s loans were purchased from banks such as Anglo and Irish NAtionwide, that lent short term development money at margins of 2% to 3%. When the development was completed the borrowers sought to switch banks to those, such as First Active, or indeed Bank of Ireland and AIB, that would lend long term at more competitive interest rates, most with margins under 1% per annum.
@L’Eagle. There are a number of reasons why the legislation is unconstitutional:
1. It is an unwarranted interference with property rights, which are guaranteed by the Constitution.
2. It discriminates unfairly against on group in favour of another group, i.e. landlords are being discriminated against in favour of tenants.
Also, a lease is a contract freely entered into between parties. It would be an unprecedented interference with the rights of individuals to enter into binding contractual agreements – something that is effectively guaranteed by the Constitution – if the legislation was introduced.
As I have said here before, there are other issues, namely issues of European Law and the European Convention that make the legislation as proposed unfeasible.
Minister Shatter should have been aware of this. Along with the other idiots that rule us, he is supposed to be a legislator.
@ WSTT. Apologies if I suggested your views were not properly informed.
Briefly, in response. The thrust of this NWL post is that FG & Minister Shatter have promised something in order to garner support and then abandoned that promise. So far we are in agreement. Many property owners and banks would be affected, but the Government is particularly conflicted in relation to the effect on NAMA and I refer to this aspect as it would undoubtedly be a factor in government thinking.
In relation to your other points: there is no property “right” in a profit that is earned contrary to public policy. To give an extreme example, it has been held that there is no property “right” in the proceeds of crime. No one has had the termerity to argue that there was a property “right” in cartel profits outlawed by the Competition Act 1991. If UORR supra-market profits are contrary to public policy by virtue of statute the same principle would apply. Further, propery rights have only weak protection in the Constitution and Article 43.2.2 allows the State delimit their exercise with a view to reconciling their exercise in light of the exigencies of the common good. I think that legislation would not breach this provision. To the extent that you disagree [and say this is a Blake v. AG (1981) / Re the Housing (Private Rented Dwellings) Bill (1982) situation] it looks as if no-one will find out who is right as Shatter has pulled his punches!
In relation to the discrimination point, this is something of a wild card in constitutional property challenges which leaves much to the discretion of the trial judge. I think the analysis should essentially duplicate the points in the previous paragraph – it is only unfair discrimination if it is unfair. Thus the property owners would either win on both counts or lose on both.
The “freely entered into” point is only an aspect of the property right and not standalone. European Union law has no application and ECHR provisions are relevant but essentially duplicate the Constitution points.
In any event, the joyous beauty of the law is that there are plenty of grey areas but in this case I think that UORR’s have a much less firm footing than the pervailing wisdom may suggest.
I voted FF out – if FG cannot stick to their promises where does that leave us!
@L’Eagle, The only points that I would make in response are that:
(1) Turnover (i.e. rental income) does not equal profit.
(2) I think that you are taking too wide a view of the term “property”. I would define it as follows:
PROPERTY. The right and interest which a man has in lands and chattels to the exclusion of others. It is the right to enjoy and to dispose of certain things in the most absolute manner as he pleases, provided he makes no use of them prohibited by law.
I would not consider the proceeds of crime to come under the legal definition of property.
In relation to the discrimination issue – If you prefer one set of citizens (tenants) before another (landlords) – who pays the compensation? The taxpayer again? Why should they subsidise tenants
There are many aspects of European Law called into question – competition (unfair advantage against tenants who are profitable and therefore cannot avail of the legislation), human rights (discrimination- who pays?).
It does beg the question as to why tenants who are unprofitable should be rewarded and favoured over those who do make a profit.
There are better methods of solving this problem than using the proverbial sledgehammer to crack a nut. The tenants were badly advised. And politicians lie – it goes with the territory.
Yes, I believe that there should be concessions on rent, just as I believe that there should be concessions on residential mortgages. The hit has already been taken, but the banks will not let the benefits filter down to the economy. They want to recoup as much back as they can with consequential damage to growth, employment and the future.
This is a summary page of a legal opinion obtained on the issue ;
“In summary, therefore, I am of the view that:
A. Any legislation which rendered void pre-existing contractual commitments providing for upwards-only rent review would deprive the landlords of a valuable contractual right without compensation. This, however, is not a dispositive consideration, since legislative interference with contractual rights along these lines is
not uncommon, i.e., the very point which Costello J. made in Cafolla.
B. The critical question is rather whether such legislation would be proportionate and objectively justifiable. For the reasons set out in this opinion, there are far reaching policy reasons why the Oireachtas might think that the prohibition of such clauses is
necessary in the public interest. Not the least of those reasons is that the Oireachtas might consider that such clauses artificially maintain unrealistically high rental levels in the retail sector, thus hindering the recovery of the retail sector. Of course, given
the high importance of the retail sector to the volume of economic transactions and consumer confidence, the economy as a whole cannot fully recover from an economic crash without the recovery of that sector.
C. In my view, any such proposed legislation is no different in principle from many other forms of legislation which preclude or render void pre- existing business practices provided for by contract. The proposed legislation satisfies the proportionality
test in that –
i. It is rationally connected to an objective of sufficient importance (i.e., recovery in the retail sector) to warrant interference with a constitutionally protected right and, given the serious social problems which they are designed to meet, they undoubtedly relate to concerns which, in a free and democratic society, should be regarded as pressing and substantial.
ii. Such legislation would also impair those rights as little as possible and their effects on those rights are proportionate to the objectives sought to be attained in that it would simply provide a mechanism whereby rents could be assessed by reference to prevailing market conditions and deflation.
iii. Critically, such legislation would not attack the essence of the contractual right, namely, the right to receive a market rent and, unlike cases such as Blake, it would not involve one sector of society (namely, landlords) being expected unfairly to bear the burdens from other sectors of society are exempt.
D. No difference in principle can be drawn between the proposed legislation and the FEMPI Act. Certainly, if the Oireachtas can constitutionally take steps drastically to interfere with existing contractual rights of service providers and public servants without compensation (as the High Court has already held in the JJ Haire case), then the proposed legislation of this kind would equally seem to be constitutionally valid.
@ WSTT. We both have entrenched positions and there is no “answer”, just room for more “noise” & it’s getting late, so you will please forgive me if I only respond to some of your points. I would simply say that your definition of property rights would permit the abolition of UORR’s if they were no longer permitted by law. (No need to respond!)
One point – Abolishing UORR’s does not lead to tenants subsidising landlords. Instead it ends rents at above market rates by allowing rent reviews downwards to the market rate. Your comment about “rewarding unprofitable tenants” presumably is a reference to the shelved government proposal which had some nonsense along those lines. That struck me as a recipe for confusion. I think that UORR’s should go in all cases. Period. The clauses were agreed in the bubble and will crucify some tenants now that the bubble has burst. Your personal interests lead you to favour Landlord arguments but supra-normal rents strike me as unfair, although morals are personal.
The “hit” will continue to be taken (as you put it) as this country is in for a long depression and debt deflation spiral as the IMF/bank bondholder drags on the country’s finances depress the economy for years to come and money leaves the country. Let’s take this conversation up again in 12 months’ time and see whether anything has changed in the interim.
The Irish State via NAMA is the largest landlord in the country,due to the disastrous and incompetent banking sector,it is also one if not the biggest “retailer”,bank branches all over the country,many of which will close.AIB and some of the others entered into sale and lease back transactions,at the top of the markek,further burdening the tax payer with above market rents and upward only reviews.Interesting dilemma,are they afraid to “burn” the buyers of these sale and leasebacks,goes without saying that Jones Lang were extremly active in this.
@L’Eagle, As I have said before, for the majority of the time until the recent bubble the market rents have been substantially in excess of the market rents. Should there, in equity, then be a review of rents in the future to. Mark the rents upwards at every point (which is approximately 80% of the time) that the rents are below the market?
I do not have a problem with market rents. I find retrospective legislation repugnant to a democracy. It is not a question of having an entrenched position. It is a question of the rule of law as legislated democratically or rule by dictat like a banana republic.
Hi WSTT how were your holidays,stateside we use a base and then % of sales above break point.Landlord and Tenant are ‘partners’ in good times L. receives more in % rent,in not so good less,but has the base to rely on.Market rent is always subjective and you get into confidentially of who is paying what,tenant improvements,free rent,Zone A nonsense,fit out,credit of tenant etc. which impacts ‘market rent’.
P.S Will Baxter,
Any barrister that says such legislation does not affect the essence of contractual rights, as in Ciii above, is off his trolley!
[…] Fine Gael called “LIARS” in metre-high lettering on Grafton Street premises (namawinelake.wordpress.com) […]
@WSTT when you attack the messenger and not the message you are already losing. You cannot defeat a good argument by saying the person giving the opinion is off their trolly.
@Despero, If barristers did not take opposing views, there would be no court cases. By the figures, they are wrong in their opinions 50% of the time. It was not my intention to play the man rather than the ball – for that, I apologize – I was trying to say that the point he made was risible.
As I have said before, I have no issue with the form of any contract between two parties. It is a matter for the contracting parties. My issue is with retrospective legislation.
Property Week 20th May 2011
Minister claims change of law is vital solution to Irish debt crisis
Retrospective rent reviews must be put in place to deal with Ireland’s “economic emergency”, says justice and law reform minister Alan Shatter. Shatter argues that changing the law is fundamental to Ireland’s recovery, despite claims in the property industry that the policy is illegal, will suppress property values and has brought the investment market to a halt.
”We only [retrospectively change the law] when there are serious public policy reasons for doing so. We’re talking about the continued economic viability of this state, which has almost 15% unemployment,” he tells Property Week.
”We are receiving substantial financial assistance from the European Central Bank and International Monetary Fund, have a budget deficit of €18bn that has to be addressed and are essentially in the middle of an economic emergency.”
Fine Gael and Labour made the election pledge, which would result in rents being reviewed downwards, before their formation of the coalition government in March to help retailers and tackle unemployment.
It is not yet law, but the announcement came just before the collapse of the €350m sale of Liffey Valley Shopping Centre by Grosvenor and Aviva to F&C Reit Asset Management and Area Property Partners, as revealed by Property Week.
Desmond Dennehy, F&C Reit’s director of property funds, says: “There are no discussions over Liffey Valley because government policy isn’t certain to become law, so you can’t make decisions.”
Investment Property Databank predicts values will drop 20% if the legislation goes through. Some valuers are now giving two valuations on property – one that assumes it does go through and one that assumes it does not.
Investment agents are also understood to be proposing that deals complete on the assumption that the legislation passes. A further payment would be made if it is taken off the agenda.
The lack of clarity is something that Shatter admits needs to be addressed, but it will not be passed as law for months. “The government has been in office for only nine weeks, and the legislation needs to be carefully prepared. We are progressing matters as speedily as we can. We hope that we can bring finality to this issue by the end of this year,” he says.
Negotiating rent reviews in Ireland at present is tough. Chartered Land has started conducting rent reviews with 80% of its tenants at its 850,000 sq ft Dundrum Town Centre scheme, for the five-year period to 2010. Only 15% have been agreed.
Despite this, the centre is only 2% vacant and rents are understood to have increased by around 40% in the reviews. However, Dominic Deeny, chief executive at Chartered Land, says the process has not been straightforward.
“In a market where retail turnover has gone down so severely, it has been difficult, and a large proportion [of rent reviews] have had to go to arbitration,” he says. Deeny suggests that an ombudsman should be appointed to deal with tenants that are suffering, rather than implementing a blanket policy that would also benefit profitable multinational companies. He also warns of prospective court action by landlords.
“The policy leaves the government open to legal challenges from landlords for tampering with existing contracts,” he says. However, Shatter believes values for private landlords and the state-supported NAMA (National Asset Management Agency) would not fall.
“In assessing capital values in the market, it is more complicated that just looking at the rent roll. I think it is a very foolish buyer that looks at the rent roll in isolation, and doesn’t consider the economic backdrop and the likelihood of the continued receipt of rent at that level,” he says.
@ WSTT. You invoke both “democracy” and “property rights” in support of your argument whereas you should only invoke the latter. The “people” have voted to abolish UORR’s – this is their democratic choice based on the single transferable voting system we have in place – but the government is ignoring the democratic will of the people and saying that property rights trump democracy. This is a minor point but your use of language is incorrect.
Legislation with retrospective effect is quite common (e.g. most of the 2009 Land (etc.) Act) and not unlawful unless infringing property rights, with only retrospective criminal effect being expressly unconstitutional.
Agreed, the country is a banana republic, although our reasons may differ. A Minister who seeks to dismantle any advantages the professions may have but backs down on UORR’s. Not the biggest issue going, but all of the other NAMA issues highlighted on this blog point to other banama problems.
ps. @ WSTT #2. Your barrister-success-stats do not take into account cases that settle, a big proportion that boost all of our stats! Plus I’d love to settle all of my cases on fantastic terms for my clients, but sometimes Irish people just want their day in court…
What caused Irish commercial property crash?
The euro zone is a group of 17 countries with a combined population of 330 million people. All the member countries have the same currency, the same central bank, the same interest rates and the same commercial lease law, except one – Ireland.
Ireland has entirely different commercial lease law to all other euro-zone countries. The two components of all countries’ commercial lease law is the length of the lease and the method used to review the rent. In all other eurozone countries lease lengths are short – say three to 10 years – with break clauses, and rents are adjusted annually by increases/decreases in the consumer price index. In Ireland lease lengths are long (say 25 years) with no break clauses, and rents are reviewed every five years by method of the ratchet upward only rent review.
Irish commercial lease law was a twinheaded monster which incentivised the massive overrenting of tenants, and more devastating, it was the rocket fuel for the valuation model in valuing commercial property which created the massive commercial property price bubble. Irish banks lent 10s of billions against these toxic leases, not against the properties. If Ireland had regular euro-zone lease law it would have been impossible to have had a commercial property crash.
Blocked by Nama plain and simple as they are now the biggest landlord in Ireland
@WB
{Shatter believes values for private landlords and the state-supported NAMA (National Asset Management Agency) would not fall.
“In assessing capital values in the market, it is more complicated that just looking at the rent roll. I think it is a very foolish buyer that looks at the rent roll in isolation, and doesn’t consider the economic backdrop and the likelihood of the continued receipt of rent at that level,” he says.}
Perhaps Minister Shatter should explain why he did not proceed, given the above comment to the international media. Looks to me like the property vested interests got at the government. Which means that the same boyos are still running the country. The blame may be being laid at NAMAs door but my guess is that it was the Galway tent brigade in a new FineGael/Labour guise
The attached FT article dated 31st August 2009 explains that the upward-only rent review lease clause was a bomb waiting to explode. he UK escaped the explosion because soon after their property crash their economy boomed and the crisis was averted. In Ireland`s case the explosion destroyed our banks and our country. Upward only rent review tied to long leases, just didn`t destroy the tenants, it massively inflated the commercial property pricing model which created the monster commercial property bubble. UK commercial rents
Published: August 31 2009
| UK commercial rents
Most industries are suffering from falling prices. Not UK commercial property. Property trusts such as British Land and Derwent London have reported relatively upbeat earnings figures; in spite of continued falls in property valuations, rents have generally remained strong. This is largely due to “upward-only” contracts, whereby rents rise through the life of a company lease, whatever the state of the broader market. However good this industry norm might sound for landlords, it also represents a potential timebomb.
As Nomura’s rent-free move to a new London headquarters shows, the problem comes when contracts, typically for five years, but sometimes 10 or more, expire or otherwise lapse. If market rents drop in the interim, leases are renegotiated at lower rates. That is what is happening now, after vacancy rates doubled over the past two years. By March, new rental contracts in the City had dropped by more than a third. This has re-focused minds on the remaining life of property companies’ leases. At Land Securities, about 22 per cent of lease contracts will expire or can be broken by 2013. At Derwent London, it is almost half.
Upward-only rents have come under pressure before. In 2004, the government considered banning them. That initiative fizzled out in the boom, but now tenants have become increasingly vocal; Ireland banned such contracts in July after retailers complained they gave an unfair advantage to new entrants. Meanwhile, high street heavyweight Philip Green, owner of the Arcadia Group, is seeking other concessions. Landlords have successfully argued in the past that upward-only reviews keep overall rents down by providing certainty of returns and ensuring a stable supply of new properties. The recession, and property surplus, are putting paid to that. Meanwhile, the timebomb ticks on.
@L’Eagle. You stated “The “people” have voted to abolish UORR’s – this is their democratic choice based on the single transferable voting system we have in place” The people did not vote to abolish UORRs. They voted for the removal of the Fianna Fail government and the election of a new coalition.
If that coalition wants to abolish UORRs retrospectively, someone has to pay for it. That is democracy and that is equity. Those that will have to pay are the taxpayers of this country.
Nobody asked them did they want to pay for the reduction in tenants’ rents. Nobody.
@WSTT
Fine Gael, Labour, Sinn Fein,The Green Party and almost all the independents promised the electorate they would ban UORRs if elected. 85% of the current Dail promised they would ban the ruinous UORR commercial lease clause in existing leases.
FG/Labour government inserted in their program for government. Minister Shatter on the RTE Frontline told the country there was a job crisis and under article 43.2.1 of the Constitution he was banning UORRS in existing leases in 2011. He then told the international media he was doing it.
Then the Fine Gael Property Speculators Association paid him a visit and the rest is history
From today’s Irish Times:
“The Coalition’s promise to come up with legislation ending the controversial upward-only rent reviews in existing commercial leases froze all activity, as the uncertainty seemed to put off the few investors who were looking at property.
Upward-only reviews are blamed for squeezing large numbers of businesses as they are trying to use recession-era revenues to pay for boom-era rents. Some landlords are willing to negotiate, but others are proving less tractable.
The last government found it could do nothing about upward-only rent reviews in existing contracts as its attorney general advised it that this could hit landlords’ constitutional property rights. During the election campaign, Fine Gael said it would tackle the issue.
Minister for Justice Alan Shatter took on the task, but found there was no way of getting around the same problem. In a budget-day joint statement with his colleague, Minister for Finance Michael Noonan, Mr Shatter said any measure to deal with the problem could expose the State to compensation claims from landlords, and so the issue was dropped.”
As I said above, it comes down to “Who pays for this?”
For a retail tenant, the best way is to negotiate a reduction with the landlord. If he won’t agree a reduction and you have a personal guarantee, get GOOD insolvency advice, prepare, lose your equity and capital with a friendly bookie and hand back the keys. You can return in a new skin at a market rent.
To paraphrase that sage of Cork, Roy Keane, who gave some good advice – “Fail to prepare, prepare to fail” If I was was in the retail business and had a recalcitrant landlord, I’d follow the Keane formula.
@WSTT, from the Irish Times article extract you cite
“In a budget-day joint statement with his colleague, Minister for Finance Michael Noonan, Mr Shatter said any measure to deal with the problem could expose the State to compensation claims from landlords, and so the issue was dropped”
“joint statement”?
On 6th December, 2011 Minister Noonan stood up in the Dail at around 4pm and announced
“I am fully aware of the difficulties that upward only rent reviews are causing for some
businesses. Despite exhaustive work in recent months by my colleague the Minister for Justice,
Equality and Defence, Deputy Alan Shatter, including the preparation of draft legislation, it
has not proved possible to develop a targeted scheme to tackle this issue that would not be
vulnerable to legal challenge or require compensation to be paid to landlords. I do not believe
the Opposition would want us to compensate landlords for any losses in their rent.”
And so the commitment was abandoned. Minister Shatter can be seen in the archived recording of Budget day in the Dail burying his head in the Budget statement as Minister Noonan read the above statement. Minister Shatter did not speak that day in the Dail on the subject of Upward Only Rent Reviews.
There was a joint statement published sometime later on Alan Shatter’s departmental website which included the following (http://www.justice.ie/en/JELR/Pages/PR11000247)
“Commenting on the matter the Minister [Alan Shatter] said: “the proposals which I brought before Government earlier this year had the particular aim of providing relief for tenants whose businesses might otherwise be viable were it not for the adverse impact arising from the fact that the rent they were paying was significantly above prevailing market levels. However, following consultation with the Attorney General, it was clear that this particular approach gave rise to significant constitutional difficulties. It was also clear that any legislative scheme, involving as it would an interference in the contractual relationship of private parties, would find it extremely difficult to survive a Constitutional challenge. Most pertinently, at this difficult time in our economic circumstances, Government was made aware of the fact that any legislative proposal would require the payment of compensation to those whose property rights would be infringed if that proposal were to be compatible with Constitutional and European Court of Human Rights norms.”
While noting that the decision not to go ahead with the legislation had been a very difficult one for Government, the Minister observed: “it is simply inconceivable, given the harsh choices that face us in relation to cutbacks in public expenditure, that the State would commit itself to establishing a compensation regime which could involve a very substantial outlay on the part of the State and which could have implications for our ability to sustain funding in a range of economic and social areas.”.
The Minister acknowledged the inevitable disappointment likely to be felt by those who had campaigned for change in this area and he expressed the hope that landlords would continue to engage with their tenants in order to provide appropriate rent concessions. He also urged those landlords who had yet to engage with their tenants to accept current realities and behave in a socially responsible manner.
Finally, the Minister said: this has also been an uncertain time for those contemplating investment in the commercial property market. I would hope that the clear decision not to proceed with the proposed rent review legislation will remove that uncertainty and pave the way for renewed activity in this sector.”
The position on here was sympathetic towards commercial tenants ( https://namawinelake.wordpress.com/2011/04/03/delivering-the-programme-for-government-pledge-on-retrospective-commercial-rents/) but the reality of compensation for landlords and respect for property rights were flagged early as issues that needed to be addressed. If this Government had recognised that there are in fact three interested parties in a commercial lease arrangement and the State is the third, there might have been a way in which the issue was dealt with whereby the State did offer compensation in cases where it was likely that the benefits from trade, employment, competitive pricing would equal or outweigh compensation paid to landlords. The Government didn’t apparently pursue this avenue.
Minister Shatter’s excuses above are reprehensible given the damage done by stymieing transactions for almost a year. It is to be hoped that future legislation eg the Fiscal Responsibility Bill and personal insolvency legislation are dealt with more deftly than the fiasco with UORRs.
@Will. So politicians are liars. This is hardly new news. Only the naive believe otherwise.
Even if we were to accept that a supreme court challenge would require compensation to be paid (which I doubt), any case for compensation would also require an estimate of the compensation.
Given the likely failure of so many retailers if rents stay high and that even @WSTT’s proposed solution is for retailers to go bankrupt, I would not be surprised if;
(i) the law were found to be constitutional (interference in property rights is widespread) but that landlords were entitled to compensation
(ii) compensation was assessed at zero, or sufficiently near zero to be negligible
Meantime, the fact that the govt is not willing to take this to court in defence of their own expressed policy desires suggests rather strongly that they have been gotten at.
The vested intersts who destroyed our country,are still in power. Fine Gael and Labour are their new puppets.
The government tore up contracts with the pharmacists and paid no compensation. The esteemed former senior counsel and constitutional expert Gerard Hogan’s opinion definitively states they can ban this ruinous clause which destroyed our country and they need not pay compensation. He is supported in this opinion by the Professor of Law at UCC David Gwyn Morgan.
Most commercial tenants believe the rent review/arbitration system is corrupt and there is a cartel at work in the Irish commercial property market..
The Irish Times article today merely repeats the property industries old mantra as does NWL above ie. that threat of the legislation has affected prices and stopped investors buying. As usual there is no analysis as to whether either statement is true. If it were true then what they should be talking about is the surge in prices and the increased level of commercial buyers in the market now that the threat of legislation has lifted.
With regard to the talk about compensation to landlords, this was just a red herring thrown in, probably by the landlords, to muddy the pitch and ensure the legislation would not pass. The new blogger l’eagle put it very well –
“If framed in a statute proclaiming that UORR clauses to be void as contrary to public policy I do not see any constitutional issues. If a clause is contrary to public policy then it would also be contrary to public policy to award compensation for the removal of the right to rely on the clause. Public policy is something which evolves over time – e.g. permissible restraints of trade – and amendment by statute would be no different to the Competition Act 1991 saying that cartels are illegal and void. No-one could sue the State for the prospective loss of market rigged cartel profits.”
I feel sure that the Government knew the truth of this when thay made their decision to go with the property lobby they have listened to them again with potentially disasterous consequences for us all.
@Despero,
“The Irish Times article today merely repeats the property industries old mantra as does NWL above ie. that threat of the legislation has affected prices and stopped investors buying. As usual there is no analysis as to whether either statement is true. If it were true then what they should be talking about is the surge in prices and the increased level of commercial buyers in the market now that the threat of legislation has lifted.”
That is true. There should be a lift in commercial property prices and in transactions following the announcement by Minister Noonan at the start of December 2012. Last week there were suggestions that two major transactions have now completed, One Warrington Place which didn’t have pre-Feb 2010 leases and Riverside II which did – the two transactions total €65m-odd. Apart from the two Google transactions on Barrow Street, the commercial market was probably worth €50m-odd for the first 11 months of 2011.
In mid January 2012, we will get both the IPD and Jones Lang LaSalle commercial indices for Q4, 2011 and yes, I would expect a lift in prices, partly on the back of certainty over the UORR issue and partly because of the reduction in commercial stamp duty from 6% to 2% and also more attractive capital gains terms for property held for a few years.
@NWL
Most commercial tenants believe that the commercial property rent review/arbitration system is systemically corrupt and there is a Cartel at work in the Irish commercial property market.. The tenants bought into contracts which implied that commercial rents would be set by independent parties. The system by which these questionable rents were set was arbitrary,not capable of objective justificatiobn,did not comply with data protection laws and were clearly anti-competitive as organised by a Cartel.
I refer you to the commercial rents discussion during the sitting of the Oireachtas Joint Committee on Enterprise, Trade and Emplynment on 30th March 2010. The attendees described how the corruption of the rent review/arbitration process was organised.. This was achieved by using,,side agreements,secret ageements, confidentiality agreements , straw tenants and other trickery. All these details are on the Dail record..
There are a number of legal cases before the High Court, ,the Supreme Court and the European Court of Human Rights.
If you were a potential purchaser of these properties in our bankrupt country you might be in for an unpleasant surprise.
Compensation for what?
If the tenants business is unviable due to usurious rent,was contemplating closing or vacating with a reset at market,where is the loss?
The problem with the tenants in this situation is that they are suffering from tunnel vision and are locked into just one “solution” to their problems to the exclusion of any lateral thinking.
In February 2009, the great “spinner’ Donald Trump put his casinos into Chapter 11 for the third time. Founded in the 1980s, the Trump casino operations first filed for bankruptcy protection in the early 1990s. The company emerged with a new Trump name but filed for bankruptcy protection again in 2004, then emerged in 2005 only to file again in 2009. It emerged like Lazarus in its current form in 2010.
At one point in this Lanigan’s Ball, Trump hoped to keep the show on the road, but was unable to raise money on the markets. He found an alternative source of funding in his father, who although he could not invest money in the company, went into the casino every night for a month and bought a million dollars worth of chips each night. He put them in his pocket and went home. At the end of the month he had supplied the casinos with $30 million of liquidity and prevented the Donald from seeking bankruptcy protection for a fourth time. After the crisis passed he cashed in his chips.
That solution is what I would term “thinking outside the box”. Something that the tenants should learn.
@JG, Hi John, A very “Happy New Year” to you. The compensation relates to the government’s interference in a private contract. Most multi-national tenants honour their contracts to lease and have not complained regarding the legacy rental levels. Those complaining are local tenants who are finding the going tough. If the government want to legislate to support those tenants it has many problems, not least of which is preference (discrimination) under the law. It considered using the blunt instrument of retrospectively banning UORRs to achieve the political ambition (to reduce rental levels) and has found that it will be forced to compensate those who suffer reduced income (the landlords) because of the legislative action proposed.
It is fairly obvious that the issue here relates to those tenants that have given personal guarantees. Without those guarantees the landlords would negotiate a market rent. Without them the tenants would hand back the keys and re-open in a new corporate structure at the current market level.
To me, it would make more sense and be more beneficial for the tenants to focus their undoubted political influence on seeking legislation to make personal guarantees unlawful in relation to commercial leases or to ring-fence all non-commercial personal assets from commercial rental liabilities.
@WSTT enjoyed “The Donald” story,slightly confused on this compensation issue,also great article in Foregin Affairs on Euro,sitting in airport.
It would be extremly helpful if NAMA released the “magic” formula it utilized in deciding to venomously oppose UORR.They stated in writing that the Irish Taxpayers portfolio was going to be negatively impacted by 2BILLION.The thousands of Irish people who pay taxes,and are facing hardship over UORR,and actually “own” this portfolio deserve an explanation.Unless of course only offshore investors or pension funds are allowed to “know” the math.
Above market rent is pretty simple to value,it’s called the “over” or overage,it gets discounted at a rate reflective of the credit.We utilize a Net Present Value or DCF the discount factor reflecting the creditworthiness of the tenant, but overage is always heavily discounted.
In this situation the discount rate would be more akin to “junk bonds” as the “over” is very unreliable with high probality of default.
Perhaps Brendan,when lunching with Davy private clients recently in London explained all this,or John M. the in house valuation guru scribbled it on the back of a napkin returning from another boondoggle.
NAMA owes the Irish people an explanation why it was so opposed to UORR and lobbied hard,FOR WHO !
@John, as far as I know NAMA’s “hard lobbying” was confined to a letter sent to former Minister for Finance, the late Brian Lenihan in May 2010 in which the Agency said that if UORRs were abolished in pre-Feb 2010 commercial leases, then the Agency’s portfolio would lose value. NAMA valued by reference to 30th November 2009 and on the basis that UORRs remained in existing leases. So the “lobbying” was confined to a neutral statement that NAMA’s portfolio would face losses.
As regards the €2bn, NAMA paid just over €9bn for Irish commercial property loans. It was IPD, not NAMA that calculated that abolishing UORRs would mean commercial values lost 20% of their values on average – given that commercial rents are down some 50% from peak you would expect a 50% reduction in the value of commercial property but some leases are post-Feb 2010 and some tenants had negotiated lower rents. 20% doesn’t look unreasonable.
So I don’t think you can criticise NAMA for pointing out the obvious, that its portfolio would lose value. And the 20% comes from the industry and even on the back of an envelope looks reasonable. And 20% of €9bn is €1.8bn.
If there is a criticism that could be levelled at NAMA, it is the fact that as late as October 2011 (two months ago) it was still referring to the 20% decline if UORRs were abolished. This was misleading because commercial property had already fallen by over 10% in 2011 alone, and this was partly in anticipation of the abolition of UORR. But beyond that, NAMA seems clean in its dealings on the issue.
@NWL said letter was posted on NAMA web site right!
Give me a break they spent 500,000 year to date on IT buy a portfolio modeling programe.
Input your data “stress” test it release the info into the public domain.Uninforned seat of the pants back of a bar mat got you into this mess,be objective informed and well advised.
NAMA parroted a vested interests position using a ‘auld pencil’
Nama was the smoke screen, the Fine Gael Property Speculators Association and their cronies organised it.
We thought that we had teachers running the country now it turns out that the graduates of DIT are. At least admisssion to teaching requires honours maths and it was an option that smart people took in the past to get a third level qualification whereas property economics, valuation and surveying degrees now require 310 points and pass maths. In the past no qualification was necessary at all. I note that the head of the portfolio Managemant for NAMA is a graduate of DIT so thats good anyway, relax everyone we are in good hands!
By Colm McCarthy
The Economics of Adjusting Retail and Commercial Rents
One Page Summary
The macroeconomic downturn in Ireland since the beginning of 2008 is the most severe since the early years of the Second World War.
As measured by real GNP, economic activity in Ireland contracted by about 17.2% in the seven quarters from Q1 2008 to Q4 2009. This is the sharpest contraction by far in the Eurozone.
Employment has fallen by 254,000 over the same period, emigration has resumed and there have been widespread business failures.
Prices and wages have been under downward pressure throughout the economy.
There has been a sharp restriction of credit availability following the system-wide
banking collapse.
The retail and commercial property markets have been impacted severely both by
the excess supply built up during the property boom and by the weakness in
demand.
The result has been strong downward pressure on market-clearing rents, inhibited by the
prevalence in Ireland of upward-only rent review (UORR) clauses in many rental
agreements.
A factor contributing to the speed of the economic downturn has been the decline in the
competitiveness of the Irish economy which accompanied the credit-fuelled property
bubble since about the year 2000.
This report argues that economic recovery in Ireland requires that all business costs,
including wages, property costs, utility charges, local taxes and professional fees, need to
fall if competitiveness is to be regained, since membership of the Eurozone precludes
currency devaluation. The process of cost adjustment is already under way, but is
inhibited in the case of property costs by the structure of the market, including the UORR
clause and the general opacity of the retail and commercial property markets.
Recent policy actions by the Irish government have been unsuccessfully challenged in
the courts on the grounds that they infringed constitutional property rights. The courts
have held that the gravity of the economic problems being addressed can justify radical
action, and this report argues that the current crisis is of unprecedented depth and
severity.
@Will. Nobody disagrees that the economy could be more competitive if legacy rents with “upwards only” clauses were reduced to current market levels. The question is – “Who pays for it?” And the answer is – “The taxpayer.”
You need to find another solution – one that works – and stop churning out the same old failed formula.
@WSTT I think the benefits here will far surpass any costs associated,did NAMA undertake a cost benefit analysis,if their ‘number’ on UORR is indicatieve of their quant ability ,it does not bode well for more complex situations like BPS.
Vacant space is expensive so are out of work pissed off people.
@JG True, empty space costs as do unemployed people. Irish times an hour ago -“Sony to close its shops.” Shoppers who went to the Dundrum shop today were met with a closed notice on the door. The statement issued by the company said –
“The trading environment in Ireland has been extremely challenging and, although much has been done to reduce the cost base of the company, progress has been hampered by a difficult retail climate along with expensive and inflexible lease agreements.”
@wstt It is not just local traders who will go , they will all go. La Senza, and Barretts have gone into liquidation shops to close in the next ten days. HMV closures also imminent.
@NWL I hope those IPD statistics that you are so happy with, are being fed from a reliable source and not from the self regulating chartered surveyors of Ireland. The Chartered Surveyors from time to time produce surveys telling us that many tenants are getting rent reductions and when asked their source they admit that they survey their own members and not tenants. My guess is that CBRE Ellis or Jones La Salle furnish IPD with the info . Q.E.D Armageddon is nigh!
@NWL
IPD statistics and their 20% reduction in values. Investment Property Database i.e IPD statistics are almost certainly nonsense and very likely supplied by the same crew who supplied the nonsense valuations during the greatest property and bank crash in the history of mankind. The Irish Society of Chartered Surveyors are the most incompetent, ignorant , arrogant and anti-tenant organisation in the world. I assume these fools supplied their usual anti-tenant statistics to facilitate their landlord paymasters propaganda.
Colm McCarthy has correctly argued the values have already been marked down.
The damage been visited on the Irish economy by allowed this two-teir commercial property market to continue is immense and the cost already is in the billions. Remember it affects shops,offices,factories and warehouses and is destroyed tens of thousands of sustainable jobs. I have absolutally no doubt on ant cost/benefit analysis the government’s cowardly decision is destroying the Irish economy and costing billions.
Unfortunately they are still been advised by these surveyor
Coalition must ensure market rents allowed to prevail in all commercial leases
DEREK BRAWN
Two-tier marketplace, with some leases upward only and others not, is absurd
EUROPEAN COMMERCIAL leases differ from Irish ones in three ways. Firstly, lease contracts do not exceed 10 years. Secondly, there are break clauses; and thirdly, the mechanism for rent determination is linked directly to the cost-of-living index.
We need to adopt this more competitive model.
Half a century ago, there were no upward-only rent review leases in Ireland. They owe their origin to our nearest neighbour, the UK. Back then, when large British institutional investors bought prime commercial properties here, they began to insist tenants sign up for long (35-year) leases, without a break clause, subject to periodic reviews where rents could only ever rise.
The logic behind this was to protect pension funds and insurance companies from the potential ravages of inflation.
In time, these leases became the industry standard.
The philosophy in Europe was always on the quality of your building; here it became the quality of your tenant and this signposts why huge mistakes were made by Irish banks during the boom, as lending was backed by the financial obligations of the lessor as opposed to the collateral of the property itself.
During the 2002-2007 credit bubble, access to cheap capital was uniform in the euro zone, yet French or German banks did not expand their lending to commercial property as aggressively as Irish ones. Why?
Well, the Irish valuation model was very different, for one. This was acknowledged by former Anglo boss Seán FitzPatrick, quoted in The FitzPatrick Tapes: “Our exposure is not to the building, it’s to the money that comes from the leasing of it. If the value of the property goes down, it doesn’t matter. We still get our loan repaid.”
Some may believe that easy credit was the issue, but banks can only engage in secured lending when they have something to secure against.
The Irish commercial property loan model also affected the more traditional residential property market in an insidious way. The preponderance of “mixed-use” developments during the boom was the modus operandi of the developer. Here, it was the commercial component that was seen as the “jewel in the crown”, because positive rental growth was assured – a one-way bet!
Developers saw these commercial leases as a way to leverage-up their property bets.
Today, these uneconomic leases no longer apply to new tenants signing a brand new lease, since the last government banned them in March 2010.
However, prospective tenants can only opt for a brand new lease on more attractive rental terms providing they can find such a unit in the right locations.
Many vacant units still have leases that are effectively no longer assignable. A tenant in arrears still has an unexpired leasehold contract, even after vacating their buildings. This is why so many commercial properties are vacant.
Since the abolition of upward only 25- and 35-year leases, the market has moved to a situation where 10- to 15-year contracts are the norm, but this has created a two-tier marketplace. Andrew Muckian, a property partner at law firm William Fry, Dublin, writing in a recent Property Week UK, said: “Because of the current state of the market, banning upward-only rent reviews has not had as big an impact as it might otherwise have had.”
He added: “Investors who buy shopping centres will get a mix of leases. Some will be upward-only and some with no guarantee of income – and that will lead to a completely different valuation model. Chances of rental growth may be limited, and we think that this will create a two-tier investment market.”
It has.
In short, the current situation is an absurdity. There are those who might say why not let these existing leases wash through the system. But should we wait until 2030 for this problem to disappear and in the meantime just muddle along? What sort of policy strategy would that be?
UCD economist Colm McCarthy has summarised the problem by highlighting the three key areas where Ireland differs from the UK on this issue: we’re locked into a common currency zone; price inflation is much lower here; and an oversupply of new un-let commercial properties exists, and there is an overhang of vacant older ones due to the recession. McCarthy argues that we need to reduce all costs as a matter of economic urgency.
Let us now see the new Government deliver on its manifesto pledge and allow market rents to prevail in all commercial leases.
Derek Brawn was head of research at the property company Savills Ireland and is now an independent property commentator. He is author of Ireland’s House Party (Gill and Macmillan, 2009)
@Will Baxter. “The preponderance of “mixed-use” developments during the boom was the modus operandi of the developer. Here, it was the commercial component that was seen as the “jewel in the crown”, because positive rental growth was assured – a one-way bet!”
No it wasn’t – on both counts. Mixed use developments were the brainchild of the Planning Departments of the various local authorities. Most were opposed by the developers, who at least recognised the fact that you could not rent retail outlets in areas (Smithfield, North Docks) that were not traditionally retail locations (i.e. Grafton Street, Henry Street etc.) That’s why there are shops in these developments that will never be occupied in our lifetimes. Such imposed commercial components could never be described as “one way bets”
The Irish Times Auctioneer or Newspaper?
Extract from the Nyberg report on the banking collapse.
2.12.5
“Meanwhile ,much of the media enthusiastically supported households’ preoccupation with property ownership”
The Irish Times property advertising revenues were very robust during the bubble years. In August 2006 it paid fifty million euro for Myhome.ie This was indicative of it’s concern that the internet was going to replace print for property advertising. The Irish Times is the gold sponsor of the annual conference of the Society of Chartered Surveyors.
Each week there were many property puff pieces and opinion pieces by surveyors talking up the property market or pushing a specific pro-property agenda. Ireland has the most anti-tenant commercial lease law in the world i.e. upward-only rent reviews tied to long leases. In the last number of months there were many half page opinion pieces penned by surveyors, defending the retention of the upward-only rent review clause in existing commercial leases. These were all one sided pieces with no acknowledging the damaging consequences of this ruinous lease clause on Irish businesses and jobs and it’s contribution to the commercial property bubble and collapse. The pro-property bias of the Irish Times is likely to have played a not insignificent role in the property bubble and crash.
The current chairman of the Irish Times is David Went. David Went was CEO of Irish Life and Permanent from 1998 till April 2007. During his tenure they purchased Irish Permanent in 1999 and TSB in April 2001 for 430 million euro. This company went bust in 2010. Irish Life was a successfull Irish company since 1939.
Property Industry Ireland was establihed in June 2011 as a lobby group for the property and construction industry. It’s directors include Mark Fitzgerald of Sherry Fitzgerald auctioneers and it’s chairman is Kieran McGowan. Sherry Fitzgerald were the leading cheer leader for the property bubble. Kieran McGowan was a non-executive director of Irish Life and Permanent from 1999 till 2008. This lobby group immediately started lobbying to prevent commercial tenants,in legacy UORR leases been allowed market rents.
On budget day December 6th Minister Noonan told the Dail Irish commercial tenants in legacy UORR leases were not been allowed market rents. He then lied and told the Dail the government would be obliged to pay landlords compensation. He had in his possession an opinion from the esteemed senior counsel and constitutional expert Gerard Hogan which definitely stated there was no case for landlords receiving compensation. In Ireland the vested interests always win out over the public interest.
@Despero Dundrum is most definetly under the control and influence of NAMA,the dimunion in value and overseas investors arguments were spurious.
Its an absolute disgrace that the govt. chocked on this,they instilled hope in very very stressful times to many people,it’s morally repugnant.
“But beyond that, NAMA seems clean in its dealings on the issue.”
I think I read somewhere,that we only know of “smoking letter” because of a FOI,NAMA did not release it,put out a statement,explain its valuation methodology.What we do know is they interfered in this process,scaremongering by stating that 2 Billion would be wiped out.
Is NAMA the property division for the Irish State and any all legalization changes affecting property has to have their consent,who asked their opinion anyway.It was a cover your ass letter to provide some downside protection,for the fiasco that is the valuation of Irish loans.Clearly NAMA was badly advised and has now dramatically overpaid for these.
Large vacancy rates further depress rents,it’s much better to have tenants open paying rent and operating expenses,taxes,insurance,repairs,etc. than dark stores.
Regarding Mark “Big Mac” Fitzgerald was Daddy not famously before the Morirarty Tribunal explaining why AIB forgave his loans,did he ever pay them back,yeah right !
“Former Taoiseach Garret Fitzgerald has confirmed that AIB and Ansbacher wrote off debts of almost £200,000 that he owed them six years ago”
http://www.rte.ie/news/1999/0217/fitzgerald.html
“Big Mac” is an avid and enthusiastic outdoorsman with a long history of “fishing” also extremely active in FG.
“Mark is a former Chairman of Bord Iascaigh Mhara (The Irish Sea Fisheries Board) and is currently a Non-Executive Director of Tedcastles, one of Ireland’s leading energy companies. He was the National Director of Elections for Fine Gael in 1997 and is also a Fellow of the Irish Auctioneers and Valuers Institute.”
Or as he humbly states on his bio page “One of the most influential individuals in the industry” !
http://www.sherryfitz.ie/ABOUTUS/mark_fitzgerald.aspx
The commercial property arbitration system and Mr Ben Dunne?—-In the Moriarty Tribunal report publised on March 22nd 2011 Judge Moriarty alleges that Mr Dunne landlord of the Eircom.building on Marlboro Street attempted to corrupt the arbitration system . The report states “What was contemplated by Mr Dunne and Mr Lowry was profundly corrupt to a degree that was nothing short of breathtaking“ Mr Dunne was the former Managing Director of Dunnes Stores.
Dunnes Stores is a multi-billion euro turnover company and one of the largest private companies in the State. Dunnes Stores has a large commercial property portfolio and is a large commercial property landlord. Mr Dunne would have had a vast knowledge,contacts and experience of the commercial property rent review and arbitration process.
If what Judge Moriarty states is true –why then did Mr Dunne think he could corrupt the arbitration process?.
This is the most troubling question the Moriarty Tribunal has raised.
Happy New Year to JG, WSTT and NWL and other bloggers – too depressed after reading the above to comment further.
Happy new year to you too,if it cheers you up inconcivable that REO the ugly redheaded step child of Tresuary Holdings makes it thru the year.The Irish Taxpayer is funding them,unlikely they ever issue another report as that would expose the incompetence at NAMA.They will most likely conviently go into receivership sparing the blushes of senior NAMA executives.They benefited significantly from the choke on UORR.Regarding the Opera CMBS the ahem ‘valuation’ was purchased from Sherry Fitz.
@Despero, ….and to you too. Also to John Corcoran :-)
I hope that you are successful in finding a solution to your lease problems in 2012. My only comment is that in dealing with politicians, you need to provide an answer for them that they can run with and save face. They are incapable of doing it for themselves. Make it one where they will find it easy to say “Yes”.
@John gallagher
In March 2011 “Ireland First” was established. The seventeen members included Peter Sutherland,Frank Flannery,John Bruton and the Cork developer Michael O’Flynn.They produced a report ” Blueprint for Ireland’s recovery”. The report mentions we need to be more competitive and reduce all our costs. It mentions we must reduce commercial rates, etc etc. It never mentioned commercial rents ,even though we have some of the highest rents in the world. Upward-only rent reviews were never mentioned. In June 2011 Property Industry Ireland was established and immediately started lobbying to prevent commercial tenants in legacy UORRs leases been allowed market rents. Michael O’Flynn is a director ,along with Mark Fitzgerald and Kieran McGowan.
@WB NAMA should issue a memo. simply stating that UORR does NOT apply to its portfolio,sorry the Irish Taxpayers.Any enforcement by its dead beat borrowers,of said lease clause to be considered an unfriendly act and strip them of management.D of F can easily make this happen.
@John Gallaher. Hi John, Unfortunately not all NAMA borrowers realise that the rental levels are irrelevant to them. To put it colloquially “Why would they give a sh*t?” They are dead men walking. NAMA has made it very clear numerous times that it will be pursuing them as far as it possibly can on foot of their PGs.
It’s just a question of time.. hand them a chocolate (70k per annum) as they wait in the queue for the old gas chamber to keep the show on the road until NAMA has all the information it needs to dispense with them. I never cease to be gobsmacked by the delusional optimism and naivete displayed by most of the NAMA debtor victims.
@WSTT but NAMA should care,if viable tenants are being forced to close stores lay off people,due to enforcement of UORR.
It will undermine the valuations,further erode its “security” it’s in all parties interest to have stores open,tenants paying market rents.
NAMA should take the initiative here,think of the goodwill it will create,in the current economic climate above market rents are unsubstaniable,they are heavily discounted by buyers,NAMA must have factored this in in buying the loans.
@JG, NAMA won’t do it, John. It compromises their claims against the developers’ personal guarantees. It would have asked them to accept a reduced rent. The strategy is not to ask the developers for anything officially. It is to make the developers ask NAMA – on a Form A, of course. In reality, the request from the developer is garbage, because the NAMA threat is “If you don’t ask us, we’ll pull the plug on you and appoint a receiver.” Duress, Hobson’s Choice – call it whatever you like, but that is the strategy.
Irish Times Saturday July 2 2011 by Ciaran Hancock
Major Players in Property and Construction Launch Lobby Group
Led by Kieran McGowan ,a former head of IDA,and chief executive Ronan King,a former partner of BDO,it hopes to play a role in getting the industry back on its feet.
As a first step the body launched a report on the sector by economist Jim Power.
McGowan who is chairman of CRH ,said he had met Nama chairman Frank Daly to discuss it’s objectives. He told me he looked forward to a producive relationship with his organisation.
Mr McGowan acknowledged there might be scepticism among the public about the members of the property industry advising government on the policy measures it should undertake to restore the sector to health
The Republic of Rent–Anglo Republic by Simon Carswell
Page 138
The Irish independent business editor, Tom McEnaney, ran a story on the emails, naming Kelly under the headline “Banking collapse economist was ” just spouting off”. The newspaper quoted another economist , Jim Power, who had been chief economist at Bank of Ireland and was now at Friend’s First, describing Kelly’s analsis of the banks as “ridiculous” and saying that the Irish banks “very well capitalised”
@WSTT well I hope NAMA has a big budget for backfilling vacat space,this is not going away.In their valuation of the loans assume they factored in “market” rents and discounted any overage,we do it daily.Small shop rents are easily off 50 to 60% from peak,the lease provisions are ignored.We run the numbers at “market” may give bank or receiver something for overage dependant on credit.NAMA must be aware that their is no “value” in these over market rents,the default rate will be off the charts in next few years.But you are probably correct NAMA will do nothing,despite being the largest Landord in the country,it will sit back and allow its portfolio to detoriate and vacancy rates to rise.
NAMAWINELAKE February 15th
UPWARD ONLY RENT REVIEW UNDER THREAT WITH FG AND LABOUR POLICIES. YIPEEE SAY COMMERCIAL TENANTS . BOO-HOO SAYS THE PROPERTY INDUSTRY.
Who-Shot -The -Tiger
“one paragraph says it all. He states we will become Zimbabwe(without the sun) if we legislate retrospectively for short term political gain”. “If it happens there will ne nobody left in employment in the country to turn out the lights–no matter what the retailers say”
NamaJew
SF ca
The blog on the rent review question and the excellent comments by all may be the most important issue that has ever been addressed on the site.
We are where we are,but we are discussing a new government policy,which could lead to the total collapse of the Irish economy and Irish society.
We all need to make contact with senior figures in the Fine Gael party and try to explain the consequencies of the proposed rent review legislation.
Hats off to the Fine Gael Property Speculators Association on a job well done. Many thanks Mr Kenny and Mr Gilmore. Two upstanding Irish patriots of the highest integrity.
@WB in fairness people are entitled to hold and have their own views,WSTT has made many significant contributions on here,he has explained his position many times in that he disagrees with retrospective legislation.
He readily engages in debate and was away ahead of most people on the ‘choke’ suggesting that compensation would be required.
Also,thanks for the info on PII-linked their mission statement.
“The regulation of landlord and tenant relationships requires proper consideration. Restrictions on rights to negotiate freely and the imposition of particular terms may have consequences beyond those anticipated by their imposition. Retrospective interference with contractual obligations can have unforeseen negative effects and requires proper consideration and consultation.”
http://propertyindustryireland.ie/aboutus.html
Regarding McGowan,TASC produced a great report “Mapping The Golden Circle” needless to say who is heavily featured!
McGarrell Reilly Group is a proud member of this cabal.
“McGarrell Reilly Group is pleased to become a member of Property Industry Ireland (PII)”
http://www.mcgarrellreilly.ie/news/
“NAMA will play crucial role in the future of the property industry. It is an organisation that must be properly funded, and sufficiently independent (like the NTMA) so that it is empowered to create the right type and pace of momentum to support recovery in the property industry as part of an overall economic recovery plan. The members of PII want to play a constructive role with NAMA.”
Can only imagine the role they want to play !
PII link above
“THE retail trade yesterday suffered its first casualty of 2012 with confirmation that lingerie chain La Senza is to close down some of its 15 Irish stores.
The closures come as the chain revealed it is shutting down 88 branches across the UK and Ireland, including shops on Grafton Street in Dublin and in the Liffey Valley and Mahon Point shopping centres in Dublin and Cork.
It is not yet known how many jobs will be lost” Irish Independent
The Grafton Street La Senza’s rent is in the region of €750 thousand plus a year, upwards only, and with €50k rates you would have to sell a t of knickers every year to make that rent.
@runemployed, there is a raft of retail failures expected in the UK in coming weeks as shops give up the ghost having struggled on to see out the lucrative Christmas period. Barratts, La Senza, D2 Jeans, Hawkin’s Bazaar have all announced closures. Here is an interesting BBC report on those in jeopardy
http://www.bbc.co.uk/news/business-13977255
Now whilst the UK also has upward only rent review leases, it is not seen as a major problem for retailers there and only received scant reference in the recent Portas review.
And that’s part of the difficulty in teasing asunder the various factors that contribute to retail and other commercial failure. In the past council rates, minimum labour rates, Sunday rates, energy costs have all been blamed by retailers, but probably the biggest challenge faced by retailers is a contracting domestic economy with households tightening their belts.
@Will Baxter; Jerome Lawrence said “A neurotic is a man who builds a castle in the air. A psychotic is the man who lives in it.” While not wanting to label anyone (man – ball), I would point out that the politicians’ castle in the air has been shown for the pipe-dream that it is. For gawd’s sake – stop living in it. Find one with more stable foundations and live in that instead.
Some of the UK’s largest occupiers have called for “audacious and radical” changes to the relationship between landlord and tenant. Speaking at the BPF Annual Conference yesterday afternoon – held at Westminster’s Queen Elizabeth II Conference Centre – JD Sports, Deutsche and the BBC said they wanted closer, more flexible and more collaborative deals with business space providers. JD Sports chairman Peter Cowgill said he was “bitter” over the way his company had been treated by landlords over the last decade due to “an incessant flow of upward-only rent reviews” and “amazingly inflexible leases”. Cowgill told delegates the natural dynamics of supply and demand do not feed into rental levels within the commercial occupier market, insisting “prices in property markets only move one way.
The level of flexibility is amazingly rigid.” He argued lease lengths fail to recognise that redevelopment can devalue a retailer’s location and, in turn, its rental value. “At any one time, we have 10 to 15 stores that just sit waiting for the clock to go until the day the lease expires. The landlord knows he can’t get that rent again, we know we can’t pass it over – it is an impossible situation. It is just an economic cost that doesn’t recognise economic reality.” Rent reviews, particularly in city centres, “have been the biggest source of manipulation we have ever faced”, Cogwill said. “A shopping centre can be 20% empty and we still encounter an upward-only rent review, based on ‘tone’ and ‘evidence’. There has been an incessant flow of upward-only rent reviews.” Weaker retailers which had succumbed to CVAs and pre-packs, were better placed to re-negotiate terms, Cowgill argued, creating an environment where weaker retailers had greater flexibility than those which have withstood the downturn better. “We, as a substantial UK retailer, are fairly bitter about the way we have been treated over the last 10 years. It has to change because upward-only rent reviews, ultimately, are a nonsense.” Earlier in the debate, Deutsche Bank’s head of UK corporate real estate, David Prout, said relationship between landlord and tenant must change radically. “That change should be audacious and radically different; it should be unshackled by false economics. We go through swings of tenant markets and landlord markets – but still fundamentally the same framework from over 50 years ago.” Chris Kane, head of workplace at the BBC, said that to outsiders, the property industry appeared a “cosy club, where nothing much has changed in decades, if not centuries”. MEPC chief executive Rick de Blaby told delegates: “Income is paramount; recessions remind us of that in vivid terms. Building owners have got every possible incentive to ensure that they put their revenue-producing customers at the very top of their priorities. With that economic reality in mind, de Blaby argued, “landlords would do well to learn the art of customer care during the course of the lease, not five minutes before it’s up for break clause or expiry”. patrick.clift@estatesgazette.com mailto:patrick.clift@estatesgazette.com
BBPA Drops Upward Only Review Clauses in Pub Leases in advance of OFT Response.
On 24 July 2009, the Campaign for Real Ale (‘CAMRA’) submitted a super-complaint to the Office of Fair Trading (‘OFT’) regarding the UK pub industry (the ‘super-complaint’) in which they raised a number of concerns, such as the use of upward-only rent reviews, similar to those raised by the House of Commons Business and Enterprise Committee (‘BEC’) in May 2009.
However, prior to a published response by the OFT to the super-complaint dated the 22nd October 2009, the British Beer & Pub Associated announced in a press release dated 14th October 2009 that they had reached a binding agreement with key licensee groups, the BII and FLVA, in response to the BEC report, “…which will see fundamental reforms that will benefit all licensees.”
Among those reforms is requirement that Pub Companies ensure Upward Only Rent Review clauses are not included in new leases and offer existing lessees the opportunity to convert to new leases subject to agreement.
@runemployed “The Grafton Street La Senza’s rent is in the region of €750 thousand plus a year, upwards only”
We use a ‘health ratio’ to evaluate the probability of receiving rent,specifically with Chapter 11 always lurking in the background,under Chapter 11 the tenant simply rejects the lease and walks or runs away.If its a large company the BK judge,will award us some shares in the ‘new co’ in lieu of rent owed.There is a lock out period preventing us and other ‘stakeholders’ selling the stock,when ‘new co’ emerges,but the minute the window opens the stock is dumped,no hard feelings its part of business.Perhaps do another lease with ‘new co’ !
The lower the ratio the ‘healthier’ the retailer and location.So in this example they would have to sell a minimun of $7.5 million in frilly knickers for us to consider them ‘healthy’ and have any comfort in receiving rent.
“What it comes down to for the landlord is this: Would they rather take a 30% reduction in rent or simply take zero?” he says. “They usually opt for the 30% break.
Consider a high-end clothing boutique, with 15% operating margins (profit before interest and taxes). Say rent typically eats 12% of sales (or $1 for every $8 of sales). With retail sales off in the neighborhood of 40% in the last year, that rent-to-sales ratio looks more like 20%, slicing already slender margins by more than half. Either find a way to cut costs, or go out of business.”
http://www.forbes.com/2009/02/02/renegotiate-your-lease-entrepreneurs-finance_0202_lease.html
@JG “What it comes down to for the landlord is this: Would they rather take a 30% reduction in rent or simply take zero?” he says. “They usually opt for the 30% break.”
In Ireland they give no reduction to the tenant who may have been paying rent for ten, fifteen, twenty years, instead they keep taking until the company is bankrupt and then if you have given a personal guarantee on the lease, (a common requirement) they take that too. Some shops are vacant here because the tenant can no longer afford to keep them open but are still paying the rent as they are liable til the end of the lease. There is no Chapter 11 in Ireland. The prime time program interviewed people in this situation recently in Liffey Valley S. centre and Blanchardstown. It is not just developer landlords, also private landlords and pension funds, they all act the same way. They hold on til they have squeezed the tenant dry.
@WB Good to see some developments in the UK. If the Government acts in the U.K. it may shame our gombeen government into action. However the same vested interests are in action in the U.K.
What the OFT are considering in the UK already exists here. All new leases here exclude “upwards only” clauses. Curiously enough, in the USA, many leases include an annual percentage increase in rents – upwards!
The OFT are not considering retrospective legislation – a legal abomination – Something that is inherently inequitable, undemocratic and unfair.
@r’unemployed Fagan the eh ‘journalist’ sorry mouthpiece for landlords in IT make a stupid claim regarding UORR and the ‘valley’,influencing the debate.
Did he bother to talk to the ‘buyers’,not a chance he lifted his ‘piece’ from Property Week and FT,typical Fagan,cut and paste job as usual.Nothing to do with the price Jack right,or the collapsing Irish economy,you spoke with the ‘tire kickers’ before printing this in the IT.Nah that’s just too much work.
Anyway who cares what NON buyers think or give as an EXCUSE they are gone,is that the basis for an article !
http://www.irishtimes.com/newspaper/finance/2011/0219/1224290287448.html
“TWO BRITISH investment funds have dropped plans to buy Liffey Valley shopping centre, located off the M50 in west Dublin, because of the promise by Fine Gael and Labour to force the renegotiation of all commercial rents if they are elected.”
Well Jack lets be having them sell it now,whats the hold up !
The owners of the ‘valley’ are the Duke of Westminister and Aviva…
“AVIVA HEALTH Insurance is to increase the cost of all its premiums by 15 per cent from next year in a move that will cost many Irish families more than €300 a year.”
http://www.irishtimes.com/newspaper/ireland/2011/1221/1224309339799.html
It an absolute disgrace what the Govt. did here,ranks up there with paying bondholders,who are these mysterious owners that require compensation,step up.Was the Duke going to sue in a Irish court or Aviva……..
Pursuing tenants who have lost their business is draconian,unfair and disgusting.The playing field is tilted towards Landlords,it was drafted to protect the likes of the Duke of Westminister at the expense of Irish tenants.
Next time Jack just print the link to the the British papers and if anyone is so inclined they can read it themselves,no one should care what excuse NON buyers give and ‘reporting’ it just makes you look like a mouthpiece for vested interests.
The Republic of Rent–Anglo Republic– by Simon Carswell Page 127
In the autumn of 2007 I met a casually dressed Fitzpatrick in Anglo’s lobby on St Stephen’s Green.
We walked down the Green to a coffee shop at the top of Dawson Street. It was a nice afternoon so we sat at a table outside. Fitzpatrick started from scratch, describing Anglo’s business model. He pointed across the road to the building on the far corner. using it as an example of how the bank wasn’t a property lender but a lender on the cash flow from rock-solid tenants in the building.
“There could be a major shop on the ground floor ,one of the biggest accountancy firms on the first floor and one of the biggest law firms on the second floor” he said. ” Anglo was covered on it’s loans , not just on the value of it’s property but on the strength of the businesses in the building. The strength of the bank loan on the building was a sign of the strength of the economy. ”
It was Fitzpatrick’s stock presentation. It tripped off his tongue from years of practice . As he was elaborating , Anglo non-executive board member Fintan Drury, a close friend of Fitzpatrick’s walked past, noticing Fitzpatrick in full flow. Drury leaned over the railing next to our table and interrupted him. ” I’d say there’s a lot of shite being talked here” he said. We all laughed.
Drury may have been joking, but with hindsight he was right-the Fitzpatrick’s banking model was shite. It took a property crash to expose how flawed it was.
The Republic of Rent—The Fitzpatrick Tapes– by Tom Lyons and Brian Carey
Page 123
“Our exposure is not to the building,it’s to the money that comes from the leasing of it” he said. “If the value of the property goes down, it doesn’t matter. We still get our loan repaid” Fitzpatrick was nothing if not consistent in this,one of his core philosophies.
It was the ruinous Irish commercial lease law. Fitzpatrick lent tens of billons against these ruinous leases. They just didn’t destroy the tenants, they destroyed the country.