Readers of the Phoenix magazine (available here with subscription) are treated in the current issue to a centrefold advertisement by John Corcoran, the owner of Korky’s shoe shop on Grafton Street in Dublin who has been locked in a legal battle with his landlords for several years. The advertisement takes the form of an open letter to Minister for Finance Michael Noonan challenging the decision announced by Minister Noonan in his Budget 2012 speech last December 2011 to abandon promised changes to Upward Only Rent Review provisions in leases created before February 2010. The open letter is accompanied by legal commentary from barrister and judge Gerard Hogan, whose views conflict with those of the Government and who appears to conclude that imposing changes on UORR leases would not be at odds with the Constitution.
There hasn’t been any response from Minister Noonan to the open letter, but in the Dail this week, the Sinn Fein spokesperson for Enterprise Jobs and Innovation Peadar Toibin asked the Minister for Justice Equality and Defence Alan Shatter to outline “steps or proposals under active consideration” in respect of reforming UORR leases. In his response the Minister did not allude to any “steps or proposals under active consideration” and appears to draw a line under the issue with last year’s announcements.
However the Minister does say that “NAMA is playing a role in dealing with problems caused by upward only rent reviews applying to NAMA properties, and since the start of the year has approved cumulative rent reductions of over €6 million” We previously learned that NAMA is approving practically all applications made to it to reduce rents, though there have been exceptions. €6m is a major reduction in income to NAMA though Minister Noonan has previously said that the long term survival of businesses in their commercial tenancies will more than offset any short-term reduction in income to NAMA. Given that NAMA has approved about 150 rent reductions, the €6m cited by Minister Shatter equates to an average annual rent reduction of €40,000.
Somehow I get the impression that we have not heard the last of the push for UORR reforms.
The full parliamentary question and response are here.
Deputy Peadar Tóibín: asked the Minister for Justice and Equality the steps or proposals that are under active consideration by him to address the issue of the operation of upward only rents.
Minister for Justice and Equality, Alan Shatter: The primary responsibility which I have in relation to this matter relates to possible legislative intervention to ban upward only rent reviews in existing commercial leases. The Deputy will recall that following extensive consideration of this matter, the Government announced in December last that it had decided not to proceed with such legislation. There was a substantial concern that any legislative scheme involving interference in the contractual relationships of private parties would find it extremely difficult to survive a Constitutional challenge. In addition, the Government was advised that any model proposed would require the payment of compensation to landlords whose rights were infringed in order to ensure that the proposal would be compatible with the Constitution and with the European Convention on Human Rights. The Government was strongly of the view that payment of compensation to landlords in such circumstances could not be justified in the current economic climate.
Although legislative intervention may not be feasible, NAMA is playing a role in dealing with problems caused by upward only rent reviews applying to NAMA properties, and since the start of the year has approved cumulative rent reductions of over €6 million. I would also mention that I have commenced the Property Services (Regulation) Act 2011 which, amongst other matters, provides for the establishment and maintenance of a Commercial Leases Database by the Property Services Regulatory Authority. This Database will assist in providing readily accessible, accurate information in order to determine the market rent payable in respect of comparable commercial properties. Work is underway to ensure that the Database will be operational at an early date.
Finally, I wish to highlight the existence of a rent review arbitration code which was drawn up by a group of experts whose membership was drawn from all stakeholders in the commercial property arena. The code, which can be found on http://www.justice.ie, provides a mechanism to deal with the resolution of rent review disputes in the commercial property sector.
NAMA Wine Lake 
Another €100 million of capital value written down by NAMA… It looks ever more likely that Joan Burton wasn’t kidding when she loosely let drop the suggestion that the Agency would lose €15 billion.
P.S. NWL, Budget 2012 speech in 2011.
(Just shows I read your every word!) :-)
@WSTT, thanks, typo corrected! NAMA says that it is offering a rent reduction on an annual basis and may therefore reset the rent in 2013, so I guess that’s why NAMA claims there is no cost arising from this initiative.
Click to access namauorr.pdf
Ahhhh… the much used Mandy Rice-Davies response to that!
This has absolutely nothing to do with the Constitution. It is simply the game being played where we have a Common Law system without the the capacity to adjust within it. In the UK, the government and parliament proposes bills and then the Sovereign signs and seals them.
Or to put it another way. There is nothing Constitutional preventing a change. In fact the Constitution makes plain that the person as Sovereign and Citizen takes precedence. The fear is that if they fiddle too much they will nullify the Status Quo Anti that the Supreme Court took in just after the Constitution in 1938. And if that occurs the administrative shit would hit the fan since everything would have to re-jig itself and recognize the centrality of the individual citizen.
@ NWL – I am not sure what NAMA means when it says “approved rent reductions”. I would presume that this includes cases where it “approves” a reduction but does not implement it as the tenant asks for a greater reduction and there is stalemate. I have encountered this situation, coupled with a demand that arrears be discharged before any rent reduction take effect, leaving a client with the impossible burden of paying the old rent into the future despite a reduction having been “approved” and offered “in principle”.
No fear of a constitutional obstacle when it comes to socialising the debts of failed banks and insurance companies. Funny how these private property rights thingies seem to flow just one way…
@NWL any update on promised negotiated reductions in State Rents? One of the programmes for reform promised action in that regard some time ago but the last update on here was a holding reply to a dail question by Mary lou McDonald.
@PTMIW and L’Eagle, you both raise interesting points about what the €6m NAMA rent reduction actually represents and progress by the State in reducing its rents, wasn’t aware of ML McDonald’s question. Will pursue.