Cowen: Impossible to overturn high rent leases

[C. Flower]

In Ireland "upward only rent reviews" are the norm. Businesses even now are having to face demands for big rent increases, even when there is vacant commercial space going begging across the country.
As their incomes are almost all falling, this is closing down firms and/or resulting in job losses.

Part of the problem is the legislation and part of it is that commercial space is on the books of the banks as collateral, or is owned by pension funds. Neither are prepared to see devaluation by lowering of rents. In the case of the banks, until NAMA is resolved, which may be years, they need to boost the "on paper" value of these assets. Government is finally saying they will do something about this. Wait for it, they are going to "establish a working group"....

Retail Ireland have welcomed the establishment by Dermot Ahern of a working group on rent reviews.

Retail Ireland director Torlach Denihan said: "Retail Ireland has made extensive representations to the Minister for Justice, Equality and Law Reform to urge that he build on his forward-looking decision to abolish upward-only rent review clauses by undertaking a fundamental reform of the law relating to leases.

"We welcome his decision today to implement our recommendation to establish a working group to look at the issue of commercial rent reviews and look forward to participating on it. Lease reform is urgently needed to save jobs and respond to the unprecedented economic crisis affecting retailers.

"Rents are a huge component of the retail cost base, but are almost impossible to reduce. Some landlords have successfully sought or are currently seeking very substantial rent increases under upward-only rent review clauses.

"Many tenants face rent increases of anything between a third and double at a time when their sales have suffered a huge drop. Retailers have been forced to make staff redundant and use the payroll savings to pay rent increases."

Read more: http://www.breakingnews.ie/business/retailers-welcome-govt-action-on-rent-reviews-448656.html#ixzz0hDCRxoFh

[C. Flower]

The Taoiseach Brian Cowen said today it was impossible to overthrow controversial shop leases struck during the boom years which bar rent reductions.

The Taoiseach said the commercial agreements – being blamed for huge job losses in the retail industry – were between private individuals and could not be interfered with under the constitution.

But Labour leader Eamon Gilmore said his party has received legal advice that it was legal to quash upward-only rent reviews, and that Professor David Gwynn Morgan of University College Cork agreed with that advice.

“There is legal opinion that says yes it is constitutionally legal to do it,” he said, accusing the Taoiseach of safeguarding wealthy landlords over jobs.

“You suddenly wrap yourself in the constitution when it comes to protecting the interests of landlords and some of these very developers that have landed us in this difficulty in the first place.”

Mr Gilmore demanded advice to the Government from the Attorney General be published.

“Let us all see it, what’s the big secret,” he said.

Mr Cowen said advice from the Attorney General was that “real, legal and constitutional” difficulties would arise if property rights were affected retrospectively.

“The unfortunate situation is it is not constitutionally valid to interfere in contracts in that way,” he said. “Unfortunately that is the strong advice available to us.”

Mr Gilmore dismissed the remarks and accused the Government of inaction over further redundancies in the retail sector.

Some shop owners were locked into high-rent leases in circumstances where “their arms were twisted by landlords or by property developers”, he added.

Read more: http://www.breakingnews.ie/business/...#ixzz0hikZtAFR

There is no question where this Taoiseach stands.

[Newsy]

[B]
The Taoiseach Brian Cowen said today it was impossible to overthrow controversial shop leases struck during the boom years which bar rent reductions.

[/COLOR][/LEFT]

This is a disgrace.

NOTHING is impossible. There isn't the political will to address this issue. These are desperate times, economically and this is Cowen's response.

So eventually these premises will lay empty with NO RENT being paid because retailers won't be able to afford to pay the high rents. They are on the ropes, as it is. And people will continue to loose jobs.

One couldn't make this stuff up, if you tried.

Nuts economics.

[greengoose]

This is a disgrace.

NOTHING is impossible. There isn't the political will to address this issue. These are desperate times, economically and this is Cowen's response.

So eventually these premises will lay empty with NO RENT being paid because retailers won't be able to afford to pay the high rents. They are on the ropes, as it is. And people will continue to loose jobs.

One couldn't make this stuff up, if you tried.

Nuts economics.

Not to mention Hangargate!!!

[Newsy]

Not to mention Hangargate!!!

Crazy stuff....crazy!!!!

[Baron von Biffo]

If these lease agreements were given a legal status equivalent to a PS contract of employment, they could be ripped up in the morning.

[Newsy]

Part of the problem is the legislation and part of it is that commercial space is on the books of the banks as collateral, or is owned by pension funds. Neither are prepared to see devaluation by lowering of rents. In the case of the banks, until NAMA is resolved, which may be years, they need to boost the "on paper" value of these assets.

So these rents are being kept at the present rate or maybe going higher, to keep the value of these properties artificially high, because of NAMA.

Banks not allowed to fail....but retailers ARE.

What a world!!!!

[DCon]

Nice deal for someone here

THE Department of Justice has spent €2m renting a building that cannot be used.

http://www.independent.ie/irish-news...-29145882.html

[culmore]

Nothing is impossible, a new short Bill can be passed in the dail in one day to reduce rent. If the government won't do it where is the opposition , let them get a legal opinion also to say it can be done and just do it

[Baron von Biffo]

Nothing is impossible, a new short Bill can be passed in the dail in one day to reduce rent. If the government won't do it where is the opposition , let them get a legal opinion also to say it can be done and just do it

Apart from the constitutional difficulties, do you think there's any teensy possibility that the government stepping in to tear up business contracts could backfire on us?

[homer]

Apart from the constitutional difficulties, do you think there's any teensy possibility that the government stepping in to tear up business contracts could backfire on us?

those leases were signed at a time when nobody foresaw the collapse in values.

Circumstances now radically different.

Government should address it. Upwards only is causing many job losses

[Baron von Biffo]

those leases were signed at a time when nobody foresaw the collapse in values.

Circumstances now radically different.

Government should address it. Upwards only is causing many job losses

That's seems a bit too simplistic. A business that can't afford a reasonable rent increase is probably on the way out anyway so the landlord insisting on his UO clause is just applying the coup de grace.

Government action to tear up existing UO clauses wouldn't end the difficulties in the commercial rental sector but would instead transfer the pain from the tenant to the landlord. That could potentially lead to even more job losses than the present situation.

Take for example a shopping centre - If most businesses are still viable under their existing leases then outlawing the UO clauses could lead to the centre owner going broke. That would kill all the jobs, not just those in shaky businesses.

There's also the damage to the reputation of the country that would follow from the government meddling in business contracts and arbitrarily erasing property rights. We depend too heavily on multinationals to risk losing them for the sake of keeping a few poorly run shops afloat.