Gerry Adams
Question:29 Deputy Gerry Adams asked the Minister for Jobs, Enterprise and Innovation the cost of upward only rent reviews to the economy in terms of job creation and retention. [4116/12]
View answerWednesday, 25 January 2012
Questions (33, 34)
Bernard J. Durkan
Question:100 Deputy Bernard J. Durkan asked the Minister for Jobs, Enterprise and Innovation the degree to which he and/or his Department has identified upward only rent reviews as a cause of job losses in the commercial sector; the extent to which the issue can be addressed as a means of improving the economic prospects; and if he will make a statement on the matter. [4405/12]
View answerWritten answers
I propose to take Questions Nos. 29 and 100 together.
Policy responsibility for upward-only rent reviews comes within the remit of the Minister for Justice and Equality, Deputy Alan Shatter. I do not have specific data on the impact of upward-only rent agreements but the National Competitiveness Council provides some data on rents generally. Rent represents an average of 2% to 7% of total costs for manufacturing businesses, and 5% to 6% of total costs for services businesses.
The Council reported in its Competitiveness Scorecard 2011 that Ireland experienced a fall of 22% in rental costs for prime industrial sites in 2010, with a decline of 12.3% in prime office space rental costs. Both of these were the largest annual declines experienced across the countries benchmarked and both marked a continuation of falling prices seen since the peak in 2007. Rental costs in many of Ireland's competitor economies rose in 2010. Nonetheless, upward-only rent reviews have kept rents for some businesses at an artificially high level compared to open market trends and property values.
The Land Conveyancing and Law Reform Act 2009 abolished upward-only rent reviews for all new leases signed on or after 28 February 2010. However, upward-only rent review clauses continue to apply to leases which were entered into prior to that date. Following legal advice, the Government has decided that it is not feasible to proceed with legislation to abolish upward only rent review clauses in existing business leases. However, businesses can make use of the rent review arbitration code, which provides a mechanism to deal with disputes on commercial rents and can help to resolve issues at a lower cost, in considerably less time, and in a less adversarial way for the parties concerned.
NAMA also has a policy guidance for dealing with tenants' difficulties arising from upward-only rent reviews. This provides an opportunity for NAMA to approve rent reductions where it can be shown that rents are in excess of current market levels and a tenant's viability is threatened. The policy also provides for the appointment of an independent valuation of market rent where necessary. NAMA has advised the Minister for Finance that where a tenant is not getting satisfaction in the negotiations with his NAMA landlord, the tenant can contact NAMA directly.