Dáil Éireann Debate, Wednesday - 18 April 2012
456 Deputy Willie O’Dea asked the Minister for Jobs, Enterprise and Innovation if he is concerned that the closure of a company (details supplied) is a further sign that rents are unsustainably high; and if he will make a statement on the matter. [18813/12]
View answerRents are just one element of overhead costs that affect businesses. The National Competitiveness 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. 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. Nonetheless, the existence of upward-only rent reviews in leases has been cited as one of a number of issues that is affecting businesses at present. The impact of the recession and a changing marketplace were also stated to be factors which led to the closure of the company referred to by the Deputy.
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. Despite extensive consideration by the Government, it has not proved possible to develop a targeted scheme to tackle upward only rent reviews in existing business leases which would not be vulnerable to a legal challenge or require compensation to be paid to landlords.
However, in Budget 2012, the Minister for Finance, Mr. Michael Noonan TD, gave a commitment that downward pressure will be placed on commercial rents in respect of which NAMA has acquired the loan on the underlying property. NAMA has developed a Guidance Note for dealing with tenants' difficulties arising from upward-only rent reviews in relation to its own portfolio of property. 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.
Minister Noonan recently informed the House that NAMA had received 114 applications for rent abatements prior to issuing the Guidance Note, of which 113 applications were approved and one was refused. Minister Noonan was also informed by NAMA that, since 6 December 2011, it had received a further 40 applications for rent abatements under the terms of the Guidance Note. By 27 March last, 5 of these applications were approved, another 2 were ineligible as they related to properties which are not held as security by NAMA, with the remaining 33 applications still under review.
Separately, the Department of Justice and Law Reform has continued to progress the recommendations of the Working Group on Transparency in Commercial Rent Reviews since it reported in July 2010. Businesses can make use of the Rent Review Arbitration Code, which was drawn up by the Working Group to help to resolve issues at a lower cost, in considerably less time, and in a less adversarial way for the parties concerned.
