Tuesday, 5 March 2013

Questions (397)

Mick Wallace

Question:

397. Deputy Mick Wallace asked the Minister for Justice and Equality if he will revisit upward only rent reviews in view of the importance of this issue to small and medium sized businesses; and if he will make a statement on the matter. [9209/13]

View answer

Written answers (Question to Justice)

As I indicated in my reply to Questions Nos. 123 and 124 of 7 February, the Government has no plans to re-examine the decision not to proceed with legislation to abolish upward only rent review clauses in commercial leases. The Deputy will recall that, following extensive consideration of this matter, the Government announced in December 2011 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. I have been advised that, by the end of 2012, the Agency had granted 212 applications for rent abatement with an aggregate annual value of €13.5 million. A further 56 applications are currently under review. Of the 276 eligible applications received to date only 8 have been refused representing a 97% approval rate by NAMA.

I would also mention that the Property Services (Regulation) Act 2011 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 www.justice.ie, provides a mechanism to deal with the resolution of rent review disputes in the commercial property sector. The effectiveness of the Code and the extent to which it is utilised by stakeholders will be reviewed and assessed over the next coming months.