Dáil Éireann Debate, Tuesday - 3 July 2012
195 Deputy Maureen O’Sullivan asked the Minister for Finance if he will explain the justification for the National Asset Management Agency stating that businesses which possess other viable businesses in a group are considered eligible to pay requested increases in rent; and if he will make a statement on the matter. [32008/12]
Amharc ar fhreagraIn agreeing to requests for rent abatements from its debtors, NAMA must in all instances be cognisant of the overriding requirement to preserve the value of collateral supporting its loans. The Agency seeks to ensure this by implementing rent abatements under the terms set out in its Guidance Note on Upwards Only Commercial Leases, which is available on its website, www.nama.ie. The terms of the Guidance Note are intended to deal with situations where tenants of NAMA debtors can demonstrate that the rents payable under their current leases are in excess of current market levels and that, in consequence, the viability of their business is threatened. This situation clearly does not arise in the case of businesses that are profitably trading or part of a profitably trading group that are in a position to honour their current contractual arrangements on rent, nor was it ever intended that the Guidance Note on Upwards Only Commercial Leases would confer benefit on such businesses.
NAMA advises that the judicious implementation of rent abatements can support the achievement of its objective of preserving the value of its properties securing its loans by (1) ensuring that qualifying tenants remain in business and continue to thereby generate rental income and (2) by safeguarding jobs and economic activity in general. The Agency points out that as rent abatements are typically agreed for an initial fixed period of no more than twelve months and are thereafter subject to ongoing assessment by reference to factors such as turnover and business profitability, any short-term loss of rental income arising from abatements is likely to be more than off-set by these long-term benefits. Agreement to rent abatements outside of the terms of the Guidance Note would, in contrast, prove contrary to the requirement on the Agency to protect the position of Irish taxpayers by extracting the best possible returns on its acquired loans and underlying property assets.
196 Deputy Maureen O’Sullivan asked the Minister for Finance if his attention has been drawn to the fact that a business with a licence that may stipulate that the proprietors can be asked to leave within one month’s notice will find itself in financial difficulty in view of the fact that it must pay three months rent up front to the National Assets Management Agency in advance even though it does not have security of tenure; his views on whether, alongside three months rent up front, a request of a 100% increase in rent on that business can place it in jeopardy; and if he will make a statement on the matter. [32009/12]
Amharc ar fhreagraIt is important to point out that NAMA has placed no such requirement on any tenant nor has it requested a rent increase in any case. I presume the Deputy is referring to specific commercial lease terms entered into freely by a tenant and landlord and which are better addressed between the parties. As previously advised to the Deputy, NAMA has acquired loans from the five participating institutions and is not the owner/operator of the underlying properties. The Agency's role is that of a secured lender. Other than properties that have been enforced, all of which are listed on NAMA's website and which are managed by the appointed receivers/administrators, properties continue to be managed by their existing owners or their professional managers/agents. The owners/professional managers are responsible for the efficient running of properties, the collection of rents and service charges, arrangements for letting of vacant units and the operation of rent reviews in accordance with the leases into which tenants have entered. On the issue of rent abatements, as I also outlined in my reply to this matter previously, NAMA has published very clear Guidelines, available on www.nama.ie, for tenants seeking a rent reduction from a NAMA debtor or receiver. It is important to emphasise that applications for rent abatements may be made in situations where tenants of NAMA debtors can demonstrate that the rents payable under their current leases are in excess of current market levels and, as a result, that the viability of their businesses is threatened. In such circumstances, tenants may seek NAMA’s approval for rent reductions. By the end of May 2012, the Agency had approved 145 applications for rent reductions under these Guidelines with just 4 applications refused. I am happy that this system is working well and NAMA is playing a leading role.
