The right moves: Opening the lettings world
The controversy and confusion surrounding issues such as "upward only rent reviews" underline the complicated nature of lettings, certainly from a tenant's viewpoint.
Indeed it was a meeting between Senator Feargal Quinn and the Society of Chartered Surveyors Ireland (SCSI) on his proposal to undo the "upward only reviews" which sparked a discussion on how to simplify the world of property lettings for everyone involved. The SCSI seized the initiative and today launch a new "Business Leasing Code for Landlords and Tenants." I met at SCSI headquarters with Conor O'Donovan, director of policy and communications and experienced chartered surveyors, Brian Meldon and Eamonn Maguire, who have driven the production of this new code.
Mr Meldon told me that the code is all about "maximising transparency and demystifying the letting process." "The aim of the code is to create a document which is clear, concise, user friendly and authoritative, for both parties." The code forms a step by step guide to a letting, starting with a simply written explanation of "the demised premises", recommendations on handling negotiations, to explaining rent reviews, insurance obligations, rent reviews, repairs, sub-lettings and assignments.
I tested my surveyor colleagues with a few typical problems that arise in lettings and they were instantly able to refer me to a clear explanation or recommendation in the code. It does contain a lot of detail, but it is written in simple English, laid out clearly and uses "tips" throughout effectively.
The code also contains a detailed "model heads of terms" and the objective is that all agents will adopt this format. Eamonn Maguire said that the "heads of terms" are a framework for negotiations before the grant of a lease. He explained, "agents work hard to market property and get a deal agreed. It follows that parties should reduce the risk of deals falling through by agreeing as much detail as possible in the heads of terms, which assists the legal process."
In my experience one of the most frustrating reasons for delaying a deal, and even letting it fall through, is delay in producing lease maps showing management company areas and car parking etc. I advise any agent to make sure these are prepared before a deal and I'm glad to see that "tip 1" of the code offers that very advice.
Mr O'Donovan said the objective is to get the representative bodies for all the stakeholders in the market to adopt this voluntary code. The society will be contacting the Law Society, landlord and tenants representative groups, Retail Excellence Ireland and Chambers of Commerce etc and are inviting any interested group to get in touch.
The first phase of launching the code is to educate the society's own members and a series of roadshows and "continuing professional development" sessions are planned. Surveyors will then be encouraged to bring the code to clients.
The final step in the code is to remind tenants of their statutory obligation to register the details of new lettings on the Commercial Leases Register. However from my discussions with agents, the market view now is that the lease register is not functioning properly. Many leases are not being registered at all, either due to ignorance of the law or, particularly in the retail sector because tenants don't want competitors to know their business. In many cases, information as basic as the floor area of the demise is missing. The flaw was obligating tenants to make the returns and I suggest that the property regulator should speedily pass the responsibility to solicitors, as a condition of stamping the lease.
I think that this one of the most useful initiatives in the business for many years. The code is available from today on the SCSI website.
The Institute of Professional Auctioneers and Valuers is going from strength to strength and I was honoured to be a speaker at their annual conference last week. The new president Eamon O'Flaherty has hit the ground running and he made a powerful speech which called on the government to introduce tax breaks to encourage the conversion of empty commercial premises in rural towns to residential use. He also attacked the issue of the reduced thresholds for tax free inheritance which are forcing many who inherit a property from a parent, to sell it to pay the tax.