FG/Labour rent plans 'pose threat to pension funds'
Published 13/02/2011 | 05:00
Fine Gael and Labour proposals to retrospectively ban upward-only rent reviews on commercial property are almost certainly unconstitutional and would slash the value of the pension funds of tens of thousands of people, the Society of Chartered Surveyors (SCS) in Ireland claims.
According to Fine Gael spokesman Richard Bruton, upward-only rent reviews are "not appropriate in the current rent environment".
He pledged that his party, if in government, would change the law and if necessary, test its constitutionality. Labour has similar proposals in their economic manifesto.
But John Moran, managing director of Jones Lang LaSalle, said the pre-election proposals were an ill-thought out, knee-jerk reaction that would have a profound impact on the property market.
He said that changing laws retrospectively was intrinsically unfair and would breach the Constitution.
"More importantly, it is likely to create enormous legal uncertainty and introduce substantial risk into doing business in Ireland," he said.
Last year, the outgoing government banned upward-only rent review clauses on new leases signed after February 28, 2010.
Those changes were criticised by tenants as not going far enough.
Justice Minister Dermot Ahern said at the time that he decided not to backdate the ban after consultations with the Attorney General.
Fine Gael and Labour said they would retrospectively ban upward-only rent reviews in existing business leases.
But Mr Moran said the policies outlined by both parties were misguided.
"The first thing people have to realise is that it will decimate the property element of the pension industry. There will be extensive reductions in the value of pensions and a new law as outlined by the main opposition parties will remove Ireland from the realm of any form of international investment in Irish property.
"Foreign investment in Irish bricks and mortar will be vital in the future if we want to kick-start the property market," he said.
The SCS accepted that the collapse in consumer confidence over the last couple of years had undermined the economic basis for many otherwise viable businesses in Ireland and action is needed to help the commercial sector, especially retail.
But these proposals would undermine all short, medium and long-term financial planning on the part of the landlord, the SCS said.
"Any decision to retrospectively change the rental agreement will have an immediate impact on tenants and landlords, second-round impacts on the economy, the property sector, the Exchequer, local government and Ireland's international reputation," Mr Moran said.
"[It] would have an immediate financial impact on pension funds which have invested in property," he added.