Thursday 26 April 2018

Maeve Dineen: Time to move forward on upward-only rent reviews

ONE of the biggest hot potatoes in the business world these days is the Government's plans to retrospectively abolish upward-only rent reviews.

We were promised legislation before the summer recess and rumour has it that the Department of Justice will introduce a bill next month, but the current delays are strangling the property market and forcing many retailers out of business.

Whatever one thinks about the rights and wrongs of upward-only rent reviews (and this is one debate where both sides can make good points) it is essential that we see the legislation as soon as possible.

The EU-IMF team have expressed concern about upward-only rent reviews.

And it is now understood that if the Government doesn't move on this soon, there is no doubtit will be forced into it ahead of the country's next quarterly review in October.

It's no surprise that this is an area of huge concern for our bailout partners -- after all, commercial rents were a key part of the property bubble.

Much has been made of the fact that for a country of only four million people we are paying some of the highest commercial rents on the planet. Grafton Street, for example, commanded some of the highest fees in the world.

The current lack of information is crippling the property market and making it virtually impossible to value office blocks and retail units.

International investors -- or some might say "bottom fishers" -- are looking at the vast swathes of commercial property on the market here but no one is purchasing them as they simply cannot put a price on the property until they know the outcome of the new proposed legalisation.

Who in their right mind would buy an office block at the moment when their value is determined almost solely by the rent roll?

No one it would appear.

Marie Hunt, an economist at CB Richard Ellis, said recently that there were only three investment transactions signed in the first half of 2011 as the market waits for clear information about what the Government has in mind.

But publication of the legislation will only be the first step.

Questions are already emerging about how it will work.

Will the legislation "exclude" landlords in severe financial difficulty?

Will it contain a clause to allow a tenant to "trigger" a review?

Will it look at profitability of the tenant by site or by group?

Will it exclude foreign retailers losing money in Ireland but with profitable parents?

A challenge to the Supreme Court is inevitable.

Any form of retrospective legislation is always odious, and an attack on property rights especially so.

This means that a final solution is not likely for at least a year -- a delay that will put almost unbearable pressure on many individuals and consign the moribund property market to at least another year in the doldrums.

The stagnant commercial property market is a concern to us all. We are all investors in this thanks to our pension funds and NAMA.

Towns and cities are scarred by shop closures. This will not change until investors regain some sort of clarity about the future.

The sooner Alan Shatter gets to grips with this problem, the better for all of us. And if he doesn't -- the EU-IMF team will do it for him.

Irish Independent

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