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Ronan company in upward-only rent battle with council over property lease

A COMPANY belonging to developer Johnny Ronan that developed the Irish Medical Council's headquarters in Dublin has brought a legal action over its entitlement to ensure the annual rent paid for that property does not fall below €820,000, which was fixed in 2008.

The proceedings by Tanat against the council were transferred on consent of both sides to the Commercial Court yesterday by Judge Peter Kelly. The case will be heard in October.

The council had initiated proceedings seeking the determination of issues under the Land and Conveyancing Law Reform Act 2009 -- which provides for downward rent reviews in certain circumstances -- but Tanat argues the issues between the sides would be best determined in the fast-track Commercial Court. The council is to make a counter-claim in the action.

The council took possession of Kingram House at Kingram Place, Dublin 2, in March 2008 under a five-year short-term lease and Tanat says the council is required to enter into a 20-year lease from January 2013 allowing only for upward-only rent reviews.

The central issue in the case is whether the relevant provisions of the Land and Conveyancing Law Reform Act 2009 allowing for downward rent reviews applies to the 20-year lease agreement.

As commercial rents in Dublin have fallen by up to 50pc since 2008, Tanat claims if the initial rent to be paid by the council under the 20-year lease starting in 2013 is the market rent as provided for in the 2009 Act, not the 2008 rent, then that initial rent and rents to be paid following reviews over the next two decades would be substantially lower.

Tanat, whose shareholders are Johnny Ronan and Peter Conlanm, was incorporated in 1989 to purchase and redevelop the property now known as Kingram House. It claims the council agreed in April 2007 to purchase the property by purchasing the shares in Tanat for some €20m.

It is claimed, while existing legislation would give the council power to purchase and hold shares in Tanat, there was a doubt in 2007 whether the council could do so.

In those circumstances, it was agreed in November 2007 the transaction would be structured so the council would be entitled to buy the shares in Tanat or lease the property to avoid a liability for VAT that would then have been payable on the grant of a long lease.

Tanat claims it was agreed the council would initially enter into a five-year lease and, if it had not exercised its option to purchase the shares when that term was up, it would enter into a further 20-year lease. Both sides intended the council would either buy the property or lease it for 25 years.

It is claimed the sides entered in March 2008 into various agreements including where the property was leased to the council for five years from January 1, 2008, at a rent of €820,000.

Tanat claims it exercised its option last December to demise the property to the council for 20 years beginning January 1, 2013. It claims the 2009 Act does not apply to that long-term lease and the council has failed or refused to take the long-term lease under the terms of the agreements.

Irish Independent