Bewley's ruling clears way for struggling shops to fight high rents
A LANDMARK decision by the High Court has opened the way for hard-pressed retailers to challenge upward-only rent reviews.
However, representatives groups have warned that it may not lead to widespread reversals of upward-only rents as it will depend on each lease agreement.
Mr Justice Peter Charleton ruled that the €1.4m annual rent being paid by Bewley's for its iconic Grafton Street premises must now fall to the market rate.
It means the coffee shop could see its rent almost halved.
The landlord, Ickendel Ltd, which is owned by Johnny Ronan through Treasury Holdings – itself part of NAMA – had argued that its 35-year lease with Bewley's only allowed for rent increases when it was reviewed every five years.
However, Mr Justice Charleton said that to proceed towards ever-increasing sums every five years – in spite of deflation – was to give an "unreal figure" for the rent.
He said the two parties, when they signed the lease in 1987, had agreed the rent would never fall below the initial figure set – €213,000 – however, thereafter it was to be a fair, open market rent.
The dispute was seen as an important test case and the decision has been welcomed by retailers. However, Stephen Lynam, director of IBEC group Retail Ireland, cautioned that the judgment may not lead to widespread reversals of upward-only rent reviews.
"Upward-only rent reviews have put immense pressure on the sector, which has seen numerous store closures and over 50,000 job losses since 2008. Retail Ireland will be reviewing the judgment in detail and assess its implications for the wider sector," he added.
A host of major retailers have cited upward- only rents as one of the main factors in their economic woes.
The closure of HMV in Ireland was blamed, in part, on its failure to get rent reductions, while earlier this month the Irish arm of Monsoon Acessorize went into examinership with a renegotiation of its rents seen as crucial as to whether it will survive or not.
B&Q went into examinership in January with "totally uneconomic rents"; while its rivals, Atlantic Homecare and Woodies DIY, were also placed into examinership last year, with some outlets being charged twice the going rent on the open market.