Govt inaction leaves retail sector cripled by high rents
Issued : Wednesday 10 March, 2010
Statement by Joe Costello TD
Minister of State at the Department of Foreign Affairs and Trade with responsibility for Trade and Development
The present convulsions in the Irish economy have revealed some strange practices in commercial activities
Who in their right mind would have imagined that commercial rent reviews could only be upward and that a downturn in the economy could not be reflected in a reduction in the rent of commercial premises?
The Government’s attempt to rectify the anomaly last year only applied to new leases and fails to address the existing business leases which are causing the problems.
The Government has refused to move beyond this point referring to the Attorney General’s advice (which he hasn’t published) and blaming the Constitution as the obstacle.
This is exactly the same “hands off” position adopted in relation to the Kenny Report on land valuation after rezoning. If implemented at the time it was published Kenny would have prevented most of the corruption of the planning process and the reckless rezoning which has destroyed much of our urban landscape and gave rise to Tribunals of Enquiry.
The question that the Government should have put to the Attorney General was whether it was constitutionally correct that a system of “upward only” evaluation of commercial rents was recognised and enforceable in the common law of the land.
The Constitutional requirement of natural and social justice, fairness and the public interest would seem to suggest otherwise. For example, liquidations or assignees in bankruptcy cases can disclaim or walk away from the leases of insolvent companies or bankrupt individuals where they believe the terms of these leases are unduly onerous. That can be done within the present law without infringing constitutional principles.
Indeed, a better example is contained in the Minister’s own Act – the Land & Conveyancing Law Reform Act (2009).
Section 50 of the Act reads as follows:
1. “A servient owner may apply to the Court for an order discharging in whole or in part or modifying a freehold covenant (whether created before or after the commencement of this chapter) on the ground that continued compliance with it would constitute an unreasonable interference with the use and enjoyment of the servient land” and again in Section 50 2(f)
“Whether compliance with that obligation has become unduly onerous compared with the benefit derived from such compliance”
Thus, if it is possible to set aside or modify a freehold covenant where the obligation to pay is unduly onerous, then surely it cannot be unconstitutional to set aside a leasehold covenant where the obligation to pay has become unduly onerous? The principle of rent modification is to be found in the 2009 Act and is not considered to be repugnant to the Constitution.
Meanwhile, the Government inaction means that the business sector and particularly the retail sector of the country is being crippled by high rents, many negotiated at the time of the boom, which can only be reviewed upwards in this present time of economic crisis.
