Proposal To End Upwards Only Rent Review In Existing Leases

Author:Mr Rory MacDonald
Profession:Arthur Cox
 
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Introduction

The inclusion of the following statement in the Government's programme for government (Government for National Recovery 2011-2016):

"We will legislate to end upward only rent reviews for existing leases."

has brought the issue of upwards only rent reviews ("UORR") in respect of existing leases back onto the public policy agenda. Heightened media campaigns by both supporters and opponents of this proposal can be expected to reach fever-pitch in the coming months with the Minister for Justice, Equality and Defence, Alan Shatter, confirming his intention to present legislation to the Dail before the summer recess, or shortly afterwards, with a view to it being enacted before the end of the year. It is widely accepted that any such legislation will have to pass constitutional muster.

Section 132 Land and Conveyancing Law Reform Act 2009 ("s 132")

UORR have been a feature of the Irish commercial property market for decades. However the tide, and public policy toward UORR, began to turn with the advent of the global economic crisis in 2008. A sustained campaign from the domestic retail sector resulted in the late inclusion in the Land and Conveyancing Law Reform Act 2009 of s 132, providing that rent review clauses in leases entered into from 28 February 2010 would be deemed to allow for upward and downward review. S 132 did not apply to leases or agreements for lease entered into prior to 28 February 2010. In the Spring 2010 Edition of the Arthur Cox Property Group Newsletter we considered the impact of the introduction of s 132 and the fact that it had created a two tier system of commercial leases. The Government's current proposal is intended to correct the imbalance.

Constitutional considerations

Constitutional review of the Government's proposal may come in the form of an Article 26 reference to the Supreme Court by the President or a challenge by a party directly and adversely affected by the proposal.

Two Articles of the Constitution are of particular relevance in the context of the current proposal. Article 40.3.2 provides that 'The State shall...protect as best it may from unjust attack and ...vindicate the ... property rights of every citizen' . Article 43 acknowledges the right to private ownership of external goods and includes a guarantee by the State not to legislate to abolish the right of private ownership or the general right to transfer, bequeath or inherit property. It further recognises however that 'the exercise...

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