Rent Reviews- Reform Or Resistance Following On From The Report Of The Working Group On Transparency In Commercial Rent Reviews?

Author:Ms Jackie Buckley
Profession:Hayes Solicitors
 
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Controversy has surrounded upwards only rent review clauses for quite some time. It had been hoped that Section 132 of the Land and Conveyancing Law Reform Act 2009 would resolve this issue once and for all. This section provides that any rent review clause in a Lease created after 28 February 2010 will be construed as providing that the rent payable following a review shall be an amount which is less than, greater than or the same as the existing rent. In other wards, irrespective of what is included in the clause the reviewed rent can be equal to, lower than or higher than the existing rent.

However, our experience to date is that landlords are reluctant to agree to anything other than an upwards only rent review clause in the hope that this legislation will be amended in the future.

There has always been a perception that the rent review process is biased in favour of landlords. Following on from that, A Working Group on Transparency in Commercial Rent Reviews was established by the Minister for Justice and Law Reform on 4 March 2010. Its terms of reference were to consider the operation of the current system for determining the rent payable on foot of a rent review clause, with particular emphasis on the arbitration process and the adequacy of the information available to all parties. It was asked if necessary to make such recommendations for changes as it thought was appropriate. The main reason behind the establishment of the working group was due to the difficulties expressed by tenants, particularly in the retail sector. For many tenants, rents were remaining at levels exceeding the rent at which these properties would let on the open market.

They were also asked to look at the perceived gaps of inaccuracy of information available in relation to commercial rent reviews and were asked to address concerns about a perceived lack of confidence on the part of tenants in both the arbitration process and in arbitrators.

The main recommendations made by the working group are summarised below:-

It recommended the adoption of an industry wide acceptance of a code of practice called the Rent Review Arbitration Code 2010. This code was attached to the report and they asked for all stakeholders to commit to their willingness to adhere to the code. It recommended that this code be reviewed no later than July 2013. Having regard to the difficulties in obtaining reliable information about rent review transactions, it recommended the establishment...

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