| Upward only rent reviews abolished in commercial leases |
On 1 December 2009, Mr Dermot Ahern TD, Minister for Justice Equality and Law Reform, signed an order banning “upward only” rent reviews in business leases.
Section 132 of the Land and Conveyancing Reform Act 2009 which gives effect to the ban will come into force on 28 February 2010 and will affect all commercial leases from that date forward. The ban will not be applied retrospectively and will apply only to new leases.
Minister Ahern said “The practice of including upward only review clauses in business leases is a deeply entrenched one. The time has come to end this practice.”
This new legislation stemmed from comments by Mr Edmund Honohan SC, Master of the High Court, in the case of Anthony Kidney and Ronan NcNamee v Julian Charlton and Edward Charlton earlier in 2009. In a “written reasoned decision” Mr Honohan said that the economic downturn should be considered when assessing upward only clauses in commercial leases and that the Courts be “informed by public policy” and remarked that in Ireland, fair rents had been a matter of public policy since the days of the Land League.
Mr Honohan went on to say that “even in a case in which the drafted meaning is clear and unambiguous, the device of severance of an offending clause will be employed by the court where performance would be contrary to public policy.” Whereas the views of the Master of the High Court should be noted carefully, a decision of the High Court is necessary to clarify the matter and the case was forwarded for hearing.
In the interim, the minister prepared legislation to give effect to Mr Honohan’s views. Minister Ahern said that the legislation had been well signalled and that he had waited a reasonably lengthy period of time before enacting Section 132 to “facilitate the market in taking on board the proposed change.” The new legislation has been welcomed by groups representing retailers and small businesses, but criticised by estate agents and groups representing property owners and landlords.
Section 132 of the new legislation will cover new leases from 28 February 2010 but will not be retrospective on existing leases, the High Court’s decision in the case is awaited to gauge its effect on existing commercial leases. |
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