Upward only ban good news for retailers

From 28 February 2010 upward only review clauses will be banned from all new leases

Majority view Minister Ahern's ban on upward only rent review clauses as a positive step, although property consultants say it will only hurt the economy

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Trade associations welcomed the news this month that upward only rent clauses have been abolished by the Minister for Justice, under section 132 of the Land and Conveyancing Law Reform Act. As of 28 February 2010, no new leases will be subject to upward only clauses, although the terms of old contracts will remain unaffected.

CEO of Retail Excellence Ireland, David Fitzsimons commented that upward only leases have been “one of the most critical issues facing the Irish retail industry,” and the passing of the banning order represents a “major achievement” for businesses.
He said however that the new law will not be applied retrospectively and therefore will not effect the majority of businesses that are locked into long-term upward only leases. Furthermore, he said many retailers are being asked to sign the clause as a condition of entry to particular schemes, “with business operators being pitted against each other.”

“We believe that when market growth returns we will inevitably revert to a situation where upward only rent clauses are the norm; if you don’t sign one you won’t get in.”

Ibec group, Retail Ireland has said meanwhile, that it is looking forward to more equitable leases being put in place in the future. Director Torlach Denihan commented: “We look forward to more equity in lease arrangements in the future…. Landlords now need to review current lease and rental arrangements to reflect the realities of the current commercial rental market. This is necessary to help retailers deliver lower prices to consumers and regain lost competitiveness.

Property consultants CB Richard Ellis have denounced the decision however, saying it will not help the majority of businesses and will only make Ireland unattractive for prospective property investors.

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