|
|
| Rent Reviews and the role of NAMA |
|
By
Department of Finance and Department of Justice and Equality
Dec 6, 2011 |
|
|
In today’s Budget speech the Minister for Finance, Michael Noonan T.D., set out the changes to NAMA policy in relation to upward only rent reviews in relation to tenants experiencing difficulties in paying rents. The Minister said:
“I am fully aware of the difficulties that upward only rent reviews are causing for some businesses. Indeed, despite exhaustive work over the past few months by my colleague the Minister for Justice and Equality, including preparation of draft legislation, it has not proved possible to develop a targeted scheme to tackle this issue that would not be vulnerable to legal challenge.
This is a matter of particular interest to NAMA and I consider that NAMA can play a role in dealing with the problems caused by upward only rent reviews which apply to NAMA properties. NAMA advise me that it has policy guidance in place for dealing with tenants experiencing difficulties in paying rents, including where upward only rent reviews might apply. NAMA have agreed to publish their guidance on this and I welcome NAMA’s realistic approach to this difficult issue.
The Minister outlined that the existing position allows for tenants and landlords to mutually agree revised contracts. However, where there is a failure to reach agreement NAMA’s policy guidance will provide an opportunity for tenants of NAMA properties to seek a review of their rent, including through the appointment of an independent valuer. The process would apply to business leases which are the subject of upward only rent reviews where the debtors are landlords of premises where NAMA has acquired the loan on the underlying property. It will have to be shown that rents are in excess of current market levels and the continued viability of the tenant’s business must be threatened from high rents. NAMA has confirmed to the Minister that it will facilitate this evaluation process as much as possible.
The Minister for Justice and Equality, Mr Alan Shatter, T.D., continued by outlining with considerable regret that the Government has decided that it is not possible to proceed with the legislation to abolish upward only rent review clauses in existing business leases.
Commenting on the matter the Minister said: “the proposals which I brought before Government earlier this year had the particular aim of providing relief for tenants whose businesses might otherwise be viable were it not for the adverse impact arising from the fact that the rent they were paying was significantly above prevailing market levels. However, following consultation with the Attorney General, it was clear that this particular approach gave rise to significant constitutional difficulties. It was also clear that any legislative scheme, involving as it would an interference in the contractual relationship of private parties, would find it extremely difficult to survive a Constitutional challenge. Most pertinently, at this difficult time in our economic circumstances, Government was made aware of the fact that any legislative proposal would require the payment of compensation to those whose property rights would be infringed if that proposal were to be compatible with Constitutional and European Court of Human Rights norms.”.
While noting that the decision not to go ahead with the legislation had been a very difficult one for Government, the Minister observed: “it is simply inconceivable, given the harsh choices that face us in relation to cutbacks in public expenditure, that the State would commit itself to establishing a compensation regime which could involve a very substantial outlay on the part of the State and which could have implications for our ability to sustain funding in a range of economic and social areas.”.
The Minister acknowledged the inevitable disappointment likely to be felt by those who had campaigned for change in this area and he expressed the hope that landlords would continue to engage with their tenants in order to provide appropriate rent concessions. He also urged those landlords who had yet to engage with their tenants to accept current realities and behave in a socially responsible manner.
Finally, the Minister said: this has also been an uncertain time for those contemplating investment in the commercial property market. I would hope that the clear decision not to proceed with the proposed rent review legislation will remove that uncertainty and pave the way for renewed activity in this sector.
<< Go Back
|
|
|
|
omniad
|
|
|
 |
