Think twice before challenging upward-only rent reviews

Decision on Bewley’s gives some clarity on the question of upward-only rent reviews in Irish courts

Bewley’s on Grafton Street, Dublin: a review carried out in 2007 set the rent at €1.46m. Since then, however, rents have plummeted. Photograph: Eric Luke

Bewley’s on Grafton Street, Dublin: a review carried out in 2007 set the rent at €1.46m. Since then, however, rents have plummeted. Photograph: Eric Luke

Mon, Jul 21, 2014, 01:15

The Supreme Court ruling earlier this month upholding what Bewley’s Café described as the “oppressive” €1.46 million annual rent on its Grafton street premises once again raised the vexed question of upward-only rent reviews.

Legislation enacted in 2009 prohibited upward-only review clauses from 2010 on but, due to strong constitutional protection of property rights in Ireland, the measures were not retrospective.

A High Court decision in March 2013 was a cause for optimism for tenants when it lead to hundreds of thousands of euro being knocked off Bewley’s rent. Many tenants who had found themselves paying rents well above the market rate saw a glimmer of hope in the decision and were waiting tentatively for the Supreme Court outcome on the landlord’s appeal.

The 1987 Bewley’s lease provided for reviews every five years with a clause that the rent would increase with market rates or be at least equal to the rent payable during the preceding period. The review carried out in 2007 set the rent at €1.46 million, a figure which, at the time, Bewley’s seemed willing to go along with. Fast forward five years, however, and market rates had plummeted.

Open to interpretation

In the High Court, the café argued that the rent review provisions contained in its agreement were ambiguous and open to interpretation.

They said their rent could not fall below a baseline of €213,000 (IR£168,000) agreed in the 1987 lease. On the other hand, Ickendel Ltd, the landlord, said the parties had agreed to review the rent every five years and that it would not fall below the amount payable in the preceding five-year period.

Mr Justice Peter Charleton agreed with the café and said there was ambiguity in the lease, meaning it could be interpreted to support either the view of Bewley’s, or Ickendel. The case went to arbitration to determine the rent payable on the 2012 review, with a figure of €728,000 being returned.

But this month a five judge Supreme Court unanimously allowed an appeal by Ickendel. Giving the judgement, Ms Justice Mary Laffoy upheld the arguments put forward by Ickendel, which were that the lease provided for a term of 35 years with five yearly reviews from January 12th, 1992. The landlord said the parties had intended there would be six successive five-year periods for which the rent could be reviewed and could not be construed as having any other effect.

In a statement delivered in the wake of the decision, Bewley’s said it was “immensely disappointed” that it would have to continue paying the “oppressive” rent.

While the case specifically concerned the Bewley’s lease, lawyers say the decision has at least provided other tenants with some clarity on the question of upward-only rent reviews. “It means that if somebody is thinking of challenging their lease, they’ll actually think twice about it,” says Thomas O’Malley, a commercial property and banking solicitor with McDowell Purcell. “

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