Retailers and business groups have welcomed the High Court decision that rent payable by Bewley's Cafe must be allowed to fall in line with market value, saying upward-only rent reviews had resulted in numerous shop closures and job losses.
Bewley’s had said it was losing approximately €700,000 a year due to excessive rents on Dublin’s Grafton Street and that 25 jobs had been lost in the caf since the rent increase.
It went to court seeking to prevent any increase on the €1.5 million a year imposed at the peak of the property bubble in January 2007.
Korky's owner John Corcoran said the decision was good news not only for Bewley's, which should see a 50 per cent reduction in its rent bill, but also for commercial tenants and the economy in general.
Mr Corcoran closed his Grafton Street store earlier this year after failing to get a reduction on his rent of €450,000 a year. His lease included the upward-only review clause.
“The ruling today will enable Bewley’s . . . to continue trading on one of Dublin’s most important retail streets where other businesses over the past number of months have failed due to oppressive rents,” he said.
Keith Rogers, head of retail at Ecco Footwear, said he had instructed the shoe retailer's solicitors to examine the business leases. However he added that it was important to remember that Bewley's case was specific, given the wording of the review clause.
Paul Brereton, manager of John Brereton jewellers on Grafton Street, said rents were based on sales which were growing at exponential rates up until 2008.
“It wasn’t viable which led to empty shops on many streets. If you want to have a viable business, the rent should not be based on boom time sales and market values.”
Retail Excellence Ireland, Ireland’s largest retail industry trade body, also welcomed the decision, saying landlords were still charging Celtic Tiger rents which are not sustainable.
"This is something that the Government need to act on immediately before we see further retail businesses fail and jobs lost in the coming months," chief executive David Fitzsimons said.
Retail Ireland said upward- only rent reviews had put immense pressure on the sector, resulting in more than 50,000 job losses since 2008.
Employers group Ibec said said many retailers would be examining their own leases to see if they could benefit from a similar judgment.
However, director Stephen Lynam warned that the judgement may not lead to widespread reversals of upward only rent reviews as each rental agreement can differ.
This sentiment was echoed by commercial property consultants CBRE, who said the decision, while significant, was unlikely to have widespread implications.
Executive director Marie Hunt said intending investors were rightfully questioning the ruling, fearing that rents on leases with upward only rent review clauses would now revert to open market value as a result of this judgment.