Landlords upping rents to boost Nama value - TD

LANDLORDS ARE increasing commercial rents in order to boost the valuation of property assets ahead of their transfer to the National Asset Management Agency (Nama), it was claimed in the Dáil yesterday.

Labour Party TD Ciarán Lynch said rents were being “inflated” during the rent review process “as a means of creating an over-valuation of properties for debunked developers as they enter the Nama process”.

In an exchange with Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan, Mr Lynch said rent increases were “creating a situation whereby retailers across the country are now threatening to go on a national strike”.

The Nama valuation process was putting jobs and businesses at risk, he added.

Representatives of the retail industry met with the Tánaiste earlier this week to discuss the crisis facing retailers who have seen rents skyrocket at a time when consumer spending has plunged.

Although new leases containing upward-only rent reviews are banned from the end of the month, the measure does not apply to rent reviews on existing leases, meaning most retailers will not benefit from the legislation.

Earlier this week, a Carphone Warehouse outlet in the Wilton shopping centre in Cork was mistakenly issued with a demand for a 426 per cent increase in rent. However, the revised rent was still more than €14,000 higher than the previous €39,000 annual rent – a 37 per cent hike.

A number of other retailers in Wilton are understood to be in dispute with landlords in relation to rents, while the situation is reflected in retail centres across the country.

Mr Lynch asked Ms Coughlan if she intended to make legislative changes to the arbitration process during rent reviews that would “give the retailers concerned a fair chance”.

The Tánaiste said she had given an undertaking to examine some of the issues that had been raised by retailers.

Industry bodies such as Retail Excellence Ireland are concerned that rents set under upward-only leases are being artificially inflated by landlords who agree a high “headline” rent per square metre with one tenant, but use side letters to make numerous concessions such as rent-free periods, contributions toward fit-out costs and break clauses that lower the overall impact of the rent.

However, as these “offline” concessions remain private, it is the headline rent that is then used as a precedent in rent reviews with other retailers.

Retail Excellence Ireland is seeking the establishment of a register of lease information that would give tenants and arbitrators access to full information. It is also calling for the retrospective abolition of upward-only clauses.

Ms Coughlan ruled out the retrospective abolition of such clauses in the Dáil yesterday.

“The legal advice is that we cannot introduce legislation to break existing contracts as it would be unconstitutional,” she said.

The issue was also raised at a meeting of the Fianna Fáil parliamentary party on Tuesday by Chris Andrews TD, prompting Minister for Justice Dermot Ahern to announce the establishment of a working group to examine problems with commercial rents.

"It's not black and white, but at the end of the day when you have institutional landlords refusing to negotiate while at the same time they are availing of State support, the Government has to do something," Mr Andrews told The Irish Times.