Overhaul of lease arbitration regime would be a game changer for retailers

Government under pressure to reform system for settling retail rent review disputes

A boarded-up store on Grafton Street. Photograph: Bryan O’Brien

A boarded-up store on Grafton Street. Photograph: Bryan O’Brien

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A shift in the power dynamic between retailers and their landlords was already well under way before the current economic crisis started. The expected publication in the coming weeks of a State-backed code governing pandemic-era relations between the sides will accelerate the process.

The Government has been under pressure from the sector to rein in what retailers allege is excessive conduct by some landlords for more than 15 years. The issue predates the last economic crisis caused by the banking collapse, when the abolition of upward-only rent reviews was the rallying cry.

Celtic Tiger

Throughout the Celtic Tiger period, successive governments displayed a tin ear towards incessant complaints from retailers that, regardless of economic circumstances, the only way was up for their rents due to standard but excessive clauses in their leases. This was a private matter between contracting parties and the State should not get involved, ministers used to say.

But as soon as the economic tide went out after the banking collapse and the government was faced with the wholesale destruction of the sector, it relented in 2009 and banned the clauses. Rents can go up or down on any leases signed since then.

There are echoes of that debate in the current push by retailers for the State to reform the system of arbitration used to settle disputes in mid-lease rent reviews. For a complex variety of reasons, retailers allege the system is heavily biased in favour of landlords. The inexorable upwards trajectory of rents, even as city centre shopping declined in recent years due to online trade, lends weight to their cause.

Just as Celtic Tiger coalitions used to say about upward-only reviews, the Government is resisting calls to become involved, citing property rights and suggesting it is a private contractual matter.

But faced with the increasingly common sight of row after row of empty units on some of Dublin’s busiest shopping streets, in the midst of another existential economic crisis, it would not be a surprise to see Ministers perform another U-turn and overhaul the arbitration regime.

It could be a game changer for the commercial property sector and for retail tenants.

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