Working group suggests commercial rent database

A DATABASE of commercial letting agreements should be made publicly available in order to assist businesses in their rent negotiations with landlords, according to a working group on commercial rent reviews set up by the Department of Justice.

The report of the working group criticises an ad hoc “over-reliance on personal knowledge” in relation to the calculation of market rents. It also expresses unease with the widespread use of confidentiality clauses, which it said masked the true level of rents.

Side agreements between landlords and tenants, which typically include rent-free periods or contributions to fit-out costs, have a “potentially distorting” and “misleading” effect on the market.

The recommendation to establish a statutory database of rent agreements is designed to assist the work of arbitrators in commercial rent review disputes. The group also proposes the introduction of a non-statutory code of best practice for arbitrators, who are typically surveyors or auctioneers.

Industry group Retail Ireland welcomed the publication of the working group’s report.

“Retailers have been trying to reduce their costs, stay in business and protect jobs, but rental costs remain out of line,” said Retail Ireland director Torlach Denihan.

“While not a panacea to many of the problems facing retailers, a new database of letting agreements will increase transparency in the market,” he said.

Larry Brennan, chairman of auctioneers Savills, also welcomed the report’s publication, while Fianna Fáil TD Chris Andrews said he would like to see a comparative assessment of Ireland’s commercial rent system with those in other European states, where index-linked rents are common.

“Viable businesses are being forced to the wall by an arbitration process that is totally out of touch with the current economic reality,” Mr Andrews said.

Under the terms of the Arbitration Act 2010, which came into operation in June, it is the duty of arbitrators to determine the open market rent for the property where there is a dispute between the landlord and the tenant.

Retail tenants have claimed that because information on open market rents is often restricted due to confidentiality clauses in leases, they are at a disadvantage.

The working group, chaired by Michael Durack SC, was set up by Minister for Justice Dermot Ahern in March after retail groups complained that their members were facing rent increases despite plummeting turnover. It said “no objective evidence” had been offered by retailers to confirm the existence of bias in favour of landlords in the arbitration process.

It also decided it would be “somewhat impractical” to establish a specialist panel of arbitrators.