Late last year, the Government announced that it would not be bringing forward legislation to abolish upward only rent reviews in pre-February 2010 commercial leases. (To read a previous article on this, please click here.) However, two alternative measures have since been highlighted as having the potential to reduce rental levels in the Irish property market.

Commercial Leases Database

Legislation enacted in December 2011 (but not yet commenced) provides for the introduction of a commercial leases database. The database will hold details on commercial leases entered into after the commencement of the relevant section of the legislation and may be inspected by any member of the public, subject to payment of a fee.

Tenants will be obliged to provide the body responsible for maintaining the database, the Property Services Regulation Authority (“the Authority”), with all the relevant details in respect of the lease, including:

• Rent payable
• Any capital consideration payable by the tenant/ landlord
• The frequency of rent reviews
• Details of payment of rates, insurance, service charges and repairs
• Details of any rent-free periods and/or any break-clause

Tenants will also be obliged to provide updated details following a rent review and to notify the Authority when their interest in the property ceases.

The Authority may also include in the database limited details in respect of leases entered into not more than five years before the commencement of the relevant section.

Failure to provide the necessary details is a criminal offence punishable by a fine. It is also an offence to attempt to circumvent the legislation by including in the lease or other agreement a clause preventing disclosure of certain information to the Authority.

It remains to be seen how beneficial such a database will be to tenants and there is a concern that it may deter landlords from giving concessions which may not be in the interests of the market as a whole. It is likely to have an impact on rent review given that historically in many cases concessionary information was kept confidential.

NAMA Guidance Note on Upward Only Commercial Leases

NAMA has published a Guidance Note to encourage debtors (and receivers) to consider reducing rents that are in excess of the current market rents where (i) the tenant can prove that the level of rent threatens the continued viability of the business; and (ii) a rent review is not otherwise due or the rent has not previously been reduced at the request of the tenant.

The Guidance Note, however, only applies to leases where NAMA has acquired the loan on the underlying property and is, as the name suggests, merely guidance. (To read a previous article on the Guidance Note, please click here.)  

Contributed by Tara Rush.

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