Lease legislation must be reformed, Retail Ireland said today, as businesses struggle to meet rent obligations that were agreed in a very different economic climate.
'Arbitrators' hands are tied by the terms of leases that are unsuited to the current extraordinary situation,' said Retail Ireland director Torlach Denihan.
An urgent response is needed from all stakeholders in the retail property sector, said the IBEC group that represents the Irish retail sector.
Retail Ireland is calling for four main reforms to lease legislation.
First, arbitrators should be mandated by law to take account of prevailing economic and commercial conditions when reviewing rents. This would save jobs and keep otherwise viable and well run retail businesses open, Retail Ireland said.
Second, a landlord should be obliged to give all material information to the arbitrator when seeking a comparison-based upward rent review. Currently, landlords are not required to divulge if a separate deal exists with another tenant.
Third, the arbitrator should be empowered to insert a break clause into a lease where a tenant's business has deteriorated due to circumstances outside the tenant's control. Break clauses were general practice before the boom years, Retail Ireland said.
Fourth, new mechanisms are needed so that rent reviews and arbitrations take account of an individual tenant's ciricumstances when it comes to comparison-based upward-only rent review clauses. Government should build on the Minister for Justice's decision to abolish upward-only review clauses in new leases, Retail Ireland said. They could be replaced in existing leases by other mechanisms, such as turnover-related reviews.
