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Upward only rent reviews - Please Explain!


FrankSpeaks

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Apr 18, 2008
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Can someone explain to me why the government advice is that anything other than upward only rent reviews are unconstitutional?

I raise this in context of the B&Q examinership, they are expecting to negotiate lower rents or break contracts or move to new premises during this period.
 

Dame_Enda

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Vested interests are why the politicians will do nothing about U.O.R.R.s.
 

Didimus

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Can someone explain to me why the government advice is that anything other than upward only rent reviews are unconstitutional?

I raise this in context of the B&Q examinership, they are expecting to negotiate lower rents or break contracts or move to new premises during this period.
I think that the advice is that interfering in existing contracts would be unconstitutional.
 

Clanrickard

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Can someone explain to me why the government advice is that anything other than upward only rent reviews are unconstitutional?
I think it is more case of contracts can't be broken. You'd signed with an upward only rent review you can't back out.
 

FrankSpeaks

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Vested interests are why the politicians will do nothing about U.O.R.R.s.
What is the constitutional bar?

I don't see anything in the constitution that would bar a rent price decrease!
 

Rocky

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I think it is more case of contracts can't be broken. You'd signed with an upward only rent review you can't back out.
That's basically it.

It's now illegal to create contracts with upward only rent reviews, but the Oireachtas can't change old contracts. They were all business to business contracts as well, so it's presumed that they knew what they were getting into and signing.
 

FrankSpeaks

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I think that the advice is that interfering in existing contracts would be unconstitutional.
I think it is more case of contracts can't be broken. You'd signed with an upward only rent review you can't back out.
That's basically it.

It's now illegal to create contracts with upward only rent reviews, but the Oireachtas can't change old contracts. They were all business to business contracts as well, so it's presumed that they knew what they were getting into and signing.
Thanks for the explanations.
 

ManOfReason

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If someone has a property to rent they can specify any criteria they like as regards the rent. If someone else chooses to agree to those terms and signs a contract to that effect it is really none of the governments business.

Just like people who bought property during the boom are screwed, people and companies that signed long term lease agreements during the boom are also screwed.
 

DownTheyGo

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During boom time 2001-07, many leases were agreed and signed on the basis of upward rent reviews only. Most tenants at the time agreed to such terms. Of course, they never anticipated what was coming around the corner. So leases now with 5- or 10-year review clauses are up for renegotiation. Of course, landlords are mandating that the rent must go up. Some leases have significant 'get out' cost clauses. So to get out of an agreement ain't so easy either and can cost even more when terminating a lease agreement and moving to cheaper premises.

A conspiracist might argue that between vested interests (NAMA/banks/political etc.) that upward is the only way to go. Additionally, such a move can only drive inflation one way and this could also be a hidden ambition for the government but I highly doubt it, makes no sense really given the state of the place right now.
 

Bren Boru

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Mar 23, 2010
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There have been a myriad of national and international funding decisions made within Ireland on the basis of the upward only review contracts. Such funding would be unravelled if the upward only clause in existing contracts was to be removed. This would open the state up to claims as well as potentially jeopardising private and semi state pensions.

Anyway, in many cases landlords and tenants have reached agreements as to rental levels and reviews. This is easier when such landlords are non institutional.
 

topcat4

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What B&Q seem to be doing is what the government wouldn't, which is to take on the landlords.

B&Q only owe money to their parent company which is Kingfisher, somewhere in the region of €17-million. They don't owe revenue or outside banks or any of the usual stuff in a case like this.

They are going into examiner-ship, stating publicly that they can trade on if the rent situation is addressed.

Seemingly 7 out of their 9 shops are viable, its a very interesting case, if they are successful in getting rent re-negotiations downward, expect others to follow suit.
 

FrankSpeaks

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What B&Q seem to be doing is what the government wouldn't, which is to take on the landlords.

B&Q only owe money to their parent company which is Kingfisher, somewhere in the region of €17-million. They don't owe revenue or outside banks or any of the usual stuff in a case like this.

They are going into examiner-ship, stating publicly that they can trade on if the rent situation is addressed.

Seemingly 7 out of their 9 shops are viable, its a very interesting case, if they are successful in getting rent re-negotiations downward, expect others to follow suit.
That is more or less what I heard on drive time today.
 

topcat4

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That is more or less what I heard on drive time today.
Yeah it was on the radio, and some news sites also have it.

They seem to want to stay, but on their own terms, their position on the face of it, is well thought out.

Could Examiner-Ship be the magic bullet to break upwardly only rent reviews?
 

gijoe

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Jul 26, 2010
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Can someone explain to me why the government advice is that anything other than upward only rent reviews are unconstitutional?

I raise this in context of the B&Q examinership, they are expecting to negotiate lower rents or break contracts or move to new premises during this period.
All to do with property rights in the Constitution. I think the government are wrong on this one. I do not think the Constitution will protect a particular right to a defined income from property, only that it cannot be appropriated from you without good reason and compensation.
 

H.R. Haldeman

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Oct 1, 2008
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On TWIP just now during the paper review there was mention of a report (I'll look for a link/ref later) that says abolishing UORR's would lead to a 20% fall in the value of commercial property.

This immediately put me in mind of this:

THE NATIONAL Asset Management Agency (Nama) has warned that proposed changes to rent legislation would “significantly impact” on its ability to repay the debt it has issued.

The agency is “very concerned” about the impact any move to allow retrospective rent reviews could have on the value of its assets. Any such legislation would have a “dramatic reduction in the value of the income-producing assets transferred to Nama” because investment properties are valued on a multiple of their annual rent.
The Irish Times - Sat, Apr 02, 2011 - Nama 'very concerned' at any changes to rent law

That was NAMA's lobbying position, and I presume I don't need to find a link to illustrate the banks' views on the matter.

And that's the answer folks. At the highest levels of government and within state institutions, the game is to continue to pretend that the property market is at the bottom, that the bubble is now behind us, that legacy issues are sorted and that the most pressing national concern is that bank balance sheets don't take further hits.

The net effect of that in the real world is folding businesses, continuing crippling rents in both commercial and residential sectors, property sales prices that are burdening more people will ruinously high repayments, and our national competitiveness being stuffed by high costs.

What is happening in the property market, commercial and residential, is one of the silent killers of recovery, and the State is the main player in the conspiracy of silence and inaction that is keeping it so. It is a disgrace of at least the same proportion as the PN's, and I would argue moreso because it is directly effecting real people in the real world right now.
 

SilverSpurs

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Nov 27, 2009
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The unfortunate reality is that if rents come down then landlords can't pay their mortgages which stiffs the banks which will then need a bailout which stiffs the taxpayer.

The economy still has a long long way to fall yet. imo.
 

Clanrickard

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Apr 25, 2008
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On TWIP just now during the paper review there was mention of a report (I'll look for a link/ref later) that says abolishing UORR's would lead to a 20% fall in the value of commercial property.
In most sane countries this is seen as a good thing.
 
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