# Government bans upward only rent reviews



## Brendan Burgess

According to the [broken link removed]

This is real knee-jerk stuff. 

It does nothing to sort out the problems of people who currently have these leases. 

I am not saying that I am opposed to it or that I support it. But it needs more discussion. 

In principle, I am against this sort of market interference - especially between commercial concerns. 

There are other issues to be dealt with such as the length of the leases and the rights acquired after 5 years. 

There was no urgency on this. Presumably if I was a tenant taking out a lease now, I would be able to negotiate out the upward only rent review clause anyway.

Brendan


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## Howitzer

You might as well legislate against purple monkey dishwasher clauses in rental agreements. Ultimately these leases have no basis in law other than being the contents of a contract, to which to can add anything - such as a purple monkey dishwasher.

And even at that they have been [broken link removed] by the Master of the High Court, Edmond Holohan



> The case that prompted the comments, involving the Apollo Galery at 51 Dawson St, Dublin, contains a clause referring the “rent previously payable” as the base line, but this may not refer only to the rent payable immediately prior to review, Mr Holohan said.
> 
> He said that as a general principle, the bargain between lessor and lessee is one of long-term mutuality, and rent review clauses must be viewed in that light. There is no presumption in favour of constructing a clause so as to make it upwards only. A court will not be easily persuaded to accept an interpretation which will give the lessor a windfall in a time of recession. And the courts will surely never rubber-stamp any interpretation which clearly has the effect of unjustly enriching either party.


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## canicemcavoy

Brendan said:


> In principle, I am against this sort of *market interference* - especially between commercial concerns.


 
What is NAMA and the bank bailout *except *"market interference"? Market interference seems to be bad only when it's helping out the small guy ("socialism for the rich").


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## mercman

Well as long as the Government know that they have inflicted a further 25% reduction in the values of Commercial Property which are subject to new leases. Lunacy and madness at its best.


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## Howitzer

mercman said:


> Well as long as the Government know that they have inflicted a further 25% reduction in the values of Commercial Property which are subject to new leases. Lunacy and madness at its best.


On what basis? 

A friend of mine is in the process of walking away from a very long standing lease which has a number of years to run solely because the landlord refuses to negotiate the rent downwards quoting the upward only rental agreement. My friend then plans on reopening in a, currently empty, retail unit elsewhere at a substantial discount to the previous rent. 

The landlord could drop the rent if he so wanted. The only thing keeping the rent at it's current level is the artificial contruct within the contract which prevents an arbitror from reaching a lower level.

Instead the friend is utilising the available capacity within the commercial market to achieve the same end.

I fail to see how this legislation "inflicts" a 25% reduction in the values of Commercial Property - the market seems to be doing this all by itself to me.

No one in their right mind signing a lease today would agree to the inclusion of an upward only rental clause so the legislation is pretty worthless anyway given it has no facility for existing agreements.


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## mercman

Well we'll see as to what happens to Property Values. But in any event it will effect many more than what is thought. What do you think makes up Pension Fuinds  -- a large portion of Commercial Property. In most instances, Landlords have done the rightful thing and induced temporary lease reductions. In the cases where they have refused to move on the rent then they will either have to pay the price or enter a costly exercise of incurring legal expense. Leases are contracts not just scant bits of paper that cannot be treated with little or no respect.


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## canicemcavoy

mercman said:


> Well as long as the Government know that they have inflicted a further 25% reduction in the values of Commercial Property which are subject to new leases. Lunacy and madness at its best.


 
I would suggest it's worse lunacy to be forcing firms to close because they cannot afford the ludicrous rates that landlords still living in the Celtic Tiger cling to.


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## mercman

canicemcavoy said:


> I would suggest it's worse lunacy to be forcing firms to close because they cannot afford the ludicrous rates that landlords still living in the Celtic Tiger cling to.



Not really sure what planet you are on. Nobody forced any tenants to rent properties at ridiculous rents. Nobody forced them to sign PGs but they did.. Now we all will be in the circumstance soon of the UK muliples taking centre stage in the retailing sector and large multi nationals in the Industrial sector.


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## canicemcavoy

mercman said:


> Not really sure what planet you are on. Nobody forced any tenants to rent properties at ridiculous rents. Nobody forced them to sign PGs but they did.. Now we all will be in the circumstance soon of the UK muliples taking centre stage in the retailing sector and large multi nationals in the Industrial sector.


 
Conditions have changed. Both those in the public and private sector are earning far less than before, and 1/2 a million are out of work.  Would you prefer that property owners hold onto Celtic Tiger level of rents, putting their tenants out of business, rather than allowing rents to drop and getting the country back on its feet again? 

I thought we had all got over the notion that the nation's progress and wellbeing could be measured solely by property prices, but I guess not.


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## Brendan Burgess

Howitzer said:


> A friend of mine is in the process of walking away from a very long standing lease which has a number of years to run solely because the landlord refuses to negotiate the rent downwards
> 
> ...The only thing keeping the rent at it's current level is the artificial contruct within the contract which prevents an arbitror from reaching a lower level.



Howitzer

As you explain this, it makes little sense to me. If he has an existing lease, he will still be liable for the rent. He can't just "walk away". If the lease allows him to walk away, then the upward only clause is irrelevant.


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## mercman

That is the point I was trying to make. One simply cannot just up and walk. To walk away is an illusion that some tenants are living under. This has had a worse effect in the market than the actual recession itself. There still remains a caliber of people/tenants they think they can freely up and walk away from their commitments. Sure I agree there are genuine horror stories but sometimes make believe stories are used to free persons from their obligations.


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## Howitzer

Brendan said:


> Howitzer
> 
> As you explain this, it makes little sense to me. If he has an existing lease, he will still be liable for the rent. He can't just "walk away". If the lease allows him to walk away, then the upward only clause is irrelevant.


I'm afraid I'm going to have to get into a game "he said / she said". I don't know all the details so don't nail me to the wall on this but ..

The business is currently running at a loss. The biggest single cost is rent. He's going to fold the company. As the company will no longer be trading and the lease is in the companies name it is worthless (?). He then sets up a new company and the new company leases the new premises.

Edit: A few more details came to me.

There's no break clause but there is a rent review due this year. The landlord came back with a figure of +40%. The assumption was that this was just a bargaining position but there's been no budging. The friend, + relative of friend who has another unit, have both told the landlord they are leaving in the new year.

The landlord has locked out other tenants in dispute, though in those cases rent had not been paid. The friend is not behind on rent.

So what do you do? Go to the bank looking for a loan so you can pay increased rent payments in the current market? You'd be laughed out of it. So .....


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## Chris

mercman said:


> Well as long as the Government know that they have inflicted a further 25% reduction in the values of Commercial Property which are subject to new leases. Lunacy and madness at its best.



So what you are effectively saying is that government protected/enforced upward only contracts are keeping commercial real estate prices at a 33% artificially inflated price. If this is true then it will be the best thing that could happen.


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## mercman

In the same manner as people run these businesses from these units, these units are a business for others. To simply mess around with legal contract terms is a very dangerous thing to do. Supply and demand pushed the prices upwards before. It happened in Ireland and every other modern economy. I can see no real valid reason for blaming landlords. In the same way nobody should blame the cost of forestry as a reason for chippies to earn crazy money and firewood to cost €9 per bag.


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## Howitzer

So what do you do in the scenario I've outlined?


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## mercman

Well if the business is going to fail then it's going to fail. I'm not to sure under Company Law can a business be closed down and restarted under a new name with same trading style and practices, directors and staff. In fairness to your friend, pig eared Landlords do not do any favours for anybody including themselves.


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## canicemcavoy

mercman said:


> Well if the business is going to fail then it's going to fail.


 
So you think it's perfectly reasonable for a landlord to currently put up their rent by 40%, even though they'll put their tenant out of business? Do you know where these mystery tenants who _will_ pay 40% extra in the current climate are coming from? Perhaps a wardrobe from Narnia?


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## mercman

canicemcavoy said:


> So you think it's perfectly reasonable for a landlord to currently put up their rent by 40%, even though they'll put their tenant out of business?



It's called Market Forces. Supply and Demand. I don't know your line of business but I bet you do not operate on a Not for Profit basis. Retail Rents increased as there was such a demand for suitable properties with high footfall, location and suitability. Nobody is saying that these retailers should be put out of business, but the landlords did not obtain the properties by theft or deception and therefore in many cases have their own committments to meet.


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## canicemcavoy

mercman said:


> It's called Market Forces. Supply and Demand.


 
Ah yes, the great immutable "market forces" that apply when property interests are making money. If the same "market forces" mean the value of their interests go down, we get the minister of finance to introduce measures to prop up the market of course.



> Retail Rents increased as there *was* such a demand for suitable properties with high footfall, location and suitability.


 
You keep talking about the past. We're talking about the present.


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## mercman

And that's the purpose of a legal document called a lease. It gives rights to both parties. I personally never said that 40% rises in rent was correct, especially when I do not know the actual base line. I'm not interested in getting involved in a Political debate, but I'm sorry I am unable to agree with your argument. There are two sides to most disputes. There is also an Arbritration process which weighs up both sides of  a dispute.


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## clypso

Brendan said:


> According to the [broken link removed]
> 
> This is real knee-jerk stuff.
> 
> It does nothing to sort out the problems of people who currently have these leases.
> 
> I am not saying that I am opposed to it or that I support it. But it needs more discussion.
> 
> In principle, I am against this sort of market interference - especially between commercial concerns.
> 
> There are other issues to be dealt with such as the length of the leases and the rights acquired after 5 years.
> 
> There was no urgency on this. Presumably if I was a tenant taking out a lease now, I would be able to negotiate out the upward only rent review clause anyway.
> 
> Brendan



This sounds a lot like the Aristocracy trying to control the growth of wage levels after the black death due a labour shortage. The forces of supply and demand were simply to great. I'd imagine clever business people will figure some way around this.


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## Bronte

mercman said:


> Now we all will be in the circumstance soon of the UK muliples taking centre stage in the retailing sector .


 
Don't know where you've been but all I see in Ireland are UK chains all over the place.  Go down Shop street in Galway for one example and it's like any street in Manchester.  

In relation to rents upwards only.  The government doesn't need to do anything, if the lease doesn't make sense people are going to walk away and either not sign or default on the lease if the money is not there to meet it (as outlined by Howitzer).  This is what is happening all over the place in relation to retail space right now and just wait until January.  Nobody today would sign a lease with a rent only upwards clause.  The power has gone from landlord to tenant, currently.  Market forces win out as always.


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## Howitzer

To be honest I don't know how the scenario that I outlined will play out or what the legal and/or financial consequences of it are. Was kinda hoping someone else who'd been through a similar situation would give a definitive answer.

It does seem to me to be shutting the barn door after the horse has bolted, returned, set fire to the barn and bolted again. As clypso alludes, there is a strong Life and Pensions industry in Ireland with it's fingers everywhere (how many shopping centres in Dublin have Irish Life in their title?)


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## askalot

Brendan said:


> According to the [broken link removed]
> 
> In principle, I am against this sort of market interference - especially between commercial concerns.



But surely upward only rent reviews are a form of market interference?


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## canicemcavoy

More rent insanity:

[broken link removed]



> CARLUCCIO’S, THE popular cafe and restaurant on Dublin’s Dawson Street, closed for business yesterday, with its operators saying it will not reopen unless it can agree a rent reduction with its landlord.
> The outlet, which employs 60 people, has been seeking to negotiate a reduction in its rent since December 2008, according to a statement issued yesterday, and has since then implemented “a pause in rental payments”.
> Efforts to agree a lower rent with the landlord made no progress at all, according to one source. It is understood rent has not been paid since early 2009.


 
A viable business closed (and its expansion halted) and 60 people out of work because Seanie's son and co. still think they're living in 2005. It would be comical if it weren't tragic.


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## Brendan Burgess

canicemcavoy said:


> More rent insanity:
> 
> [broken link removed]
> 
> 
> 
> A viable business closed (and its expansion halted) and 60 people out of work because Seanie's son and co. still think they're living in 2005. It would be comical if it weren't tragic.



Are you suggesting that the landlords should let the tenants escape their obligations?


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## fobs

Brendan said:


> Are you suggesting that the landlords should let the tenants escape their obligations?


 
maybe they should try to renegotiate though as some rent is better than NO rent surely? What would you suggest is the answer?


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## canicemcavoy

Brendan said:


> Are you suggesting that the landlords should let the tenants escape their obligations?


 
No, I'm saying that Doc Brown and Marty there should travel back to the present and realise things have changed and that businesses simply cannot afford the rents that were negotiated back at the height of The Insanity(tm). 

Do you really think that the current situation is better - where businesses have to close, putting more people on the dole queues, while buildings remain empty off our supposedly premier shopping street making it look even tackier than before - and most importantly, the building's owners get no rent *at all*?


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## Firefly

canicemcavoy said:


> More rent insanity:
> 
> [broken link removed]
> 
> 
> 
> A viable business closed (and its expansion halted) and 60 people out of work because Seanie's son and co. still think they're living in 2005. It would be comical if it weren't tragic.


 
According to your link no rent was paid for almost a year, hardly a sign of a viable business


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## canicemcavoy

Firefly said:


> According to your link no rent was paid for almost a year, hardly a sign of a viable business


 


> One source said the restaurant, which serves approximately* 5,000 customers* per week,


 
That sounds pretty viable to me.


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## Latrade

Firefly said:


> According to your link no rent was paid for almost a year, hardly a sign of a viable business


 
and



> One source said the restaurant, which serves approximately* 5,000 customers* per week,


 
I'd say they had to reduce their prices in the last while in order to keep customers in the door so margins would have decreased dramatically, leading to the conclusion it wasn't that viable in its present state. 

But the other lesson is that all businesses are having to do the same and reduce their prices. Unless I'm missing something why is it more beneficial for a landlord to let a property go vacant than reduce their rent? Genuine question.

Is there some tax incentive? Is it that the banks won't facilitate the loss in rent towards the debt? I mean, I'd have thought the landlords are business people just like those who lease the property, why are they refusing to move on price?


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## mf1

If you, as a landlord,  have a tenant who is perfectly capable of paying the rent but would prefer not to, what do you, as a landlord do? 

Re-negotiate the rent to a rent more to the liking of the tenant? 
Keep it as it is and let the tenant find the rent, not just from turnover, but from their own resources? 

If you, as a landlord,  have a tenant who cannot pay the rent, from turnover or resources,  and there is no guarantor  what do you, as a landlord do? 

Re-negotiate the rent to a rent more to the liking of the tenant? 
Let the tenant go? But pursue for all their obligations under the Lease?
Have tremendous confidence in certainty of recovering full debt from tenants?
Have tremendous confidence that you can re-let at or close to the current rent? 

And the fact that the rent had not been paid for so long may well mean, its better to let them go as tenants. 

mf


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## canicemcavoy

mf1 said:


> If you, as a landlord, have a tenant who is perfectly capable of paying the rent but would prefer not to, what do you, as a landlord do?


 
It sounds like there weren't "perfectly capable" of it. Unless you think that businesses shut their doors just for the craic.



> And the fact that the rent had not been paid for so long may well mean, its better to let them go as tenants.


 
Riiiiight. And who do these geniuses think will be their next tenant - a building whose only previous tenant before this was an egg-and-chips diner? What is their plan B, exactly - do they have a queue of people lined up prepared to pay over €700K per annum? Have you seen how many empty businesses there are now along Dawson St?


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## mf1

Now now. Keep the personal jibes out of it. 

I'm just struggling to see what your actual point is. Is it that all rents  of all commercial properties should be reduced? 

The facts of the particular case may well never be known.  It is, however, clear that there was a Lease signed which is contractually binding, that the tenant did not pay the rent and that the premises have now closed - be it temporarily or permanently. 

We don't know anything about the viability of the business - it may well not be viable on a rent of half or a third of that originally agreed. 

mf


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## canicemcavoy

mf1 said:


> Now now. Keep the personal jibes out of it.


 
Please point out where I made a personal jibe against you.



> I'm just struggling to see what your actual point is. Is it that all rents of all commercial properties should be reduced?


 
No. My point is, why are commercial landlords not even taking part in negotiations to lower rents? Why do they prefer not to receive any rent or have the building vacated, rather than give an inch? This strikes me as sheer hubris. There's absolutely no financial sense to it. It's hilarious to hear talk of "market interference" when the whole point is that the landlords are ignoring market realities.


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## Firefly

canicemcavoy said:


> My point is, why are commercial landlords not even taking part in negotiations to lower rents?


 
Maybe they are. Also, if a landlord owns 5 properties and word gets out that cheaper rent was negotiated by another tenant, then the others would try for a reduction.


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## Brendan Burgess

Canice

You are being very vague and obscure, which is not like you.

Why not tell us the magic solution to this problem? 

If I am to guess what you are saying - it's something like this. 
Rents have come down generally.
Landlords who have perfectly valid contracts should reduce their rents to the current market rent.

So should those who bought apartments for €400k which are now worth €200k go back to the sellers and ask for their money back? Or perhaps they should turn to their lenders and say that they won't pay back the loan? 

Most landlords are very practical. 
If a tenant has the ability to pay the rent or if they have a personal guarantee, they will want to get paid. 
If they don't have a personal guarantee, they will work with the tenant and try to come to some arranement. They may agree to a temporary reduction in the rent.

I feel very sorry for tenants who have taken out expensive leases and for whom business has dropped.  But it's another very complicated situation and each situation needs to be dealt with on its merits. If I was the landlord in this case, I would be less inclined to negotiate with the tenant of such a successful business if they choose to do their side of the negotating in public.

Brendan


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## Brendan Burgess

As for personal jibes:



> because Seanie's son and co.





> No, I'm saying that Doc Brown and Marty there should travel back t





> And who do these geniuses think will be their next tenant





> a building whose only previous tenant before this was an egg-and-chips diner?



None of these personal jibes add anything to your argument. In fact, they distract from whatever argument you are trying to make.


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## canicemcavoy

Brendan said:


> You are being very vague and obscure, which is not like you.


 
There I was thinking I was being clear! I don't think it's necessary to have the solution at hand before pointing out there is a problem. I think having 500,000 people unemployed is a problem. I have no magic solution. Should I avoid pointing out that 500,000 people is a problem?

And there _is_ a problem here, unless people really think that having empty commericial buildings along our main shopping streets and putting people out of work, while at the same landlords stilll aren't receiving any money, isn't a problem. 



> Landlords who have perfectly valid contracts should reduce their rents to the current market rent.


 
I find sudden stoic Catoesque adherence to the letter of contract law rather ironic when AAM has a whole forum devoted to ways of figuring out how people who make "perfectly valid contracts" for mortgages with banks should be bailed out. 



> I would be less inclined to negotiate with the tenant of such a successful business if they choose to do their side of the negotating in public.


 
But that's not true. The story *only* came out after the negotiations were over and the restaurant had already closed its doors. Or should I say, after attempts to negotiate had failed.


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## canicemcavoy

Brendan said:


> As for personal jibes:
> None of these personal jibes add anything to your argument. In fact, they distract from whatever argument you are trying to make.


 
Er, I had presumed we were talking about personal comments against people in the forum. Not wisecracks aimed at public figures - and, in one case, a building. (I didn't realise that "egg and chips diner" was a personal insult, some of my favourite eateries have done egg and chips - I was indeed a big fan of the old Graham Sullivan restaurant myself!)


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## Brendan Burgess

Canice

I presume that you have no inside knowledge of this case? I don't have either. 

But as I see it, the guy negotiated a lease at the top of the market. He can't even claim that he was a victim of an unfair rent review clause. 

The state of Dawson Street is not a big problem for the landlord. If he has a substantial tenant who has guaranteed the rent, he will probably insist that they pay the rent.

If he has a tenant who is going bankrupt, he will probably work with him. 

Tenants have extraordinary rights to long leases under the law. One of the downsides of this is that the landlords want high rents. 

I think that the market in general should be liberalised. If I enter into a lease for 5 years or 10 years, then I should have no further rights on expiry of the lease.Because someone with a 5 year lease has a right to renew that lease under Irish law, landlords tend to insist that they sign 21 year or 35 year leases to give them an obligation as well as a right. 

I have successfully negotiated my way out of a long-term negative lease by negotiating with the landlord and agreeing to pay the costs of finding another tenant. 

The public outcry that landlords should all reduce their rents for the benefit of retailers creates the wrong atmosphere in which to have meaningful negotiations.


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## Howitzer

I have no inside knowledege of this particular case but it strikes me that it doesn't represent the norm.



> The restaurant is operated by Carluccio’s Ireland Ltd, a company owned by Ron Bolger, chairman of Irish Food Processors; Peter Murray, a former chairman of Anglo Irish Bank; and investors organised by NCB Stockbrokers.
> The restaurant is in a building on the corner of Dawson Street and Duke Street that formerly housed the Graham O’Sullivan restaurant, and which was purchased in November 2006 for approximately €17 million.
> Carluccio’s subsequently agreed a 20-year lease with the landlords, at an annual rent of €680,000. The building was bought by a group of investors assembled by D2 Private, a property investment business founded by David Arnold and Deirdre Foley in 2004. D2 manages the building on behalf of the investors, who are members of a partnership called the Duke Co-ownership partnership.
> It is understood Jonathan FitzPatrick, son of the former chairman of Anglo Irish Bank, Seán FitzPatrick, is a member of the partnership. There was no response to a request for a comment yesterday from D2 Private, which banks with Anglo Irish Bank. Jonathan FitzPatrick could not be contacted.


Whilst it's not all that unusual for 1 bank to be represented on both sides of a commercial transaction, well, look, The Times details all the people involved. These aren't Mom and Pop operations. I don't know what these people were up to.


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## canicemcavoy

Brendan said:


> But as I see it, the guy negotiated a lease at the top of the market. He can't even claim that he was a victim of an unfair rent review clause.


 
At that time, it was a landlord's market. As far as I know, upwards-only agreements were the norm. Therefore, if one wanted to open a business in central Dublin, you either agreed to such a lease, or didn't get one at all. Hobson's choice.

As I say, this forum has a section dealing with negative equity. Everything you say about people who rented commerical property at the top of the market equally applies to people who bought houses at the top of the market; that they made the deal fairly, in full awareness of its consequences, etc, etc. 

But I have to think the situation with the former is far more serious; while negative equity has many ramifications, at the end of the day, the worst that happens is that the owner cannot sell to get a larger home or to move to a new job. The former means that jobs are being lost.



> The public outcry that landlords should all reduce their rents for the benefit of retailers creates the wrong atmosphere in which to have meaningful negotiations.


 
There's no way to argue against this logic. Before there was any public awareness of the issue, landlords weren't negotiating. Now that there _is_ public awareness, that gives landlords a reason not to negotiate? So I guess that the newspapers shouldn't be printing stories about this issue?


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## Brendan Burgess

> There's no way to argue against this logic. Before there was any public awareness of the issue, landlords weren't negotiating. Now that there _is_ public awareness, that gives landlords a reason not to negotiate? So I guess that the newspapers shouldn't be printing stories about this issue?



Fair point. 

It's a very valid issue to discuss in public. I suppose what I meant was that if I was the landlord in this case, I would not appreciate being demonised by the media when they know nothing about the case.

We obviously have to agree to differ. But I would have far more sympathy for an ordinary Joe who bought a home at the top of the market who is now overindebted than for 

" Ron Bolger, chairman of Irish Food Processors; Peter Murray, a former chairman of Anglo Irish Bank; and investors organised by NCB Stockbrokers."


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## canicemcavoy

Brendan said:


> Fai
> We obviously have to agree to differ. But I would have far more sympathy for an ordinary Joe who bought a home at the top of the market who is now overindebted than for
> 
> " Ron Bolger, chairman of Irish Food Processors; Peter Murray, a former chairman of Anglo Irish Bank; and investors organised by NCB Stockbrokers."


 
I don't have much sympathy with them either - certainly, if it was only Anglo Irish Bank apparatchiks on either side who were suffering, my reaction would be similar to Kissinger's quip about the Iran-Iraq war. My sympathy is with the 60 ordinary joes who lost their jobs over this.


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## Firefly

canicemcavoy said:


> My sympathy is with the 60 ordinary joes who lost their jobs over this.


 
I would assume that if rent was not paid for a whole year then other bills were not being (at least partially) paid either. This leads me to think that the business was not viable and those 60 ordinary joes were probably going to lose their jobs anyway. In fact, the landlord probably could have terminated the lease well before now. You'd also have to question the restaurant's owner's expectation of running a restaurant with this level of overhead...that's a lot of pizzas!


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## canicemcavoy

As I said already; if you feel that the status quo of having empty retail outlets, people on the dole, and landlords receiving no money anyway is better than *any* alternative, that's your prerogative.


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## Howitzer

[broken link removed]

This seems to be a pretty common sequence of events now in these cases, though I'm not convinced the structure of parties involved is reflective of business norms - except in the bubble mania world of a few years back.

The Times certainly seems to go to extraodinary lengths detailing the people involved. The slicing and dicing seems more to do with, uhm ... financial whizz-kiddery, than running any sort of business. It's hard to apply any sort of business logic to the decisions these people may make with regards to these investments.



> Documents in the Registry of Deeds show that a mortgage taken out with Bank of Ireland and registered against 11 and 12 Duke Street and 52 Dawson Street involved the following owners and shareholdings: Bryan McSharry, Dublin 4 (2.36 per cent); Brooklawn Property Holding Company Ltd (9.46 per cent); Jonathan FitzPatrick, Greystones, Co Wicklow (6.76 per cent); David O’Rourke, Donnybrook, Dublin 4 (4.73 per cent); Peter Small, Blackrock, Co Dublin (3.38 per cent); Philip Munnelly, England (9.46 per cent); Dermot Gleeson (6.76 per cent); Tom O’Connor, Shankill, Co Dublin (4.73 per cent); Alison Rohan, Rathmines, Dublin (1.35 per cent); Deirdre Foley, Ranelagh, Dublin 4; David Arnold, Foxrock, Dublin; and Brendan O’Mara, Stillorgan, Dublin.
> 
> The last three partners in the list had a 49.66 per cent shareholding between them.
> 
> D2 Private was founded by Ms Foley and Mr Arnold. Mr O’Mara is a non-executive director of the firm and founder of the Bruce Shaw quantity surveying firm.
> 
> Mr McSharry is a director of Celtic Foods Trading House, a company owned by Ray McSharry and his family. Brooklawn is associated with the Crampton family. Mr FitzPatrick is a son of former Anglo Irish Bank chairman Seán FitzPatrick. Mr O’Rourke’s profession is not known. Mr Small is a property investor. Mr Munnelly is associated with Munnelly Support Services in Harrow, England.
> 
> Mr O’Connor is a solicitor and a director of Docklands Community Trust. Ms Rohan signed the mortgage documents as attorney at law for members of the partnership.
> 
> Carluccio’s Ireland is owned by Ron Bolger, chairman of Irish Food Processors; Peter Murray, a former chairman of Anglo Irish Bank; and investors organised by NCB Stockbrokers.
> 
> Mr Gleeson stood down as AIB chairman in July last year.


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## mercman

It does appear that a very one sided view is been perceived in the case of Retailers vs Landlords. Nobody was ever forced to sign a lease for any Commercial Property. The retail game is full of greed. It was pretty obvious that retail rents were out of control and that casualties woulkd occur. The moaning and groaning of the retailers throughout the country is loud and pitiful. If it was all as difficult as they make out why didn't they bail out when things were booming. 'If you can't stand the heat get out of the kitchen'


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## Sunny

The problem with the debate on rents is that people are forgetting that many landlords can't afford to drop rents because they bought properties at such low yields during the boom years. These guys all have debt to service so while it might be politically easy to call for rent reductions, in reality in a lot of cases, it is not possible to do so. I am willing to bet that most landlords who can afford to negotiate would negotiate. 
There is no easy solution to this mess.


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## mercman

+1. Thank you Sunny


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## Protocol

Yes, as somebody pointing out the massive level of rents here, I do agree that it is difficult for some landlord who face debt repayments.


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## mercman

Just maybe consider that the rents are not too high for the property; just too high for the tenant in the current market. Whilst tenants are publically screaming for lower rents, how many will take note and tell their landlords things are fine when it happens, 'I owe you money'. Reciprocal answer -- None. They have frightened those with money off instead of encouraging them to spend. Retailers have  become a noisy voice box for what we all know - We're in a Recession Stupid. The sympathy vote has been dumped.


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## canicemcavoy

If you feel that strongly about it, perhaps you should set up a public campaign urging landlords to maintain their rents.


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## Firefly

canicemcavoy said:


> As I said already; if you feel that the status quo of having empty retail outlets, people on the dole, and landlords receiving no money anyway is better than *any* alternative, that's your prerogative.


 
I was pointing out where I felt this business might not be viable. I never said anything about preferring the situation you have described. Far from it.


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## mercman

Firefly said:


> I was pointing out where I felt this business might not be viable.



Correct, Because we have come from a Property Boom, it is a pity that Joe Public doesn't acknowledge that the mass of Financial Casualties relate to persons that have been involved in the Property Business.

Sure the Real Estate Alliance are able to spout off for the Retailers, as to how difficult things are, how the rents have crippled the retailers' businesses. But the facts are that the same retailers chose to pay the rents. In many cases it was easily evident that some businesses would not last, or be able to pay the rent or were dealing in product and produce that has suffered because of a Worldwide recession. So quit beating the landlords, try beat the hearts and minds of those that allowed this crazy stupidity and madness -- The Banks.

So far there has not been too many high profile legal cases involving retailers that have gone bang, but the emphasis is really blaming one  entire sector -- landlords


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## canicemcavoy

mercman said:


> So quit beating the landlords, try beat the hearts and minds of those that allowed this crazy stupidity and madness -- The Banks.


 
In this case, one of the landlords is the son of a famous banker, Seanie. I wonder does he agree that his current problems are entirely due to his father as you seem to?


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## Protocol

mercman said:


> Just maybe consider that the rents are not too high for the property; just too high for the tenant in the current market.


 

I don't fully agree.  Some commercial rents are too high, and will always be too high.  They are based on property values that were inflated way beyond fundamentals.

*They will still be too high with 2-3% growth in the economy.*

I read somewhere else that office rensts are 10 euro per sqm in Munich.  In Dublin it's much higher (can somebody confirm how much???).  I heard 40+ per sqm, but can't confirm that.


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## mercman

If you could posture yourself to read the thread. What has his father got to do with it. All of the Banks in general simply went on a roll of careless lending. What the heads of all the Banks did was bad business and they should all be turfed out. In the case you chose to mention the person concerned owns a tiny portion of the property. In that particular property, the tenant is as much at fault to choose to pay such a ridiculous rent in the first instance.


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## canicemcavoy

mercman said:


> If you could posture yourself to read the thread. What has his father got to do with it.


 
You're blaming our current woes solely on bankers, and excluding all blame from landlords who overpaid for property. The father of the landlord in question, Seanie Fitzgerald, was head of a large bank now well-known for loaning money for property. Yet I doubt that the landlord in question thinks that his father is totally at fault.

I'm also amused that you have no sympathy for retailers who overpaid for their leases (fair enough), yet have sympathy for landlords who overpaid for property.


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## mercman

canicemcavoy said:


> You're blaming our current woes solely on bankers, and excluding all blame from landlords who overpaid for property.
> 
> I'm also amused that you have no sympathy for retailers who overpaid for their leases (fair enough), yet have sympathy for landlords who overpaid for property.



And who gave the landlords the money -- Eh the bankers working on dicky valuations. 

I am not at all amused where you state I hold no sympathy for the retailers. The main difference is that if a retailer goes bang he loses his stock and his business. If a landlord goes bang the Bank take the property, the family home and all and sundry.

So I suppose you think this is amusing. Mad and Sad


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## canicemcavoy

mercman said:


> And who gave the landlords the money -- Eh the bankers working on dicky valuations.


 
Ah right. So everyone who bought property in the past 10 years relied on their bank to tell them how much to borrow?  No-one did like, say, Sean Dunne and relied on their wife to value a site?



> If a landlord goes bang the Bank take the property, the family home and all and sundry.


 
Can you tell me a single instance of where someone also lost their family home? This is not standard practise.



> So I suppose you think this is amusing. Mad and Sad


 
Actually, you're the one I find amusing. It's quite charming, like finding one of those elderly Japanese soldiers who hasn't realised that WW2 is over.


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## flattea2

The fact is that the upward only rents are an antiquated way of doing business, are against principles of an open market and are a sop to the landlords.

The sooner people realise that it is the market which will decide on all things - be it prices, wages, rents etc the better. Government interference destroys in these type of matters.


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## mercman

Canicemcevoy, I have no great desire to enter a discussion with you especially when you think you know it all and you do not. This property bubble is a worldwide problem -- not just in Ireland but the entire western world, the only thing it will take a lot longer to recover here. If you knew the facts regarding the person that borrowed the money, you would have a different attitude. The Banks did near 100% lending on that transaction.

Regarding the family home scenario, this is why there is presently 8 homes on Shrewsbury Road lying there unlived in.

Please don't tell me my business. The Supply and demand curve changed very quickly and as flattea2 said the market will decide the future -- nothing else. And in case you do take your head out of the sand, recessions don't last forever, the same way as booms didn't.


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## Howitzer

[broken link removed]

Latest press release from REI. Sorry for the entire copy/paste but they make some reasonable suggestions - in my opinion. My highlight.



> Retail Ireland, the IBEC group that represents the Irish retail sector, today called on the Government to change the law on leases to suit the economic climate.
> It said that an urgent response is required from all stakeholders in the retail property sector to address the difficult trading situation faced by retailers.
> "In view of the current economic climate, Retail Ireland calls on Government to reform legislation on retailer's leases. Arbitrators' hands are tied by the terms of leases that are unsuited to the current extraordinary situation," Retail Ireland director Torlach Denihan said.
> "To save jobs and keep as many otherwise viable and well run retail businesses open, arbitrators should be mandated by law to take account of prevailing economic and commercial conditions when reviewing rents," he said.
> *"When seeking a comparison-based upward rent review, a landlord should be obliged to give all material information to the arbitrator. Where an increase being sought is justified by a higher rent contained in a lease with another tenant, the landlord should be obliged to provide a comprehensive picture of his relationship with that latter tenant. Under the current process, landlord's are not obliged to divulge if a separate deal exists with the latter tenant that gives a major discount on the rent amount contained in the lease. Both the arbitrator and the tenant facing the rent review remain in ignorance of the real situation, and the incomplete information given to the arbitrator will probably lead to a misguided conclusion that a rent increase is justified," he aded.*
> "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. The arbitrator should be empowered to form a judgement as to the reasons for the deterioration of the business with reference to prevailing economic and commercial circumstances. Break clauses were general practice before the boom years, but some landlords refused to provide them when times were good. It should be mandatory that they be contained in all new leases."
> "New thinking was shown by the Supreme Court last December in the Linen Supply of Ireland case when it allowed the examiner to repudiate leases as part of a rescue package because previous arrangements were not working. New thinking is similarly required with regard to comparison-based upward-only rent review clauses in existing leases because they are not working in the current circumstances. New mechanisms are needed so that rent reviews and arbitrations take account of an individual tenant's circumstances. Government should build on the Minister for Justice's decision to abolish upward-only review clauses in new leases by reviewing how best to replace them in existing leases by more suitable mechanisms such as turnover-related reviews."


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## Bronte

canicemcavoy said:


> Can you tell me a single instance of where someone also lost their family home? This is not standard practise.
> 
> 
> .


 
Yes you can lose the family home. The only way around this is to operate as a company and not let the bank have a lien on the family home or other assets. 

I don't see why you have sympathy for the people in the Carluccio case, they are big boys. Yes the 60 workers lost their jobs but it seems until commercial rents in Ireland get a reality check a lot more business will go bust, but new one's will replace them and that's going to mean less rent, less overheads and lower wages for workers, and cheaper dining in the case of restaurants or cheaper clothing in the drapery business. Things got way out of hand during the boom and what we need is a sharp quick period of adjustment to get things moving again. Not sure that this is going to happen though.


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## mercman

Howitzer, thanks for the update. Personally I find that some of the changes which are been requested are very very off the planet. My opinion is that REI are a bunch of leeches, scratching the bottom simply to make an influence on the entire sector. Some of the Board members are very questionable in their past actions. The high property prices didn't stop some of them from jumping into the market at the very top. Even more interesting the product that are sold by some of them make it a real reason for consumers to travel North to purchase items at vastly discounted prices.

Like everything in recesssions the property market would have found its own level without interference. As mentioned earlier nobody forced some of the retail tenants to pay vastly inflated rents just to get a pitch. Now things have got bad they want to run and run and make the landlords suffer.


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## Howitzer

mercman said:


> Personally I find that some of the changes which are been requested are very very off the planet. My opinion is that REI are a bunch of leeches, scratching the bottom simply to make an influence on the entire sector. Some of the Board members are very questionable in their past actions. The high property prices didn't stop some of them from jumping into the market at the very top. Even more interesting the product that are sold by some of them make it a real reason for consumers to travel North to purchase items at vastly discounted prices.


I don't know anything on their background so can't comment, merely that they are now a representative body.



mercman said:


> As mentioned earlier nobody forced some of the retail tenants to pay vastly inflated rents just to get a pitch. Now things have got bad they want to run and run and make the landlords suffer.


Actually this is incorrect. As the highlighted sections of the article mentions, and which I alluded to in earlier posts, many tenants WERE forced into paying crazy prices.

How can someone be forced into signing a contract? 



This scenario is quite common and not just me talking out of my hat. Tenant signs lease 25 years ago with 35 year term, regular rent review and upward only rent clause. This was the norm. 

At review landlord hikes rent by astronomical number.
Tenant disagrees.
Case goes to arbitration.
At arbitration landlord produces lease indicating another tenant is paying a similar rate and as such it is now the market rate.
Arbitrator finds in favour of landlord.
Landlord gives discount to other tenant.
The tenant has 2 choices in that situation - pay the increased rent or close the business. The extent to which the tenant can even close the business is debatable as they are fixed to the contract and will be liable if they don't pay to full term. So effectively, wind up the company or pay a rent that will eventtually force you to wind up the company.

The case is obviously different for newer entrants to the market but that doesn't mean the process isn't inherantly flawed and as such needs radical reform. Most of the points raised by REI relate solely to transparency on what was a completely opaque process.


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## mercman

Howitzer said:


> Actually this is incorrect. As the highlighted sections of the article mentions, and which I alluded to in earlier posts, many landlords WERE forced into paying crazy prices.
> 
> This was the norm.
> 
> At review landlord hikes rent by astronomical number.
> Tenant disagrees.
> Case goes to arbitration.
> At arbitration landlord produces lease indicating another tenant is paying a similar rate and as such it is now the market rate.
> Arbitrator finds in favour of landlord.
> Landlord gives discount to other tenant.
> 
> 
> The case is obviously different for newer entrants to the market but that doesn't mean the process isn't inherantly flawed and as such needs radical reform. Most of the points raised by REI relate solely to transparency on what was a completely opaque process.



But where these crazy prices or market prices. This is of major importance  and there is a difference.

You are forgetting that the tenant is obliged to place his case to the Arbitrator. Both sides can choose to make a calderbank offer if they so wish.

Tel me in cases where tenants were making collosal profits did they make provisions to pay the landlord. 

Nobody likes or wants to see others been forced out of business but REI just simply wish to make landlords suffer or in many cases go Bang.


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## Howitzer

I'm simply relaying a mechanism widely used by landlords in the arbitration process to force rents up to a level of their choosing. That the system can be so manipulated is the issue.

The price was a fake price which was immediately repaid as a discount or rebate to the third party tenant. Did you read the section I highlighted in the REI article?


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## mercman

Howitzer said:


> The price was a fake price which was immediately repaid as a discount or rebate to the third party tenant. Did you read the section I highlighted in the REI article?



Yes I read it but that does not mean that the REI are correct. They just believe that that the more noise they make the more changes they will get. The squeaky wheel and all that !!

It will get to a point where International Property Funds walk away from Ireland. And that will nobody any good -- landlords or tenants. We will be left with retail properties that have simply not been ungraded.


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## Howitzer

I'm telling you it's correct. I personally know of 3 instances of this practice independantly of the REI report. I've detailed the consequences in the earlier posts in the thread - to which no one gave much of a viable alternative bar shugging the shoulders and going "oh well".

International Property Funds like transparency - not croney capitalism.


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## Brendan Burgess

Howitzer said:


> I'm telling you it's correct. I personally know of 3 instances of this practice independantly of the REI report. I've detailed the consequences in the earlier posts in the thread - to which no one gave much of a viable alternative bar shugging the shoulders and going "oh well".



Howitzer

This is a very serious matter.  What did the tenants who were subject to this fraud do? 

If they went public on this, then commercial tenants would have a much stronger case. 

I am aware of one case where the rent review, about 5 years ago, seemed mad. Apparently, the arbitrator was "well known for favouring the landlord". So I asked the retailer, why this particular arbitrator was selected by his advisor if he was so well known. Why did they not select an arbitrator known to be biased in favour of the tenant?


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## Howitzer

Brendan said:


> Howitzer
> 
> This is a very serious matter. What did the tenants who were subject to this fraud do?


They paid the increased rent. What else could they do?


Brendan said:


> If they went public on this, then commercial tenants would have a much stronger case.


Isn't that what REI, their representative body, are doing?



Brendan said:


> I am aware of one case where the rent review, about 5 years ago, seemed mad. Apparently, the arbitrator was "well known for favouring the landlord". So I asked the retailer, why this particular arbitrator was selected by his advisor if he was so well known. Why did they not select an arbitrator known to be biased in favour of the tenant?


Again, as the REI report states, all they're looking for is transparency. The falsified nature of the other leases wasn't apparant, or provable, under the exiting arbitration process.

The situations I'm aware of were in 2 biggish provincial towns. I don't know why one arbitrator was chosen over another, my guess would be one of limited choice in the matter.


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## mercman

Howitzer said:


> They paid the increased rent. What else could they do?
> 
> I don't know why one arbitrator was chosen over another, my guess would be one of limited choice in the matter.



It remains as to the discretion of both valuers to AGREE and choose an Arbritrator. If this is not possible, the IAVI appoint one without any conflict of interest.


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## Howitzer

mercman said:


> It remains as to the discretion of both valuers to AGREE and choose an Arbritrator. If this is not possible, the IAVI appoint one without any conflict of interest.


And again, I'm not saying the Arbitrator is biased. Merely that the system lends itself to manipulation by one party. Ultimately the tenant is bound to the lease unless a break clause can be inserted - which again again is what REI suggest.

REI are making suggestions to improve the system of commercial tenancies and contract law. Where's the problem in that? How do we compare to best practice abroad?


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## Brendan Burgess

Howitzer 

You are specifying it in much more direct and clear language than the REI statment.



> At arbitration landlord produces lease indicating another tenant is paying a similar rate and as such it is now the market rate.
> Arbitrator finds in favour of landlord.
> Landlord gives discount to other tenant.



To me, this amounts to fraud. And the tenants involved should challenge it in the courts. 

There is a tough one for, say the landlord of a shopping centre. He gives X a discount because he is in serious financial trouble. Y demands the same discount although his business is still financially healthy. 

In practice, I think that the landlords are probably refusing to reduce the rents for all tenants. He may choose not to take enforcement action against X.


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## Howitzer

To me it's fraud as well but it's not illegal, as far as I'm aware.

REI use more couched language but it is the same thing. If neither the tenant or arbitrator are aware of side deals what can they do? If the deal is not in itself illegal and the landlord is not obliged to reveal it's existance what law have they broken?



> "When seeking a comparison-based upward rent review, a landlord should be obliged to give all material information to the arbitrator. Where an increase being sought is justified by a higher rent contained in a lease with another tenant, the landlord should be obliged to provide a comprehensive picture of his relationship with that latter tenant. *Under the current process, landlord's are not obliged to divulge if a separate deal exists with the latter tenant that gives a major discount on the rent amount contained in the lease.* Both the arbitrator and the tenant facing the rent review remain in ignorance of the real situation, and the incomplete information given to the arbitrator will probably lead to a misguided conclusion that a rent increase is justified," he aded.


 
I couldn't care less about the competitive advantage obtained by one tenant achieving a better deal than another - that's business - but it's the process that has been entered into that matters. If there's no transparency, like in any walk of life, all you're doing is inviting rogue behavior.


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## Bronte

At arbitration can a tenant produce another similar lease with a lower rent than the one the landlord produces at the higher rate?


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## mercman

Bronte said:


> At arbitration can a tenant produce another similar lease with a lower rent than the one the landlord produces at the higher rate?



Yes and any other information which is required to fight their case


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## Howitzer

426pc rent hike for shop was mistake, says agent

Funny case from Cork. Not quite sure how 53,000 gets mis-typed as 205,000.



> Meanwhile, retailers body Retail Excellence Ireland (REI) said other tenants at the Wilton Shopping Centre had received demands for increases of between 30pc and 58pc.
> David Fitzsimons. of REI, said that the exorbitant rent demand is just the latest bid by one of a number of developers to try to bump up the value of their properties. He cited demands for increases of 100pc at The Pavilions Shopping centre, Swords, and an increase of over 40pc in Monaghan.
> "Landlords who are being lined up for NAMA are seeking to boost their yields and thus boost the valuation of their properties At the same time that some landlords are quoting high headline rents they are also doing deals with some retailers which include rent free periods," he added.


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## canicemcavoy

Howitzer said:


> *"Landlords who are being lined up for NAMA are seeking to boost their yields and thus boost the valuation of their properties*


 
Bingo.


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## Howitzer

REI seems to be doing us all a favour by laying bare the realpolitik of the situation. 

Keep the balls in the air. Keep dodging, keep jumping. Fake numbers here, vitual contracts there. Don't ask questions. Accept the status quo.

The only saving grace has been when cases eventually make it to the Commercial Court that there is sufficient competence there to see these for what they are.


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## mercman

Howitzer said:


> REI seems to be doing us all a favour by laying bare the realpolitik of the situation.



Some i offer respect and pity to some of the tenants of the points you have made yourself command respect. The points that Retail Excellence Ireland (REI) command nothing but for landlords of Commercial Property to put the boot in. REI make volumes of noise to try and make a point. 

Whilst this is not a communist state the REI sound like a group that want us to turn that way. They would be better turning on the wholesalers and telling them to reduce their prices. And what about the chemists that are publically overcharging ?? Yet again nobody wishes to make a stand for the Public in this regard.

And in the case of some of the previous posts I made the Board of REI had better come out and show their hand on some of their Board members who have conducted their affairs in a very peculiar manner. And some that have had their franchisees not pay any rent because the business just didn't happen. But I forgot landlords should let people like these in rent free to see if the project works.

So before you all cast aspersions about landlords and before an opinion is cast, judge the matters from both sides.


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## Howitzer

mercman said:


> And in the case of some of the previous posts I made the Board of REI had better come out and show their hand on some of their Board members who have conducted their affairs in a very peculiar manner. And some that have had their franchisees not pay any rent because the business just didn't happen. But I forgot landlords should let people like these in rent free to see if the project works.
> 
> So before you all cast aspersions about landlords and before an opinion is cast, judge the matters from both sides.


Odd post. Can you post a link to back up any of these points?

I have no affiliation to REI and know nothing of it's board members.


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## Howitzer

[broken link removed]


> Bestseller Retail (Ireland) Limited, the fashion chain that owns the Vero Moda, Jack and Jones, Only and Name It outlets employing 270 staff, has been granted interim examinership status by the High court today.
> 
> ....
> 
> Along with the rest of the retail sector, we have experienced a very challenging trading environment in the last two years. Our trading position has been further undermined by the steady increase in rents across all of our stores, which has seen property costs rise to unsustainable levels. During the Examinership, we will be negotiating with all of our landlords to secure more realistic rental levels," said Ms. O'Mahoney.


This appears to be the only route available for rent renegotiation. This is no way to do business.


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## canicemcavoy

For those interested, next Tuesday and Wednesday, the Dail will debate a Labour Party bill to allow for downward review of commercial rents for existing leases.


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## mercman

And I wonder what odds are been given that he will not go through,


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## canicemcavoy

Very good article here:

[broken link removed]

*Seven days on Grafton Street*

Thought that this part had a few observations relevant to the thread:



> WEDNESDAY MORNING
> 
> There are around 10 empty premises along Grafton Street. West jewellers is one of the more recent casualties. Dunnes Stores’s double-fronted premises has been vacant for a year and a half. So has the old Mortgage Store premises at the junction of Nassau Street.
> 
> For John Corcoran, owner of Korky’s footwear shop, it’s a depressing sight.
> 
> “This should be our Bond Street, but the place feels utterly degraded,” he says. “You have too many convenience stores, fast-food outlets, mobile phone shops. This is in the middle of Georgian Dublin. It should be our most elegant street, but its lost its lustre,” he says. “With the rent, its very hard to make money. Virtually everyone is on an upwards-only rent review, We pay €445,000 in rent. It’s crazy rent. And we’ve another €50,000 in rates on top of that. This street is an example of how the economy went bust. We got so disconnected from the real world. We thought the street was up there with Fifth Avenue. We believed the hype.”


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## mercman

Most important was that Korkys themselves obviously believed the Hype and simply requires a change in the law to bail them out.


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## Howitzer

Discussed on the The Frontline last night, should be on the RTE Player by now. 

Nothing different to what's been highlighted on this thread over the last couple of years. However it does now appear to be accepted that these side deals are real. That the arbitration process is a sham and that legislation will be required as the system has failed to regulate itself.


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