Ahern Publishes Commercial Rent Review Report

The Minister for Justice and Law Reform, Dermot Ahern TD, has today published the Report of the Working Group on Transparency in Commercial Rent Reviews.

The Minister said the Report contains two key recommendations:

(i)  establishment of a public database containing relevant details of letting agreements and rent reviews in the commercial property market, and

(ii) acceptance on an industry-wide basis of a Rent Review Arbitration Code which has been drawn up by the Group and which is intended to provide a uniform procedure for the governance of rent review arbitrations in the commercial property market.

Speaking on publication, Minister Ahern said: "When I established the Working Group I gave it very tight terms of reference aimed at developing practical solutions to some of the problems which confront the commercial property market and the retail sector in particular. I would like to commend the Group for the efforts they have made to address the relevant issues."

"The recommendations proposed are sensible ones. I am happy to endorse them and I look forward to progressing them as quickly as possible. Their implementation will, of course, require the cooperation of all relevant stakeholders and I fully expect that the necessary cooperation will be forthcoming."

The Report of the Working Group is available on the Department's website www.justice.ie

17 August 2010

Note for Editors

List of Working Group Recommendations

I. The Group considers that public confidence in the outcome of rent review arbitrations in the commercial property market can best be sustained if there is a uniform procedure for the governance of such arbitrations. It therefore recommends an industry-wide acceptance, on a voluntary basis, of a code of best practice along the lines of the Rent Review Arbitration Code which is appended to this Report and further recommends that all stakeholders commit publicly to their willingness to adhere to this code.

II. The Group also recommends that the operation of this code be reviewed no later than July 2013.

III. The Group has noted that there are difficulties in obtaining accurate information about letting agreements and rent review transactions in the commercial property market. It therefore recommends the establishment of a public database in which would be entered the relevant details of letting agreements and rent reviews in that market.

The Group points to the intrinsic link which exists between Recommendations I and III in that access to accurate information about letting transactions in the commercial property market is critical in terms of ensuring that arbitration awards in rent review disputes are based on the premise that all relevant information is available both to the arbitrator and to the parties to the dispute.

IV. The Group also makes the following recommendations which are ancillary to its Terms of Reference but which may assist in facilitating the smooth operation of the rent review procedure:

· the parties to a commercial lease should, unless there is a particularly strong reason which warrants otherwise, ensure that the rent review clause is drafted in a neutral way which facilitates either party in instituting the rent review process;

· equally, the parties should review carefully the terms of any arbitration clause to ensure that, in the first instance, it allows them to reach a mutual agreement as to their preferred arbitrator. Where such an agreement cannot be reached, the clause should enable either party to approach a pre-agreed nominating body (which may be one of several mentioned in the clause) in order to secure the necessary appointment;

· when a nominating body is approached in connection with an appointment they should make the appointment within a reasonable period of time and, ideally, within one month from the date of receipt of the application for such an appointment. The costs of the appointment should fairly reflect the administration costs of the organisation involved in the appointment;

· given that arbitration arises only where the parties have failed to reach an agreement on the reviewed rent, early recourse to mediation might be considered in an appropriate case in order to resolve the dispute, and

· rent reviews should take place as close to the review date as is feasible so as to avoid any unnecessary lag between the market conditions prevailing at that date and those prevailing at the time the review actually takes place.

Terms of Reference of the Group 

"To consider the operation of the current system for determining the rent payable on foot of a rent review clause, with particular emphasis on the arbitration process and the adequacy of the information available to all parties and, if necessary, to make such recommendations for change as may seem appropriate." 

Membership of the Working Group

Michael Durack, Senior Counsel, acted as Chairman of the Group. The other members of the Group were :

· Jonathan Buttimore, Office of the Attorney General

· Torlach Denihan, Irish Business and Employers Confederation

· Mark Fielding, Irish Small and Medium Enterprises Association

· Niall Gaffney, Irish Association of Pension Funds

· Stephen Mackarel, Retail Excellence Ireland

· Avine McNally, Small Firms Association

· Grainne O'Carroll, Department of Enterprise, Trade & Innovation

· Martin O’Reilly,* Irish Association of Investment Managers

· David Potter, Irish Auctioneers and Valuers Institute

· Gavin Ralston, Senior Counsel

· Barry Smyth, Society of Chartered Surveyors

· Regina Terry, Department of Justice and Law Reform

Mary Joy, Department of Justice and Law Reform acted as Secretary to the Working Group

*Fergus Dowd acted as substitute for the final two meetings of the Group.