A leading commercial property law expert has urged firms to unite to force landlords to cut rents.
A new Bill to allow distressed commercial tenants to negotiate a rent reduction is expected to be published by the Government by the end of this month.
Experts at Cork-based legal practice Michael Powell Solicitors say it is without question that there is strength in numbers and now is the right time for commercial tenants to unite and collectively exert pressure on their landlords, who tend to be more responsive when exposed to a collective group seeking a reduction in rents, as opposed to dealing with tenants on an individual basis.
"The proposed legislation will only apply to lease agreements entered into prior to December 2009, when the former government abolished upward only rent reviews for new leases. Accordingly, a two tier rental market has emerged, creating a gross inequity whereby those subject to leases signed pre-December 2009 are left paying higher rents. Upward-only rent reviews are not reflective of the times we live in," said Michael C Powell, Head of Property and Conveyancing at the firm.
The legal expert says that in accordance with the proposed legislation, firstly the tenant will submit a request to the landlord seeking a reduction in their current rent in line with the market rate.
The landlord will be obliged to respond to this request within the 28 day period, regardless of whether or not they are agreeable to the rent substitution.
"Interestingly, it has also been indicated that the landlord will be entitled to require that their tenant make extensive financial and other disclosures to support the contention that the business is not capable of sustaining the current rent. In an interesting twist, the new bill could require a landlord to make financial disclosures to the tenant but there should not be a requirement to disclose personal records".
If no agreement is reached a compulsory mediation process will ensue.
In the event that this mediation process also fails to prove successful for either the landlord or the tenant, it has been signalled that an application may then be made to the Circuit Court within 12 months of the original request.
"Potentially the most contentious aspect of the incoming legislation is the indication that in circumstances where the landlord is dissatisfied with the rent determined by the court, they may terminate the lease with the tenant, within six months of the court's determination. Conversely, if the tenant finds that the court-determined rent is unacceptable, they will also be entitled to terminate the lease with the landlord within the specified time frame."
