Case illustrating legislation in relation to upward only rent review clauses not retrospective
By Caroline Browne, Partner
During the property boom the inclusion of upward only rent review clauses in leases had become standard practise.
The Minister for Justice, Equality and Law Reform, on the 1st December 2009 signed a Ministerial Order banning upward only rent review clauses in leases under Section 132 of the Land and Conveyancing Law Reform Act, 2009.
The Section came into operation on 28th February 2010. The section applies to commercial leases of property used wholly of partly for the purpose of carrying on a business. The ban only applies to commercial leases entered into on and after February 28th 2010. It will not be possible to contract out of this new provision. Therefore, after this date, any commercial leases with an upwards only rent review clause will be deemed to have an open market rent review clause instead. This means that the rent payable after a review may be lower, higher or remain the same depending on the market.
The provision will not provide help to existing tenants whose leases dated prior to the 28th February 2012 contained upward rent review clauses, as Section 132 is not retrospective in nature. This is illustrated by the recent decision of Mr Justice O’Neill on the 16th May 2013 were it was held that the upwards only rent review clause in the 20 year lease of the Medical Council’s headquarters at Kingram House, Dublin is not affected by a law banning upwards only rent reviews for commercial premises. The 20 year lease commenced in January 2013 between Tanat Ltd and the Council. The rent as per the lease is €820,000 although the current market rent for the property is €374,100. While the lease commenced in January 2013, the lease was part of a series of transactions involving a put and call option agreement dated 2008 between Tanat Ltd and the Council concerning options for the property, including a 20 year lease.
The Council had argued it was entitled to the benefit of Section 132 of the Land and Conveyancing Law Reform Act 2009, the law banning “upward only” rent review clauses in leases for business premises which came into effect in February 2010. The judge ruled the put option in the 2008 agreement amounted to an agreement for such a lease and therefore Section 132 did not apply.
