IRISH PENSION fund managers have expressed concern about the impact of new legislation banning upwards-only rent reviews on new commercial leases.
Minister for Justice Dermot Ahern this week tabled an amendment to the Land and Conveyancing Law Reform Bill which will amend the law to prohibit the practice.
However, the move has raised alarm that it could adversely affect the value of pension funds which are heavily invested in commercial property.
The Society of Chartered Surveyors vice-president Peter Stapleton said the legislation, which is expected in late July, could undermine the value of pensions.
“If you have a property that is re-let in a pension fund then that property will be affected. A significant amount of Irish commercial property is owned and held by the institutions and pension funds. So everybody with a pension will be impacted by the introduction of this proposed legislation.”
Pension funds have already struggled to perform in recent months, and have only just managed to record three successive months of gains for the first time in two years.
However, earlier losses mean Irish pension funds are still facing losses of 25.7 per cent over the past 12 months.
Meanwhile, Retail Excellence Ireland, which represents 8,500 retail stores, has welcomed the legislation.
Chief executive officer David Fitzsimons said the move would be positive for business development in the Irish retail industry.
“While this move is a major step forward and helps shift the balance of power more equally between landlord and tenant, we are, however, disappointed that the legislation will not apply retrospectively.”
Mr Fitzsimons said retailers were locked into long-term upward-only leases and the legislation would have no consequence on their ability to keep trading.
“The fact that existing rent contracts cannot be decreased to current and more realistic market levels means the retail sector is haemorrhaging businesses and jobs at a rate of noughts.
“Our global counterparts are paying a property cost average of 6.9 per cent of turnover while the Irish retailer is forced to bear an unsustainable fixed cost of 20 per cent or more of turnover.”
Earlier this week a rent dispute between a division of Harcourt Developments and one of its tenants at Letterkenny Shopping Centre came to the High Court. The tenants claim they are facing a 47 per cent rent increase at their upcoming five-yearly rent review. The landlord Lindat Ltd has denied this is its intention.
Last month businesswoman Pia Bang called on landlords to come to “feasible arrangements” with retailers to accommodate the economic downturn. She said her company, Bancastle Ltd, which ran clothing and home furnishings outlets in Dublin, had gone into liquidation “because of the downturn and because of rent”.
In a November 2008 rent review Ms Bang’s landlord, Irish Life Asset Managers, increased the rent to €165,000 a year from €118,000.
