A LANDMARK HIGH Court judgement, which is likely to see the rent that Bewley’s pays for its Grafton Street premises fall, could have far-reaching implications for upward only rent reviews (UORR) in Ireland.

In a judgement issued today Justice Peter Charleton said that the amount of rent Bewley’s pays to its landlord Ickendel Limited must fall in line with current market conditions, a ruling that could have significant repercussions for upward only rent reviews.

Upward only rent reviews – where commercial leases were subject to occasional reviews where rent could only rise or remain flat but never fall – have been a contentious issue in recent years with the decline in property prices.

The coalition promised in its programme for government to abolish such lease agreements altogether – they were abolished for new leases in 2010 – but ran into difficulties over fears that any law could violate the Constitution.

In this case, Ickendel, owned by developer Johnny Ronan’s Treasury Holding Group, had taken a case against Bewley’s arguing that it could not reduce rents because its lease agreement only permitted UORR.

The court had heard that the parties entered into a lease agreement in 1987 when the rent was set at around €213,000 and that there had been rent reviews every five years since then with 2007′s review, at the height of the property boom, seeing rent fixed at €1.46 million.

In 2012 that same figure was claimed despite it having been fixed “at the height of the property price inflation that undermined the Irish economy” the judge said today.

Threshold

Bewley’s had claimed that the rent review was “ambiguous” according to the judgement and its legal team had argued that the lease agreement did have a provision to allow rent to fall as long as it was not below the €213,00 threshold set in 1987.

The judge ruled that a clause in the lease agreement concerning rent review could only be construed to allow for rent to fall just as long as it did not fall below the figure initially agreed in 1987.

In his judgement, he said: “The parties bargained so as to agree never to fall below that initially agreed rent and I cannot see that they bargained thereafter for anything other than a fair open market rent. That can rise and that can fall.”

Judge Charleton said that it was not in accordance with “business sense” that a rent agreed five years ago “should govern a hospitality market changed for the worse”.

The Irish Commercial Tenants Association, a lobby group for commercial tenants in Ireland which has campaigned for UORRs to be abolished, welcomed the ruling, describing it as a “milestone”.

ICTA’s John Corcoran said: “In essence this is very positive news, not only for Bewley’s which should result in a reduction of the company’s rent bill on Grafton St by up to 50 per cent, but also for commercial tenants and the economy in general.

“The ruling today will enable Bewley’s, an iconic business to continue trading on one of Dublin’s most important retail streets, where other businesses over the past number of months have failed due to oppressive rents.”

Read: Shop that warned of high rents closes with 8 jobs lost

Previously: Government admits defeat on upward-only rent reviews

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