Government bans upward only rent reviews

[clypso]

According to the [broken link removed]

This is real knee-jerk stuff.

It does nothing to sort out the problems of people who currently have these leases.

I am not saying that I am opposed to it or that I support it. But it needs more discussion.

In principle, I am against this sort of market interference - especially between commercial concerns.

There are other issues to be dealt with such as the length of the leases and the rights acquired after 5 years.

There was no urgency on this. Presumably if I was a tenant taking out a lease now, I would be able to negotiate out the upward only rent review clause anyway.

Brendan

This sounds a lot like the Aristocracy trying to control the growth of wage levels after the black death due a labour shortage. The forces of supply and demand were simply to great. I'd imagine clever business people will figure some way around this.

 

[Bronte]

Now we all will be in the circumstance soon of the UK muliples taking centre stage in the retailing sector .

Don't know where you've been but all I see in Ireland are UK chains all over the place. Go down Shop street in Galway for one example and it's like any street in Manchester.

In relation to rents upwards only. The government doesn't need to do anything, if the lease doesn't make sense people are going to walk away and either not sign or default on the lease if the money is not there to meet it (as outlined by Howitzer). This is what is happening all over the place in relation to retail space right now and just wait until January. Nobody today would sign a lease with a rent only upwards clause. The power has gone from landlord to tenant, currently. Market forces win out as always.

 

[Howitzer]

To be honest I don't know how the scenario that I outlined will play out or what the legal and/or financial consequences of it are. Was kinda hoping someone else who'd been through a similar situation would give a definitive answer.

It does seem to me to be shutting the barn door after the horse has bolted, returned, set fire to the barn and bolted again. As clypso alludes, there is a strong Life and Pensions industry in Ireland with it's fingers everywhere (how many shopping centres in Dublin have Irish Life in their title?)

 

[askalot]

According to the [broken link removed]

In principle, I am against this sort of market interference - especially between commercial concerns.

But surely upward only rent reviews are a form of market interference?

 

[canicemcavoy]

More rent insanity:

[broken link removed]

CARLUCCIO’S, THE popular cafe and restaurant on Dublin’s Dawson Street, closed for business yesterday, with its operators saying it will not reopen unless it can agree a rent reduction with its landlord.
The outlet, which employs 60 people, has been seeking to negotiate a reduction in its rent since December 2008, according to a statement issued yesterday, and has since then implemented “a pause in rental payments”.
Efforts to agree a lower rent with the landlord made no progress at all, according to one source. It is understood rent has not been paid since early 2009.

A viable business closed (and its expansion halted) and 60 people out of work because Seanie's son and co. still think they're living in 2005. It would be comical if it weren't tragic.

 

[Brendan Burgess]

More rent insanity:

[broken link removed]



A viable business closed (and its expansion halted) and 60 people out of work because Seanie's son and co. still think they're living in 2005. It would be comical if it weren't tragic.

Are you suggesting that the landlords should let the tenants escape their obligations?

 

[fobs]

Are you suggesting that the landlords should let the tenants escape their obligations?

maybe they should try to renegotiate though as some rent is better than NO rent surely? What would you suggest is the answer?

 

[canicemcavoy]

Are you suggesting that the landlords should let the tenants escape their obligations?

No, I'm saying that Doc Brown and Marty there should travel back to the present and realise things have changed and that businesses simply cannot afford the rents that were negotiated back at the height of The Insanity(tm).

Do you really think that the current situation is better - where businesses have to close, putting more people on the dole queues, while buildings remain empty off our supposedly premier shopping street making it look even tackier than before - and most importantly, the building's owners get no rent at all?

 

[Firefly]

More rent insanity:

[broken link removed]



A viable business closed (and its expansion halted) and 60 people out of work because Seanie's son and co. still think they're living in 2005. It would be comical if it weren't tragic.

According to your link no rent was paid for almost a year, hardly a sign of a viable business

 

[canicemcavoy]

According to your link no rent was paid for almost a year, hardly a sign of a viable business

One source said the restaurant, which serves approximately 5,000 customers per week,

That sounds pretty viable to me.

 

[Latrade]

According to your link no rent was paid for almost a year, hardly a sign of a viable business

and

One source said the restaurant, which serves approximately 5,000 customers per week,

I'd say they had to reduce their prices in the last while in order to keep customers in the door so margins would have decreased dramatically, leading to the conclusion it wasn't that viable in its present state.

But the other lesson is that all businesses are having to do the same and reduce their prices. Unless I'm missing something why is it more beneficial for a landlord to let a property go vacant than reduce their rent? Genuine question.

Is there some tax incentive? Is it that the banks won't facilitate the loss in rent towards the debt? I mean, I'd have thought the landlords are business people just like those who lease the property, why are they refusing to move on price?

 

[mf1]

If you, as a landlord, have a tenant who is perfectly capable of paying the rent but would prefer not to, what do you, as a landlord do?

Re-negotiate the rent to a rent more to the liking of the tenant?
Keep it as it is and let the tenant find the rent, not just from turnover, but from their own resources?

If you, as a landlord, have a tenant who cannot pay the rent, from turnover or resources, and there is no guarantor what do you, as a landlord do?

Re-negotiate the rent to a rent more to the liking of the tenant?
Let the tenant go? But pursue for all their obligations under the Lease?
Have tremendous confidence in certainty of recovering full debt from tenants?
Have tremendous confidence that you can re-let at or close to the current rent?

And the fact that the rent had not been paid for so long may well mean, its better to let them go as tenants.

mf

 

[canicemcavoy]

If you, as a landlord, have a tenant who is perfectly capable of paying the rent but would prefer not to, what do you, as a landlord do?

It sounds like there weren't "perfectly capable" of it. Unless you think that businesses shut their doors just for the craic.

And the fact that the rent had not been paid for so long may well mean, its better to let them go as tenants.

Riiiiight. And who do these geniuses think will be their next tenant - a building whose only previous tenant before this was an egg-and-chips diner? What is their plan B, exactly - do they have a queue of people lined up prepared to pay over €700K per annum? Have you seen how many empty businesses there are now along Dawson St?

 

[mf1]

Now now. Keep the personal jibes out of it.

I'm just struggling to see what your actual point is. Is it that all rents of all commercial properties should be reduced?

The facts of the particular case may well never be known. It is, however, clear that there was a Lease signed which is contractually binding, that the tenant did not pay the rent and that the premises have now closed - be it temporarily or permanently.

We don't know anything about the viability of the business - it may well not be viable on a rent of half or a third of that originally agreed.

mf

 

[canicemcavoy]

Now now. Keep the personal jibes out of it.

Please point out where I made a personal jibe against you.

I'm just struggling to see what your actual point is. Is it that all rents of all commercial properties should be reduced?

No. My point is, why are commercial landlords not even taking part in negotiations to lower rents? Why do they prefer not to receive any rent or have the building vacated, rather than give an inch? This strikes me as sheer hubris. There's absolutely no financial sense to it. It's hilarious to hear talk of "market interference" when the whole point is that the landlords are ignoring market realities.

 

[Firefly]

My point is, why are commercial landlords not even taking part in negotiations to lower rents?

Maybe they are. Also, if a landlord owns 5 properties and word gets out that cheaper rent was negotiated by another tenant, then the others would try for a reduction.

 

[Brendan Burgess]

Canice

You are being very vague and obscure, which is not like you.

Why not tell us the magic solution to this problem?

If I am to guess what you are saying - it's something like this.
Rents have come down generally.
Landlords who have perfectly valid contracts should reduce their rents to the current market rent.

So should those who bought apartments for €400k which are now worth €200k go back to the sellers and ask for their money back? Or perhaps they should turn to their lenders and say that they won't pay back the loan?

Most landlords are very practical.
If a tenant has the ability to pay the rent or if they have a personal guarantee, they will want to get paid.
If they don't have a personal guarantee, they will work with the tenant and try to come to some arranement. They may agree to a temporary reduction in the rent.

I feel very sorry for tenants who have taken out expensive leases and for whom business has dropped. But it's another very complicated situation and each situation needs to be dealt with on its merits. If I was the landlord in this case, I would be less inclined to negotiate with the tenant of such a successful business if they choose to do their side of the negotating in public.

Brendan

 

[Brendan Burgess]

As for personal jibes:

because Seanie's son and co.

No, I'm saying that Doc Brown and Marty there should travel back t

And who do these geniuses think will be their next tenant

a building whose only previous tenant before this was an egg-and-chips diner?

None of these personal jibes add anything to your argument. In fact, they distract from whatever argument you are trying to make.

 

[canicemcavoy]

You are being very vague and obscure, which is not like you.

There I was thinking I was being clear! I don't think it's necessary to have the solution at hand before pointing out there is a problem. I think having 500,000 people unemployed is a problem. I have no magic solution. Should I avoid pointing out that 500,000 people is a problem?

And there _is_ a problem here, unless people really think that having empty commericial buildings along our main shopping streets and putting people out of work, while at the same landlords stilll aren't receiving any money, isn't a problem.

Landlords who have perfectly valid contracts should reduce their rents to the current market rent.

I find sudden stoic Catoesque adherence to the letter of contract law rather ironic when AAM has a whole forum devoted to ways of figuring out how people who make "perfectly valid contracts" for mortgages with banks should be bailed out.

I would be less inclined to negotiate with the tenant of such a successful business if they choose to do their side of the negotating in public.

But that's not true. The story only came out after the negotiations were over and the restaurant had already closed its doors. Or should I say, after attempts to negotiate had failed.

 

[canicemcavoy]

As for personal jibes:
None of these personal jibes add anything to your argument. In fact, they distract from whatever argument you are trying to make.

Er, I had presumed we were talking about personal comments against people in the forum. Not wisecracks aimed at public figures - and, in one case, a building. (I didn't realise that "egg and chips diner" was a personal insult, some of my favourite eateries have done egg and chips - I was indeed a big fan of the old Graham Sullivan restaurant myself!)