International retailers may copy court route to cut rent

More international retail chains may follow B&Q and Pamela Scott into examinership in a bid to make landlords tear up crippling rent agreements following the rescue of almost 800 jobs in those companies.

International retailers may copy court route to cut rent

The two firms used the High Court process to force their landlords to abandon controversial upward-only rent reviews, which had left them struggling to pay boom-time rents with recession-era turnover.

However, while the tactic was hailed a victory for the retail sector and the 777 workers whose jobs were saved, thousands of smaller firms are being denied the option to follow suit because of delays enacting law that would allow them enter examinership in the lower courts.

Examinership in the High Court usually costs at least €200,000 and bills routinely top €500,000, which is beyond the reach of most struggling small and medium firms.

The Companies Bill 2012 contains a provision allowing for a process dubbed “examinership-lite”, which would allow firms to open their books to a judge of the circuit court for a fraction of the cost.

Jobs Minister Richard Bruton published the bill last December, but his department said yesterday it would not reach committee stage before the autumn. That means it is unlikely to become law before the end of next year or early 2015.

However, David Fitzsimons of industry body Retail Excellence Ireland said the outcomes for B&Q and Pamela Scott could have a knock-on effect on rents for the retail trade, particularly as several CEOs of major international retailers were preparing the groundwork for a similar move.

“This is a gamechanger. B&Q is the first international company that has successfully applied for protection. It would seem the judiciary are far more au fait with what is going on out in the world of retail than the Government is.

“Certainly what happened today will get landlords unnerved and get them rethinking these leases and hopefully other landlords will come to their senses and agree rents that would get these retailers through a pretty horrific time.”

Fine Gael promised to outlaw upward-only rent reviews when it got into government and produced draft legislation to that purpose in 2011 but swiftly abandoned the idea, claiming it had legal advice that such a move would be unconstitutional.

John Corcoran of the Irish Commercial Tenants’ Association said that decision was not credible and urged the Government to revisit the issue.

“By not doing anything the Government is colluding with landlords in putting people out of business. How’s that for a jobs strategy? They could still legislate to end upward-only rent reviews and give businesses a chance to get through this. It’s never too late to do the right thing.”

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