Expert says rent review changes should cover existing business leases

THERE seems to be a possible misapprehension, with far-reaching consequences, in regard to upwards-only rent review clauses in business leases.

The law has been changed by the Land and Conveyancing Law Reform Act 2009, which has just come into force. This provides that, irrespective of the wording of the clause, the rent may be reduced where this is necessary for a fair market rent.

However, the change only applies to new leases so it is of no help to hard-pressed business tenants. It is reported the attorney general has advised that to extend this change to existing leases would be “retrospective” and therefore unconstitutional. With respect, this view seems to me to be wrong in that retrospective change would be one which applied to rent reviews which had occurred or become due in the past – not to existing leases.

More important, there have in the past few decades been several laws modifying landlord and tenant law and these have usually been made to apply to existing leases. This practice was upheld as constitutional by the High Court in the Shirley case in 2006.

The details of this rather technical area, including a list of the landlord and tenant statutes just mentioned, are worked out in an article I published last year: ‘Do Changes to Landlord and Tenant Legislation Apply to Pre-existing Tenancies?’ (2009). Conveyancing and Property Law Journal (a copy of which I could email to anyone interested).

No doubt, it is a happy coincidence that the establishment view of things coincides with the interests of banks who have advanced money to landlords to acquire premises on the basis of existing rent levels: the banks’ interests would be damaged by a change which would reduce rents.

Prof David Gwynn Morgan

Department of Law

University College Cork