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The entrance to Bewley's Oriental Café in Dublin's Grafton Street. Graham Hughes/Photcall Ireland

In landmark decision, court says Bewley's Grafton Street rent should fall

A court today ruling could have far-reaching implications for upward only rent reviews that commercial businesses have been lobbying to have abolished.

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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30 Comments
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    Mute Begrudgy
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    Mar 25th 2013, 4:43 PM

    Great news.

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    Mute John Burke
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    Mar 25th 2013, 4:48 PM

    I thought the minister for cant do won’t do said it was unconstitutional? Do ministers get it wrong????

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    Mute Cillian Murphy
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    Mar 25th 2013, 4:54 PM

    And the self same minister also told us it was unconstitutional to reduce ex-Ministerial and ex-Taoiseach pensions…I wonder if he was wrong with that as well??

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    Mute Emily Elephant
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    Mar 25th 2013, 5:03 PM

    It’s two different questions. It’s unconstitutional for the state to take away upward only rent review unless it compensates the landlord (which is much too expensive). This case is about what “upward rent review” meant in the specific lease. It doesn’t get rid of the clause – it just says that it doesn’t mean what the landlord wanted it to mean. (Lawyer’s screw-up.)

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    Mute Sheik Yahbouti
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    Mar 25th 2013, 4:50 PM

    At last, a sane and sensible ruling on a matter ridiculous as to be incomprehensible. Well done, Mr. Justice Charleton.

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    Mute Marc Anthony Power
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    Mar 25th 2013, 5:10 PM

    Finally. .. sense is starting to show is face. … for to many years greedy landlords have ruined many potentially viable businesses

    91
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    Mute Frank2521
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    Mar 25th 2013, 4:48 PM

    About time. Will it be retrospective? A lot of landlords worried tonight.

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    Mute Brian
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    Mar 25th 2013, 6:20 PM

    Any ruling that goes against Johnny feckin Ronan is alright by me.

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    Mute Kevin Smyth
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    Mar 25th 2013, 10:08 PM

    Johnny Ronan is a pirate.

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    Mute glangaurdatyabowsey
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    Mar 25th 2013, 4:49 PM

    fair ruling, but at the end of the day the landlord can set the rent and the tennant can choose to stay or go.

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    Mute James Comerford
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    Mar 25th 2013, 4:51 PM

    Well done, and your attitude will have the streets of our town and citys void of business. Is that what you wanted to achieve when posting such a ridiculously ill researched comment.

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    Mute John Doyle
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    Mar 25th 2013, 4:57 PM

    Its not that ridiculous of a comment. But Anybody who thought Upwards only rent was a good thing must’ve been high on something.

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    Mute John Stenson
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    Mar 25th 2013, 9:11 PM

    If you’ve nothing sensible to say then do us all a favour and say nothing.. if everyone had your attitude to business there wouldn’t be a business left in the country..

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    Mute Ignoreland
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    Mar 25th 2013, 5:51 PM

    This all came down to the particularity of the clause in the contract in that it said rent couldn’t fall lower than as agreed in 1987, and not “lower than was agreed at the previous agreement”. So if the lease contains a clause to the effect that the rent cannot fall lower than the most recent previously agreed level, then unfortunately this judgment isn’t going to have much of an impact.

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    Mute Alan Madden
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    Mar 25th 2013, 7:12 PM

    Fock Johnny Ronan. Another contributor to this beautiful mess we are in. Delighted with the ruling.

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    Mute Sham Rock
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    Mar 25th 2013, 6:21 PM

    On prima facie evidence, this is good news. It will be no harm for our builder class to abide by the rules of capitalism at all times, not just when it suits them.

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    Mute Jason Bourne
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    Mar 25th 2013, 5:50 PM

    Good news for sure.

    Anyone know if upwardly rent is common around the world or is it just another Irish basketcase example?

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    Mute Emily Elephant
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    Mar 25th 2013, 8:38 PM

    Here & UK. Nowhere else AFAIK.

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    Mute Richard McCarthy
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    Mar 25th 2013, 8:45 PM

    A lot of rental contracts in some US states are on a short term lease bases,not anything like the long term rigid leases seen in Ireland, with the rental dependent on market conditions,it makes for a very flexible system.

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    Mute John Clarke
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    Mar 25th 2013, 8:43 PM

    This is a very wise and right decision by high court. These UORR’s were a throw back to the greed and excesses of the Celtic tiger years and are now putting people’s jobs in jeopardy. Rents should be set taking into account current market conditions/rates, and in any direction.

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    Mute Andrew Telford
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    Mar 25th 2013, 6:31 PM

    Can anyone enlighten ass to what was the intended purpose or benefit of this upward only legislation… Because I pretty much suspect it came about as a pure consequence of a a brown escalope trading hands on a golf course and serves no purpose

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    Mute Colin Tyrrell
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    Mar 25th 2013, 6:59 PM

    This ain’t the place to ‘enlighten ass’.

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    Mute dowthebow
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    Mar 26th 2013, 5:58 AM

    Or trade “brown escalopes”!!

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    Mute Richard McCarthy
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    Mar 25th 2013, 8:25 PM

    While very welcome this ruling comes too late for the many premisess across the country that were forced to close,this interference in the marketplace was and still is the main cause of the many job losses still seen across every town and shopping mall in the state.

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    Mute Andrea Rock Massey
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    Mar 25th 2013, 9:00 PM

    It won’t make any difference to the majority of business owners unfortunately. It is only happening for Bewleys because of a particular clause in their lease. If such clauses were in other leases we would have seen more cases like this already. UORR are counter productive and hopefully someday, something will actually be done about them. Do many businesses have shut their doors already because of them.

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    Mute Andrea Rock Massey
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    Mar 25th 2013, 9:02 PM

    *Too many businesses*

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    Mute Pat O Neill
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    Mar 25th 2013, 10:32 PM

    Hang on a second. Before the celebrations lets consider what has really happened here. Regardless of the merits of the particular clause put into this agreement (ok it’s fairly one sided) the courts have put their size 12′s into the middle of a legally binding agreement between two free and lawful parties whose spirit has now been violated. Forget for a second the current disadvantage to either party – that’s business after all. I for one do not like the idea of our judiciary taking what could be seen as a populist semi-political stance on a legal agreement between two parties engaged in of their own free will. When is a contract a contract? When is it OK for us to engage in an agreement and not be afraid the nanny state will rescind it?
    There can be very good reasons for UORR’s – like a fixed mortgage repayment schedule. This is a bad day for freedom, commerce and investment. It will end up like so many recent sticking plaster solutions to this mess we are in and will hurt a lot of people in unintended ways. No one will make another speculative commercial investment in this country for a long time. We never needed brave investors more and now we are thumbing our noses at them. There are no set rules anymore, young people should leave this basket-case banana republic as soon as they get a chance, this is going to take a generation to fix judging by the way we are going about it.

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    Mute brian magee
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    Mar 26th 2013, 12:20 AM

    How do new Bewleys not own the building? They’ve been there so long, did they own it and sell it?

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    Mute Mark Salmon
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    Mar 26th 2013, 7:17 AM

    1. Very few other countries see the need for these contracts.
    2. Most of them are doing better than Ireland.
    3. Prices rise and fall, thats commerce. Fixing prices is interference with market forces.
    4. It’s the duty of the courts to interpret contract clauses in disputes, that’s why they are there.

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    Mute Sergé
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    Mar 25th 2013, 9:04 PM

    If Bewley’s rent does indeed fall by 50 per cent, I would like to see even a modest decrease in the level of prices. Somehow I don’t see that happening.

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