Upwards only rent reviews – a thing of the past?


The Dáil has now passed the Land and Conveyancing Law Reform Bill 2006 which contains the much hyped Section 131. This section will effectively result in the curtailing of upwards only rent review clauses in commercial leases negotiated once the Act and section are brought into force.

The section provides that a provision in a lease for a review of rent (ie a rent review clause) shall be construed as providing that the rent payable following such review shall be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the rent review date.

Retailers have been calling for the Government to introduce legislation banning upwards only rent review clauses in favour of a rent review based on the current market rent. Whilst the section does not specifically require a review of the rent in accordance with the current market rent, it will put Tenants in a stronger position when negotiating a rent review as they are no longer tied to an upwards only rent review.

There has been a lot talk in the media lately about the difficulties being faced by retailers with landlords seeking to increase rents on foot of upwards only rent review clauses in leases negotiated during the boom times. With a significant fall off in retail sales, tenants are finding it difficult to pay their rent.

This piece of legislation will not assist retailers with existing leases and will only apply to leases entered into after the introduction of the section. Many retail industry commentators have suggested this could in fact result in these tenants being worse off as their leases are now even less attractive to prospective assignees.

From a landlord’s perspective, the legislation will give rise to uncertainty on the level of rental income in the future with a knock on effect for the value of pension funds.

It had been hoped by landlords that the legislation would include provision for the parties to contract out of the section however such a right has not been included.

The Bill is to go before the Seanad before being signed into law by the President. At present there is no indication as to when the Minister for Justice will bring the Act and Section into Force. Some commentators believe it may not be until January 2010. We will update you as soon as the Minister indicates when the section will become law.

If you would like more information please contact Gráinne Macdougald Associate Solicitor