Bewley’s has had its “landmark” victory against endless upward only rent rises overturned by the Irish Supreme Court. The coffee company says it now faces a €1.5m (£1.2m) annual rent bill for its flagship Dublin premises.
Last year the company won a test case against Ickendel Ltd, the owner of its Grafton Street cafe, which many saw as marking the end of upward only rent reviews. Bewley’s group chief executive, John Cahill, said he was “immensely disappointed” by the latest verdict. “All we had wanted for our business was a little economic reality,” he added.
“The landlord has managed to achieve an oppressive rent of €1.5m which was set in 2007 at the height of the unsustainable property bubble, and which is double the market rent set in January, 2012,” explained Cahill. “All we have sought to achieve is an acknowledgement of economic reality and fair treatment with a rent that reflects market values.”
Bewley’s rent was doubled to €1.5m at its last rent review date on New Year’s Day 2007 —at the peak of the property bubble — by Ickendel, a company controlled by the developer Johnny Ronan as part of the Treasury Holdings group. Loans associated with it have since been transferred to the National Asset Management Agency (NAMA).
Five years later the rent on the Dublin premises was up for review again. This time a dispute broke out between the landlord and Bewley’s after the retailer claimed the rent should fall due to the recession and collapse in property values. When the dispute eventually reached the High Court in March last year, it ruled the rent should be reduced to €728,000 (£579,000).
Ickendel appealed and the Supreme Court has now ruled that “it was dealing with a narrow matter” related to the five yearly reviews contained in a lease signed in 1987 and which clearly allowed for upward only rent movements.
Ms Justice Mary Laffoy, on behalf of the five judges sitting in the Supreme Court, found there were specific clauses in the agreement focused solely with upward-only rents and “these did not bargain for a rent revision arrangement based on a ‘market rent’ that can rise and fall in respect of different review periods”.
Bewley’s management has said it is seeking further legal advice on its option but, not surprisingly, retailers and property owners and managers have widely differing views on the ruling.
“This decision will simply undermine a potential return to stability in the domestic economy and will lead to the loss of vulnerable jobs in the Irish retail industry,” said David Fitzsimons, chief executive of the business lobby group Retail Excellence. He claimed the Supreme Court’s decision “to apply the terms of this onerous lease proves how out of kilter legacy commercial leases are with a turbulent domestic economy”.
However Andrew Muckian, partner and head of the property department at Irish corporate law firm William Fry, stressed the verdict would only boost the country’s recovery. “This ruling will be greeted with relief by NAMA and all landlords and investors and is likely to act as a further stimulus to international and domestic investor interest in Ireland’s recovering commercial property sector,” he added.
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