Brendan Howlin (Wexford, Labour)
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That is agreed.

Ruairi Quinn (Dublin South East, Labour)
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Hear, hear.

Willie Penrose (Longford-Westmeath, Labour)
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I thank my colleague, Deputy Ciarán Lynch, for bringing this important and timely legislation before the House. It is vital in the context of saving and securing jobs and keeping businesses operating in a difficult environment. It is clear from our discussions with retailers on this issue that exorbitant rent contracts are forcing high street retailers throughout the State out of business. I invited representatives of Retail Excellence Ireland to address the Joint Committee on Enterprise, Trade and Employment in February 2009 and they made their views clear in this regard. Businesses throughout the State which are struggling to keep their doors open in the absence of credit from the banks are eventually finding themselves with no choice but to close their doors. The impact of this is that more and more jobs are being lost and employees are being forced to join the ever lengthening dole queues.

The practice of upward only rent reviews, which is at all times anomalous, is clearly out of synch in current economic circumstances. There should be a pure commercial property market in so far as in the normal course of business, it is the supply and demand for premises that should dictate the ultimate price. In this case, the rent charged appears to have no application in the commercial market. It is incredible that a situation could have been allowed to develop where rents could only ever be increased. While this practice will be banned in respect of all future leases from 1 March 2010, for many well known retail outlets throughout the State the new legal provision will provide little or no solace. They are locked into substantial upper six-figure annual rent agreements with no escape hatch. As their turnover continues to plummet, we see the evidence of the fallout. Many well known outlets have ceased to exist and others are for sale. The casualty list of this crazy practice continues to grow. Surely these clauses are anti-competitive in nature as their sole purpose is to insulate landlords from commercial reality while the unfortunate tenant is pummelled into submission and eventual closure due to prohibitive rent demands.

As legislators we cannot continue to sit on our hands and allow the shutters to fall across our streetscape in the full knowledge of the impact this inertia will have on employment in the retail sector. Notwithstanding the legal niceties and complexities that will undoubtedly be trotted out again this evening in response to this important proposal, we must vigorously pursue a solution that is grounded upon the important constitutional principles which reflect the requirements of the common good. Where there are constitutional issues reflecting a hierarchy of rights, we must resort to what is best for the common good and in accordance with social justice, as permitted in the Constitution under Article 43. A do nothing stance in the current economic climate will see more of our well known companies up sticks. Moreover, in a situation where our business model clearly makes no sense, the spectre will arise of many of the prominent international names following suit.

I am fortified in my argument that it is feasible to draft legislation that will be of help to hard pressed tenants and which will pass muster from a constitutional perspective by a perusal of an important article by Professor David Gwynn Morgan entitled "Do Changes in Landlord and Tenant Legislation Apply to Pre-existing Tenancies?" in the Conveyancing and Property Law Journal 2009. Professor Morgan points out succinctly that in the past 20 years or so, several laws that have modified the landlord and tenant relationship have come into operation and that many of these have applied to existing cases and leases.

The case of Shirley v. O'Gorman is instructive in this regard. Professor Morgan states in his article:

Landlord and tenant law is an area which, because of its origin in the mists of feudalism, in bygone centuries, has frequently been considered to be in need of radical change by legislation. Moreover, in practice, as we shall see, the attitude usually taken by the Legislature (as with such other long-standing arrangements as companies or families) is to apply the new law even to those tenancies which existed before the change of law.

A major policy point, which would support this view, is the simple one that individuals (or companies) have to take their chances with major, unexpected changes to the economic, business, social or personal environment. Why should they be protected from legal changes? Another practical reason for this is that tenancies tend to be long-lived in comparison with, say, torts or crimes or even the time taken to perform most contracts. Accordingly, if the Legislature were to decree that its changes should not apply to "existing tenancies", they would take a long time to come into effect. In addition, the law would be limping on several legs, with different regimes for different generations of tenancies.

The Landlord and Tenant (Ground Rents) Act 1978, with which the Minister will be familiar, came into effect in August 1978 and applied to existing tenancies. Under this legislation a tenant with a large interest in a property was allowed to acquire the fee simple, although the landlord was entitled to some small compensation. On a strictly literal reading, this might be construed as an interference in the landlord's right to cover the fee simple, but it passed muster constitutionally.

Articles 43.2.1 and 43.2.2 of the Constitution are of significant import in this case and are of paramount importance in the construction of this legislation. Article 43.2.1 provides that the State recognises that the exercise of rights in regard to property "ought, in civil society, to be regulated by the principles of social justice." Article 43.2.2 provides:

The State, accordingly, may as occasion requires, delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.

In the case of Shirley v. O'Gorman there is no doubt that the social justice aspect of the argument prevailed. A proper balance between the property rights and social justice arguments can, to paraphrase Professor Morgan, be best left to the democratically elected Legislature rather than the courts. In this case, the freehold reversal was acquired for the landlord. Mr. Justice Peart remarked in an obiter dictum:

Other factors apart from pure economic factors come into play, to which a Government may have regard in deciding on a social justice policy. There can be other factors or disadvantages affecting the enjoyment of the property, which arise from the status of the tenant. Ownership is not absolute and there still exist the remnants of obligation between landlord and tenant, aside from the payment of a rent, which have led to measures being taken from time to time by the Legislature, and which have effectively emasculated the effect certain covenants (that is against assignment, sub-letting, making alterations and in respect of user, etc.), such that a landlord will not be permitted to unreasonably withhold consent ... A measure which enables a tenant to have these restrictions removed completely can be seen as pursuing a social justice objective, which is apart and distinct from any question of wealth distribution.

Professor Morgan concludes that in most cases changes to the law, often radical changes, apply to existing tenancies. He instances cases where radical pro-tenant changes were introduced in the 1931 Act and extended in the 1980 and later Acts. He opines quite presciently: "It would probably also be the case with any remedy in legislation, which might be enacted, to alter the upwards-only rent review clause."

The Bill addresses the special emergency or exigency which has arisen from the application of upward-only rent review and the horrendous economic impact these clauses have on small and medium-sized enterprises where a rent review, which generally occurs every five years, leads to companies closing down or winding up, with a consequent loss of jobs and business activity. Once the Legislature considers that a measure is reasonable and necessary for the common good, it will not constitute an unjust attack. I know all the cases which the Minister will trot out and I have a fair idea of the advice he has received, from Blake v. Attorney General in the early 1980s onwards. In each case the Supreme Court considers whether the aim or dominant objective of the legislation is for the common good and whether what is proposed amounts to an unjust attack on property. That is the balancing of the rights involved.

Having regard to the exceptional economic circumstance and the significant hardship suffered by existing tenants who are now subject to upward-only review clauses in their leases, and to the exigencies of the common good and the principles of social justice, and where the existing regime is clearly unfair in so far as it locks tenants contractually into exorbitant rent regimes and processes which bear no relation to market realities, the Bill which was prepared so assiduously by Deputy Ciarán Lynch, whom I compliment, should be accepted. If necessary, the Minister can amend or modify it as he sees fit, in accordance with constitutional advice, the advice from the Attorney General or whoever. Delay is no longer an option. Foot dragging must be replaced with action. I exhort the Minister, on behalf of hundreds of individual retailers, some of whom are in the Gallery, who find themselves in that position to accept the Bill and help to secure businesses, sustain current jobs and open up the opportunity for new jobs to be created.

This Bill would pass the test of proportionality, in so far as it does not constitute a disproportionate interference with a landowners' property rights, relative to the objective being sought. It should be pointed out that a landlord will still be entitled to the open market rent, which will be determined at the rent review. In the context of the NAMA Act 2009, the rent generated from the property is highly material to the process and is a necessary element in arriving at a determination of acquisition values under Part 5 of the Act. The rent roll is important in that regard. One wonders if that is the real obstacle to the passage of the Bill.

Arthur Morgan (Louth, Sinn Fein)
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I thank the Labour Party for sharing time with me, but I do not thank it for requiring me to follow Deputy Penrose as I cannot match his lungs or delivery.

I hope the Minister, Deputy Dermot Ahern, who is present and is a solicitor by profession, will consider the compelling legal argument which has been presented by Deputy Penrose regarding this matter. It offers strong encouragement to the Government to at least consider carefully the Bill. As has been explained already, upward-only rent review clauses mean that when there is a periodical review of the rent being paid, the conclusion of the review is that the rent will not decrease. How, at a time when retailers, small businesses and enterprises are struggling to keep their doors open, trying to keep a few more people from the grasp of unemployment and trying to contribute to economic recovery, are upward-only review clauses still in existence?

At a time when there was an over-reliance on property and consumption, these clauses became a universal feature which were accepted in Irish commercial leases. This is just further testament to what Sinn Féin have said all along, namely, that the over-reliance on the construction sector and the development of a property bubble posed a massive threat to the economy. This over-reliance was not sustainable and could not continue. Not only did these clauses mean that small businesses were priced out of the market, but, because the artificial wealth created by the property bubble veiled the reality that rents would come down because of the over-inflated nature of the sector, those with a long-term lease and such clauses are left paying more in rent than someone taking up a contract. How can companies compete? It will strangle existing businesses.

Government representatives always tell us we need enterprise in Ireland and about the importance of increasing competitiveness, but the existence of these clauses in existing leases is damaging business and creating unemployment. Upward-only rent reviews bind tenants with a lease to pay more for property than it may be possibly worth, as they add extra pressure in terms of expenses to businesses which are already struggling. This is particularly exacerbated by the fact that 55% of small and medium-sized businesses are being refused credit by banks. We all know, from the debates in this House and the broader public domain, that when the NAMA legislation was going through the Houses, we were promised it would resolve the issues of credit flow to small and medium-sized enterprises, which are the backbone of our economy and employ some 80% of those employed in the State. Yet, there is no sign of the delivery of proper credit streams to small and medium-sized enterprises.

Hughes & Hughes bookstore has been mentioned. Bestseller, the company behind the clothing brands Vero Moda and Jack Jones, recently announced it is closing its operations in Ireland. Both attributed their closure to the high property costs in Ireland. All a person has to do is walk down Grafton Street or any other street in the State to witness the effect exorbitant rents are having on businesses. While there was once a time when businesses clambered to get rental space in and around the areas to which I refer, retailers are trying to get out. It may be more accurate to say they are being forced out because of the large rents involved. Soon, we will see more businesses act like Molly Malone and wheel their wheel barrows through streets broad and narrow to sell their wares. This is not an exaggeration. It is not scare-mongering. It is inevitable unless something is done.

This time last year the Minister for Justice, Equality and Law Reform, Deputy Ahern, first signalled that he would introduce legislation to tackle the rent review issue. Since then a welcome Act has been introduced in order to ban upward-only rent clauses, but that does not deal with the possibility of downward clauses. Since last year almost 15,000 businesses have ceased trading. While new commercial leases cannot now include an upward-only rent review clause, there are thousands more which are locked into these unsustainable leases. The working group to examine commercial rents is not due to report until the end of June. Can the country afford to wait that long? I look forward to the Minister's reply. Businesses cannot afford to wait for the report of the Minister's working group. After receiving the report, how long will it take the Government to take action? The example of the mid-west task force demonstrates that often the Government is only prepared to pay lip-service to economic recovery. We will have to wait and see in this case. I hope the Minister will take the matter very seriously.

Spiralling rents, coupled with the economic downturn, has had a serious impact on the retail sector. Opponents of the abolition of upward-only rent reviews argue that these rent reviews actually benefit tenants in the long-term. They argue that if landlords could not increase rent, they would be willing to grant only short-term leases in order to ensure they could re-let a property soon after at a higher rent. However, the process of negotiation needs to be given greater focus. Carluccio's restaurant in Dublin negotiated a reduction in rent after it closed earlier this year and said it would not be reopening unless it could secure a rent reduction. Today, the business has reopened and is reported to be doing well. There is no possibility landlords will yield the same rents on commercial leases as they did five years ago. That is why it is in the best interests of the landlord and tenant to abolish these clauses.

There are two types of tenants. One is the institutional investor and the other is a smaller investor. Both are naturally anxious to gain the maximum possible from their investment. However,they have to recognise, and they have not been prepared to do so thus far, that retailers are being squeezed out, forced to lay off their staff, close their doors and walk away.

The Government has regularly talked to us about the need for competitiveness in this economy. Of course, when the Government does so, it is referring mainly to low and middle income workers, and mainly those in the public service. It is time we brought competitiveness, some level of fairness and a level playing pitch back to the rental sector. The Government has an opportunity to do so through the Bill.

I understand the comments by Deputy Ciarán Lynch earlier in regard to the Government, first, voting down a motion he put forward and, then, bringing back pretty much the same motion at a later date in its own name. Since I have come into the House, that has been the practice, although I do not understand it. Where is the embarrassment in the Government in accepting legislation that is well crafted, or reasonably well crafted if it wants to so describe it? As was said by the two previous speakers, the Government could itself amend the legislation to put it into the shape it would accept in order to save jobs and create a level playing pitch.

Let us consider for a moment who are the employees in these businesses. Sometimes, they are full-time employees who are very grateful for what is often long-term and secure employment. In other cases, they are people who can only afford to do short-term or part-time work because they are, perhaps, single parents, parents with a young family who simply cannot afford child care or people looking after elderly parents. For those reasons, they are delighted with the work offered by this sector.

I hope the Government will recognise that if it does not take this business seriously and move soon, more people will be added to the 432,400 already on the live register. The Minister for Justice, Equality and Law Reform has a capacity to act quickly when the need arises. The need certainly arises here, and I hope he will act accordingly.

Dermot Ahern (Louth, Fianna Fail)
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I wish to share time with the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Billy Kelleher.

Brendan Howlin (Wexford, Labour)
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Is that agreed? Agreed.

Dermot Ahern (Louth, Fianna Fail)
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On a procedural point, I only received a copy of the Bill at noon yesterday. In the context of fairly significant legal issues, it would be important that, in future, Bills be made available as expeditiously as possible. I did not know about this being-----

Dermot Ahern (Louth, Fianna Fail)
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The Bill was not available to my Department until yesterday at noon. The first I knew this was being taken was when I read in The Sunday Business-----

Brendan Howlin (Wexford, Labour)
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I will raise this procedural matter. If the Bill is formally moved, it is laid before the House or it cannot proceed. We will have that matter checked for the Minister.

Eamon Gilmore (Dún Laoghaire, Labour)
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The Minister did not try very hard to find it. It was moved last Thursday. This is nonsense.

Dermot Ahern (Louth, Fianna Fail)
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As we debate this evening, businesses are hurting, people are being laid off and 432,000 of our friends, neighbours and families have no jobs. That is 432,000 reasons why we, as legislators, need to be here, breaking our backs to find real workable and practical solutions which lead to real jobs and real prosperity. To do that, we have a duty to be honest and to acknowledge what we can do and what we cannot. False hope and PR alone do not create jobs and do not put bread on the table.

We cannot support and accept a Bill that is legally and constitutionally unsound, which this Bill is. The reasons for this are many and involve both legal and practical considerations. Our strong view is that it not constitutionally permissible for the State to interfere through legislation with pre-existing leases freely negotiated on a commercial basis by private parties. Any attempt to do so would clearly constitute an unjustifiable attack on property rights contrary to Article 40.3 of the Constitution and also would not be justified under Article 40.3.2° as being wholly disproportionate. Initially, I propose to focus on the legal reasons which underpin our opposition and, lest Deputy Lynch be in any doubt on this point, I can state categorically, on the basis of unequivocal advice received from the Attorney General, that his Bill is not consistent with the Constitution.

Dermot Ahern (Louth, Fianna Fail)
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When I address the legal considerations, I will then deal with the practical side of the equation. At the core of the Bill is an attempt to impose a substantial restriction on private property rights, since one of its key objectives is to effect a change in the amount of rent which has been agreed as a result of a contractual arrangement which has been freely entered into by the relevant parties. In this context, rent from commercial premises is undeniably property for the purposes of the relevant provisions of the Constitution. Lest the Deputy is in doubt about the matter, I again refer to Articles 40 and 43 of the Constitution.

Dermot Ahern (Louth, Fianna Fail)
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The statutory alteration in a contractual term which the Bill would bring about is capable of having significant discriminatory effects. If constitutional principles are to be satisfied, the intervention proposed must be necessary and proportionate. Any legislation which fails to satisfy this test runs the risk of amounting to an unjust interference in property rights. In this regard, and bearing in mind the terms both of the Constitution and the European Convention on Human Rights, the Bill does not appear to be on a sound footing.

I remind the Deputy that existing commercial leases have been entered into by a wide range of landlords, not all of whom would be in similar circumstances. The properties to which these leases relate will also vary considerably in terms of character and profitability. Whatever impulse may be driving the Deputy in producing this Bill, even he must acknowledge that there is no attempt made in it to deal in a balanced way with the interests of landlords and tenants.

Dermot Ahern (Louth, Fianna Fail)
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The complexity of the financial arrangements which sometimes underpin commercial lease arrangements is completely ignored, as are the obligations which are taken on foot of them. Furthermore, in purporting to treat all tenants equally by giving them the benefit of the Bill's provisions, there is a risk that some will be given a benefit which they do not need and that some landlords may suffer disproportionate disadvantage.

I understand that this Bill has not been developed with the interests of landlords in mind. However, I cannot ignore the fact that, while originally entered into by both parties, the upward-only rent review clause was intended to protect a landlord's income stream from the vagaries of the market. If that benefit is now to be removed by the State and not the market, we would be depriving individuals and companies of an important contractual right, and would be doing so without compensation and also in an arbitrary and discriminatory way.

The provision in the Bill enabling the order to limit its application to a class or type of business, or to a particular geographical area, or how that is to be defined, does not solve this problem. Not only are there no guidelines as to the basis upon which any order could be lawfully made, which in itself creates constitutional issues, but in making provision for such order, the Bill implicitly recognises it is not legally possible to apply section 132 of the Land and Conveyancing Law Reform Act 2009, which was passed last July, to all pre-existing leases indiscriminately. In other words, if the promoters of the Bill are so certain about its legality, why does the Bill not just state bluntly in the Bill that the ban on upward-only rent review applies to existing leases? This is not stated and the Bill does not address the fundamental issue of how the State can constitutionally legislate to extend section 132 to pre-existing leases.

The Deputy is undoubtedly aware of the principles which informed the striking down by our courts of the old rent restriction legislation. Those principles inevitably come into play in regard to the proposed interference with commercial rights freely negotiated between individual parties.

Reference has been made to the ground rents legislation in the context of the Shirley High Court decision - which it is acknowledged will be heard by the Supreme Court very shortly - as if that amounts to a precedent for intervening in this particular area. Again, the advice from the Attorney General is that the Shirley decision deals with a completely different matter, namely, the entitlement to purchase the fee simple, subject to payment of compensation. That provision is part of a long-standing legislative scheme designed to remedy the obvious inequity of the old common law position whereby on the expiration of a lease the property built by the tenant would revert to the landlord. This is patently unfair. The Attorney General has advised that the justifications for such a provision do not apply to a proposal to extend section 132 to existing leases.

The retrospection element contained in the Bill and the potential effects this would have upon completed legal transactions immediately raise issues of compatibility with the Constitution. While the Deputy may have advice to the contrary, my legal advice and that of the Government, is that legislative restrictions which affect property rights retrospectively are prima facie unjust.

Dermot Ahern (Louth, Fianna Fail)
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At first sight, it is also possible that the envisaged restriction on property rights would be disproportionate to the social good apparently sought to be achieved. In essence, what the Bill seeks to bring about is a downward adjustment in rents across the board. It is difficult to conceive how this would be possible to implement in a constitutional manner.

It can be guaranteed that if this Bill were to be enacted, the State would undoubtedly face a number of legal challenges from those whose position was adversely affected by its provisions. We would be mired in litigation with no confidence of a successful outcome for many years to come. Even if we could intervene retrospectively it would send an unmistakable signal to business - I accept there are business people in the Public Gallery and obviously they are required to be here by the Labour Party - that this State would intervene, willy-nilly, with private contractual rights in a significant and arbitrary manner whenever it decided.

I suggest that the business community would want to be very careful about what is being proposed in this respect because if that is the case it would set a precedent for State intervention at any time when it so decided -----

Dermot Ahern (Louth, Fianna Fail)
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-----to intervene in private contractual arrangements.

Dermot Ahern (Louth, Fianna Fail)
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The proposals before us are not new, rather they are a repackaged version of a Bill introduced by the Labour Party last year which was acknowledged by Government and by Fine Gael as being legally flawed.

When discussing my proposal to ban upward-only rent reviews and the Labour Party proposals, the Fine Gael spokesperson for justice, equality and law reform, acknowledged that he was "not sure whether the Minister can go any further than he already has,". He went on to agree with my assumption that, "retrospection is not an option". Another Fine Gael speaker went on to stress that "as Deputy Charles Flanagan said, however, it would appear that if an attempt was made to interfere with existing leases we would probably end up with somebody challenging this legislation. It will end up in the Supreme Court and God only knows when a decision will be taken. In the meantime new leases will be entered into and no change will have been made". This repackaged version of the old Bill, before us this evening, maintains the constitutional flaws of its predecessor.

Before turning to more practical considerations, I also wish to address two lines of argument which have also gained currency in recent days. It has been suggested that intervention in this area is possible on the basis of the justifications recited in the Financial Emergency Measures in the Public Interest Act 2009. However, the 2009 Act does not give the Legislature the freedom to interfere in an arbitrary way with property rights in general. The legal issues arising under the 2009 Act are entirely different and the same financial imperatives do not apply.

An alleged link between NAMA valuations and demands on the part of some landlords for high levels of rent increase has also been suggested. Any attempt by landlords to increase the value of their property by seeking to impose unsustainable rent increases will have no impact on the valuation placed on such property by NAMA.

Leaving aside legal considerations, the Bill is also unworkable in practical terms. I suggest that Deputies read the Bill. It raises a number of questions to which no answers are given. The trigger for its application is the formation of an opinion by Government that tenants of commercial premises cannot fairly be expected to pay rents at the rates previously prevailing, or at any increased rate. This is a very subjective test. No guidance is given as to how Government is to form its opinion and no mechanism is provided in the Bill as to the objective factors which should bolster any assessment by Government in this area.

Dermot Ahern (Louth, Fianna Fail)
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If this Bill is to pass muster and go before the courts, it would have to give that type of guidance. Such objectivity is a crucial element if the impact of Government intervention is to be proportionate and non-discriminatory.

If, as law and equity would seem to require, there is a proper assessment as to the need for Government intervention, the timeframe required for such an assessment would be such as to defeat the emergency imperative which allegedly is the underlying rationale for the Bill.

As I understand, the effect of the Government order which is mandated by the Bill would be to allow the current provisions of section 132 of the Land and Conveyancing Law Reform Act 2009, to apply to all leases, and all agreements for leases, regardless of when they have been entered into. The Bill does not make it clear as to whether this provision is intended to apply to existing leases where reviews have already taken place, which could be this year, last year or some years previously. If it is intended to so apply, this is a recipe for market chaos as rents previously agreed would have to be recalculated to accord with the Bill's provisions. If it only applies to existing leases in the context of future reviews, the difficulties which have inspired the Bill, such as high rents resulting from determinations on the basis of upward-only rent reviews, are not being addressed and the Bill may be regarded as disingenuous. I believe it is.

The current section 132 is framed in very neutral terms and does not preclude an upward review where this would be justified. If one examines closely the new subsection (2)(b) of the Deputy's Bill, it seems clear that it only contemplates a downward adjustment. As Deputies will be aware, market rent is traditionally the rent which, on the basis of vacant possession, a willing tenant would pay and a willing landlord would accept. Even in our current difficult circumstances, it is not inconceivable that market rent in some cases might be more than the sitting tenant is willing or able to pay. The Bill, in failing to address this issue, does not do justice to the complexity of the commercial property market. Neither does the Bill deal at all with the situation where the parties fail to agree on the appropriate level of rent. One of the undoubted difficulties in this area is that the parties are seldom ad idem as to the rent which is to be paid. Presumably the standard provision in a rent review clause, whereby, in the event of a dispute, the matter goes to arbitration or review, is not being interfered with. However, there is a reference in the Bill to the fact that the Government order may provide for any measures necessary to secure compliance with it. I ask the Deputy if he is contemplating the establishment of some additional mechanism to verify whether the reviewed rent equates with the Bill's provisions. In that event, is Government to substitute its version of the reviewed rent for that which has emerged on foot of the review? This is plainly nonsensical.

Finally, I would observe that the basis for discriminating as between particular types of commercial premises and particular geographical areas is not clear. The concept of geographical area, in this context, is especially vague. Is this a reference to counties, townlands or specific streets?

The Bill is deeply flawed both in its legal and practical aspects and I do not propose to comment any further on its demerits. This is not a Bill which the Government could endorse with any credibility. I reject any suggestion the Government should accept the Bill, amend it or introduce a similar Bill. The unequivocal legal advice from the Attorney General and confirmed by independent legal advice is that the Legislature cannot retrospectively pass law today to rewrite contracts freely entered into by two individuals.

Dermot Ahern (Louth, Fianna Fail)
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The Bill is deeply flawed. I will state what the Government has already done to address some of the difficult circumstances confronting those in the retail sector. We must not lose sight of the fact that the rent issue, while undeniably important, is not the only issue with which that sector has to deal and the Government has been very proactive, across the broad range of economic activity, in seeking to support the retail sector. A revived economy is the best support that Government can offer and Ministers across a range of Departments, are working tirelessly to create a business-focused environment which is essential to the overall well-being of our commercial sector.

We must not lose sight of the fact that the rent issue, while undeniably important, is not the only issue with which that sector has to deal and the Government has been very proactive across the broad range of economic activity in seeking to support the retail sector. Ultimately, a revived economy is the best support that the Government can offer and Ministers, across a range of Departments, are working tirelessly to create a business focused environment which is essential to the overall well-being of our commercial sector.

For business leases entered into from 28 February, the inclusion of upward only rent review clauses is effectively prohibited. The relevant provision is contained in section 132 of the Land and Conveyancing Law Reform Act 2009. The effect of that provision is that such rent review clauses are to be construed as providing that the rent payable following review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed. This provision applies even if the lease contains what purports to be an upward only rent review clause.

In introducing section 132, I was conscious of the fact that the concept of an upward only rent review clause did not cohere well with current economic reality. I was concerned to ensure, within the legal and constitutional constraints which inevitably inform the policy choices which Government must make, that some measure of relief was granted in respect of business tenancies. I was clear when steering that legislation through the Houses about the limitations we have in that respect but wanted some measure of relief to be granted in respect of business tenancies. I wanted to send as strong a signal as possible to the market to encourage landlords and tenants to re-negotiate rents to take into account the current economic difficulties. Many landlords are renegotiating on the principle that half a loaf is better than none. The Deputy does not have a monopoly on compassion in this area but compassion cannot change the legal reality within which we operate.

I am as aware as anyone else of the hardships being borne at this time by the retail sector. However, every redundancy and every business failure cannot be laid at the door of upward only rent review clauses. Other factors are also at play and the Deputy does not do the sector any service by suggesting that the resolution of this one problem will deal with all of the difficulties which confront it.

In the future, the section 132 provision may bring about shorter leases of seven to ten years, possibly accompanied by a fixed rent for the duration. In the retail sector the way will be open for turnover based rents, arguably a fairer way of determining matters in this sector. In general, the flexibility introduced by the provision should facilitate tenants in trading their way out of present difficulties.

I have already established a working group to look at the process whereby rents are reviewed in the commercial sector. Its terms of reference are to consider the operation of the current system for determining the rent payable on foot of a rent review clause, with particular emphasis on the arbitration process and the adequacy of the information available to all parties and if necessary to make such recommendations for change as may seem appropriate. I have also asked the group to report by the end of June. Michael Durack SC has agreed to chair the group and it is proposed that a number of representative groups, such as Retail Excellence Ireland, IBEC, the Small Firms Association, ISME, the Irish Association of Investment Managers, the Irish Auctioneers and Valuers Institute, the Irish Association of Pension Funds, the Society of Chartered Surveyors, the Department of Justice, Equality and Law Reform, the Department of Enterprise, Trade and Employment and the Office of the Attorney General will have a representative on the group.

The Government is more than willing to adopt any proposal the working group will make and to listen to any of the relevant suggestions from the Opposition of the groups representing the retail sector. We cannot, however, accept half-baked proposals. They must be legally sound. With due respect to the Deputy and the proposal before the House tonight, and I do not want to be confrontational-----

Dermot Ahern (Louth, Fianna Fail)
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-----but we have looked at this issue high up and low down in the Department-----

Dermot Ahern (Louth, Fianna Fail)
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-----and with the best advice available from the Attorney General. I can assure the House that it is impossible for the Legislature through legislation to rewrite contracts entered into freely by two individual parties previously. We are more than willing, however, in a short space of time, if there are relevant and legally sound proposals to come forward from the working group or, indeed, any other quarter, to try to address some of the ills of our economic situation, particularly in the retail sector, which we all understand. We are practising politicians and realise there are difficulties out there but I am not in the business of hoodwinking people.

Billy Kelleher (Cork North Central, Fianna Fail)
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I would like to speak on the broader issues of the Government's strategy to support businesses, improve competitiveness and sustain employment.

Ensuring that our enterprises receive the support to assist them through the current difficult period is key to safeguarding employment. The Department has been very active in the past year to respond to the difficulties being faced by businesses and there has been a range of supports provided by the enterprise agencies - IDA Ireland, Enterprise Ireland and the county and city enterprise boards - across a wide range of issues. All of the agencies have re-focussed their strategies to take account of the current economic situation. To address the immediate threats to Irish businesses from the current crisis, new schemes have been introduced, such as the employment subsidy scheme to help retain jobs in our vulnerable exporting companies, and the enterprise stabilisation fund to help protect jobs in our exporting companies hit by current difficulties.

My colleagues and I are also keen to support small and medium size enterprises and I am particularly aware that there is difficulty for some businesses in accessing credit. This issue of concern to many people and has been raised on numerous occasions in this House. The Minister for Finance announced a new credit review system in the budget. The credit review system will examine the credit policies and practices of the banks, particularly for SMEs. This new system will inform Government what further action might be necessary to secure the flow of credit to Irish enterprises and, through publication of the analysis from the review process, help ensure that the performance of the banks participating in NAMA is transparent to all.

There is a credit supply clearing group in the Department of Enterprise, Trade and Employment and the establishment of the credit review group by the Minister for Finance shows we are conscious of the need for a flow of credit to small and medium size businesses. There is inherent difficulty in the banking sector itself that has been discussed continually in the House. Primarily, however, the focus must be to ensure we repair the impaired balance sheets of the banks and get lending flowing into small and medium size businesses. The credit review system is critically important in that and will make sure we have a system whereby there can be an independent analysis of the refusal of credit to small and medium size businesses and an appeals process put in place so there is outside adjudication on whether banks are fulfilling their obligations in the context of the previous capitalisation of the banks and any further assistance they might require.

If we think back only a short period, while we are talking about populist issues in the House this evening, we can remember that some parties did not even support the bank guarantee to ensure we underpinned the banking system, which was of critical importance in ensuring the integrity of the financial system and, equally importantly, that we have a banking system that will function when the impaired balance sheets are addressed and recapitalisation is brought to bear and that we have a flow of credit. That debate has been exhausted but it is important to remember it when Deputies opposite, who are concerned about businesses this evening, were not concerned at the time because it was more populist to be against the banks when that was politically expedient.

Enterprise Ireland delivers a wide range of supports to Irish companies targeted at the specific requirements of clients throughout all regions to ensure that they develop to their full potential in terms of innovation and exports which in turn stimulate job creation. Enterprise Ireland, in recognising the significant changes in the current economy both in Ireland and globally, has prepared a recovery strategy to identify the actions that will be undertaken to help clients. The agency has refocused its efforts on strengthening and sustaining companies of strategic importance through a range of initiatives focused on the needs of its client base.

The county and city enterprise boards continue to provide support for small businesses in the start-up and expansion phases. Job creation is an inherent consideration in the activities of the boards. In 2010, the county and city enterprise boards will continue to assist micro-enterprises throughout the country by both direct grant aid to businesses and project promoters and also through the provision of a range of other important business supports such as mentoring, business training and business advice designed to help to stimulate indigenous enterprise creation and to boost employment creation. The Tánaiste reconvened the small business forum in December 2009 and we hope to arrange another meeting in the coming weeks to discuss the needs of the small business sector. We all understand the importance of getting credit flowing and supports such as employment subsidies but other key issues can also be addressed.

I visited Enterprise Ireland's headquarters in East Point today to attend the launch of the 73 companies involved with its new high potential start-ups initiative. These companies demonstrate the innovative and entrepreneurial instinct that remains alive and well in this country. It is important that we highlight the success stories as well as the difficulties faced by our business community if we want to send a better message both domestically and internationally.

Ireland's exports have shown resilience in 2008 and 2009. For our size, Ireland has a disproportionately large share of world trade markets particularly in regard to services. A return to growth in our main trading partners accompanied by a sustained improvement in our own competitiveness should present opportunities for further export growth in existing markets. We are also focused on exploiting the potential of emerging and high growth markets. We are consistently striving to diversify our export profile, exploit our talents and opportunities and guard against overdependence on specific markets. We are developing a new trade strategy but the resulting document will not simply be left on the Department's shelves. It will be a breathing document which will evolve with changing markets and global commerce. We will focus primarily on our traditional markets in the UK, the United States and Europe, as well as Brazil, Russia, India and China, which have huge growth potential. However we face challenges from a weak sterling and struggling US economy.

In the coming months, we will dedicate all our efforts towards promoting innovation and entrepreneurship. We will support the export community, by which we will live or die, so that we will have positive outcomes not only for our exports but also our inward investment.

I would have liked more time to discuss the Bill in detail because I am aware of the difficulties that arise in the wider economy. Rent is one issue but competitiveness in terms of energy and labour costs must also be addressed. We need an honest debate on these issues instead of the populist rhetoric we sometimes hear in this House.

Charles Flanagan (Laois-Offaly, Fine Gael)
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With the approval of the House, I wish to share my time with Deputies Joe Carey, Coveney and Ring.

Jack Wall (Kildare South, Labour)
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Is that agreed? Agreed.

Charles Flanagan (Laois-Offaly, Fine Gael)
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On behalf of the Fine Gael Party, I welcome the Land and Conveyancing Law Reform (Review of Rent in Certain Cases) (Amendment) Bill 2010 and commend my colleague, Deputy Ciaran Lynch, on introducing it. It is not a perfect Bill and I am sure the Deputy will acknowledge that he does not have a monopoly of wisdom on it. Opposition Members do not have available to them the same level of expertise as those on the Government benches. If this Bill is not perfect, let us discuss it in committee so that we can deal with the contentious issues on an all-party basis to ensure we address the problem.

I am keenly aware of the enormous pressures that commercial tenants face. Retail Excellence Ireland and the Grafton Street Tenants Association have done an excellent job in highlighting the dire straits in which many tenants now find themselves. Sadly, in recent times, a number of landmark businesses in Dublin city centre have closed their doors with a loss of jobs and, in some cases, cultural capital where shops that have been part of the fabric of Grafton Street for decades have simply disappeared overnight.

The problem of unsustainable rents is felt in cities and towns around the country, including in my own local towns of Portlaoise and Tullamore. No business is immune from the current economic meltdown and those trapped in commercial leases paying exorbitant rents are in a particularly difficult situation as they struggle for their very survival.

Last year Fine Gael supported section 132 of the Land and Conveyancing (Law Reform) Act 2009 because it reflected our policy to abolish upward-only rents. At the time, the Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, suggested that the section could not apply to existing leases but that view has been disputed by Professor David Gwynn Morgan, who has argued that in recent decades several laws have been introduced that modified existing landlord and tenant leases. The matter may not be as black and white as the Minister has suggested, therefore. Precedents include the Shirly case, the Landlord and Tenants (Ground Rents) Act 1978, the Landlord and Tenant Act 1931 and the Landlord and Tenant (Amendment) Act 1980, all of which affected existing leases and tenant-landlord relations. I regret the negative tone taken by the Minister, who spoke for 20 minutes but offered nothing.

Notwithstanding constitutional arguments, dialogue is needed at this time. Many landlords have engaged with their commercial tenants because the recognised the writing on the wall and reduced rents to reflect changed times. However, I understand that tenants have had particular difficulties with large commercial landlords and Government intervention is needed in this context. The Minister is in a unique position in that he can call people into Government Buildings to facilitate the resolution of disputes. The ability to bring people together is one of the most powerful aspects of being a Minister. Unfortunately, this Government has been slow to make use of its potential to mediate as we have seen with the Tánaiste and Ryanair. It would be a lost opportunity if the Minister did not dedicate his energies to resolving the upward-only rents crisis, a word which I do not use lightly.

I acknowledge that he has established a working group to examine the adequacy of information available to all parties in the context of commercial rent reviews. While I welcome what at least represents some action, I am somewhat surprised by the group's narrow remit. When the Minister outlined the group's membership, I did not hear him mention a representative from the Grafton Street Tenants Association or Retail Excellence Ireland.

The reality is that commercial leaseholders are the victims of a rare approach to commercial leases that Ireland adopted from the UK. It is time we recognised our place in Europe by adopting international best practice in landlord and tenant law. Within the EU, commercial rents are linked to inflation and leases tend to be for shorter terms and contain break clauses. These regimes are fairer and more reflective of the realities of commercial life. Such a progressive approach is long overdue in Ireland and I am calling on the Minister to consider introducing a new Bill which would consolidate existing landlord and tenant legislation as well as modernising this area of law. The Land and Conveyancing (Law Reform) Act 2009 was only a first step in overhauling the conveyancing and landlord-tenant regime. That Act arose from a seminal report by the Law Reform Commission in 2005 and I believe the commission should be asked by the Attorney General to prioritise a report on consolidating and modernising landlord and tenant law.

Our key focus must be the preservation of jobs. Fine Gael has expressed concern about the lack of competitiveness in the Irish economy and the negative role that high commercial rents are playing in that environment. Ministerial intervention is needed immediately to preserve jobs. The Labour Party's Bill is welcome but it represents a short-term solution. What Fine Gael would like to see is the introduction of new measures that would allow businesses to apply to court for rent reviews in exceptional circumstances. This would afford greater protection to businesses. 9 o'clock

What is certain is that festering sore of upward-only rents can be resolved with political and legislative will. I call on the Minister, Deputy Ahern, to roll up his sleeves and get involved. A solution could be achieved that could benefit all parties and I trust this is what he will decide to do now, as well as taking on board the policy proposals of Fine Gael in this area.

Joe Carey (Clare, Fine Gael)
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I commend the Labour Party and Deputy Ciarán Lynch for bringing this Bill before the House this evening and I compliment Retail Excellence Ireland on bringing this matter to the attention of the public. The chief executive of Ennis Chamber of Commerce, Ms Rita McInerney, informed me today that 70 commercial properties are available at present to buy or rent in Ennis. Some 700 businesses are on the rates books of Ennis Town Council. It is a frightening reality that 10% of the rateable commercial properties in Ennis are vacant, unoccupied or have had to close down because of the recession. Unfortunately, this scenario is replicated throughout the country. It is blatantly clear that commercial retail rents in Ireland cannot be sustained in the current trading environment. Many of these rent agreements were struck during the height of the economic boom experienced in this country and bear no resemblance to the economic reality faced by our country. The regime of upward-only rents has resulted in many of our retailers, who were hanging on by their fingertips, going to the wall and bringing valuable jobs with them. I have spoken to many Clare business people who are struggling due to the unsustainable leases into which they are tied. They are crying out for some respite or a helping hand.

There were 38 retail insolvency cases in Ireland in the first two months of 2010. The retail sector in this country is in crisis and that must stop. It is a profoundly depressing experience to walk down any street in any city or town in this country and witness as commonplace white-out windows and the ever growing proliferation of "To Rent" signs. In the past fortnight, the significance of what is happening to smaller shops with the loss of four, five or six jobs on a daily basis was underlined by the closing down of two signature retail outlets, namely, the bookseller Hughes & Hughes and Bestseller, the renowned clothing chain which has gone into examinership. Both these retailers blamed excessive rents for their difficulties. Rents charges on properties are now exceeding labour costs. It is commonplace to find retailer's rents representing up to 20% of their revenue. This position is causing great financial stress to businesses and it is simply unsustainable.

It is somewhat ironic that, little by little, we are seeing some of those involved in our now discredited banking sector beginning to appear as landlords of buildings and shopping centres. Just as we must know what took place in our banking institutions, we must also know what is going on in the rental market. There must be full transparency in the process, which is not the case at present. The whole industry requires proper regulation and full disclosure. In short, there must be a level playing field for all parties engaged in the process.

It is obvious to all that the retail sector has taken it fair share of cuts. They have cut the prices charged to consumers and cut labour costs by letting people go or reducing hours. However, in the case of the most significant cost, that is, rent, nothing can be changed.

There is price flexibility in all walks of business life. We see it in sales, special offers for products, discounts for bulk purchasing and promotions. Without this flexibility the business world would simply not exist. The only area in business where there is no flexibility is in respect of rents. This evening, the Government has an opportunity to introduce a retrospective ban on upward-only rents. This ban will go some way towards stopping the loss of vital retail jobs. It will give much needed support to small and medium-sized businesses which provide these jobs. I urge the backbenchers in Fianna Fáil to stand up and represent the people who put them in here and to stand up for the small and medium-sized businesses that provide the jobs that people are crying out for. I am sick and tired of watching the shedding of crocodile tears by Deputies, moaning about job losses. Tonight, they have an opportunity to stand by their people and the retail sector of this country by supporting this Bill. I appeal especially to the backbenchers in this regard.

Michael Ring (Mayo, Fine Gael)
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I wish to make a small contribution to this motion. I compliment the Labour Party on bringing this Bill before the House. I have never seen as many people in the Gallery before. The reason they are there is that businesses are under pressure. I was disappointed with the contribution of the Minister for Justice, Equality and Law Reform tonight, but perhaps I should not have been. The Government has only one interest, that is, the banks. It is not interested in businesses or people who are trying to create employment in this country.

We are here to legislate. We should be able to introduce the necessary legislation to deal with this rent problem. Many firms have gone out of business and we have lost thousands of jobs because of the rent situation in the country. The Government should govern , but the problem is that it is occupied by the banks and it only cares about ensuring that the banking institutions are saved. We should find ways to support and help small businesses. This is the area from which we will have to build up the economy. The big multinationals will no longer come into this country and we will come to depend more and more on firms consisting of two, three and four employees. What is happening at present? We are losing such firms on a daily basis. We do not see it on RTE and TV3 but such people make up the backbone of the economy.

The Government has shown the same attitude towards the Criminal Law (Home Defence) Bill. It referred the matter to the Law Reform Commission and various reports. We have more reports and more libraries filled with reports in this country than ever before. However, we need action to help small businesses under pressure and attack, which are trying to keep going but which are unable to survive. They cannot get money from the banks and they cannot get support from the Government. Local authorities believe they can continue to charge as before. The small businesses paid for benchmarking but charges continued to be placed on them and this continues to happen now with landlords. They kept prices up and people cannot pay. Jobs are being lost.

Governments are here to govern. The Minister referred to the need to impress upon people the need for confidence. The Government has lost its way. What is needed now is a general election. We need a new Government with new thinking and ideas because this Government has gone stale. Please God, in a short time to come, the Acting Chairman, Deputy Jack Wall, might become Cathaoirleach. He might be in the job with the gown around him because these guys have lost their way.

Simon Coveney (Cork South Central, Fine Gael)
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It is nice to have some comic relief in a serious debate. I support the Labour Party in what it is attempting to do this evening. In essence, the Bill proposes to allow the Government to make an order to allow for, in effect, an annulment of the upward-only rent review clause in existing rental contracts in extreme circumstances and in specific market sectors where the Government deems it appropriate to do so. Let us be clear: this is an emergency measure. It is not normal legislative work. We are trying to keep the people watching this debate and thousands of others throughout the country in business.

The effect of upward-only rent reviews in the middle of a recession is that retailers are being driven out of business by the law. We are legislators and it is our job to change the law and to take emergency measures when appropriate. As a result of a law passed by this House, retailers are faced with upward-only rent reviews that landlords will use, at times cynically, to drive up rents for various ulterior motives, often linked with loan book value, property valuations or, in some cases, anecdotal evidence would suggest, to try to get rid of so-called troublesome tenants when they know such people cannot pay.

We have an obligation to solve this problem as policymakers and legislators. No one else will solve it. There are dozens of small businesses in the retail sector at present unable to pay existing rents and facing a demand for significant rent increases. The Minister of State, Deputy Kelleher, knows that is also the case in our city of Cork, as does Deputy Ciarán Lynch who has spoken to many of the tenants to whom I have spoken.

The property valuation bubble has long since burst and we have seen reductions in values of between 20% and 60%, depending on the land valuation or the property valuation but, unfortunately, the rent bubble that grew during the Celtic tiger period is still inflating for many people despite the fact that their revenue and their margins have collapsed. That is not sustainable. Their businesses are not sustainable because of laws that we have passed in the past. We have an obligation to address that problem.

It is extraordinary that even though the Minister of State outlined a number of initiatives and proposals that the Government is trying to take to help businesses, he did not even mention rent, which is what we are discussing this evening and tomorrow night. Let us focus on the issue at hand, which can be summed up by a retailer to whom I spoke today who has two identical premise. For one, in Foyleside in Derry, he is paying €66,000 a year in rent and for the identical 500 sq. ft. property in Liffey Valley in Dublin, he is paying €190,000 a year in rent. He is being asked in the rent review to increase the latter to €220,000 a year. How can businesses in Ireland survive against their competitors north of the Border in that type of mad situation?

The problem must be solved. I do not mind whether it is solved by this Bill or by a new initiative coming from the Government using a bit of imagination, but we need to find answers. It was somewhat depressing to listen to the Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, spend almost his entire speech explaining why he can not do this rather than trying to give people hope that he is serious about finding a solution to this issue.

We need to stop looking at this in an entirely legalistic way. We must get around the law, but there are policy ways in which we can potentially do that. For example, look at how the UK and the US dealt with bank bonuses. They could not deal with the issue legally because people were contractually entitled to receive bonuses for performance so they decided to deal with it through taxation.

Jack Wall (Kildare South, Labour)
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The Deputy has one minute remaining.

Simon Coveney (Cork South Central, Fine Gael)
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The US Congress proposed a 90% tax on such bonuses to, effectively, eliminate them. There are different ways of looking at issues. I am not saying that is the appropriate way, but we must find a way. We cannot allow businesses wither on the vine because of inappropriate rental valuations that apply to a boom time when we are in the depths of this recession.

The final issue I would raise is the distinction between institutional landlords and individual landlords. There are many responsible individual landlords in Ireland who are doing deals with their tenants to try to keep them in business, and I would encourage more of that. However, there are institutional landlords and, in particular, banks, about whom, regardless of what the Minister stated on the so-called NAMA effect on rental prices at present, I have deep concerns. There is even a State-owned bank, Anglo Irish Bank, deliberately trying to push up rents in order to potentially add value to loan books and to property valuations in advance of those loan books being taken over by NAMA.

Jack Wall (Kildare South, Labour)
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The Deputy should conclude.

Simon Coveney (Cork South Central, Fine Gael)
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I want the Minister to investigate that issue to ensure that we are not standing over a State-owned bank or any other banking institution in Ireland deliberately trying to drive up rent for their own profitable gain in terms of the anticipation of a valuation that may be put on that property by NAMA. I plead with the Minister to ensure that this issue becomes a priority for him and for Government.