Monday, February 14, 2011

Retail sector wants action on rates and rents | The Post

Retailers have been at the coal face of the recession, with shop closures and job losses linked to unemployment, reduced spending and weak consumer confidence.

With 250,000 people employed in this sector, many feel that the outgoing government has not done enough to protect these businesses. So the sector has pressed general election candidates to deliver solutions to problems such as high costs and boom-time rental agreements.

Retail Excellence Ireland (REI) has come out strongly in favour of the positions being taken by Fine Gael and Labour.

‘‘The policies outlined by Fine Gael and the Labour Party will be central to our economic recovery.

These policies will support jobs, reduce prices to consumers and will greatly assist recovery in Ireland’s largest industry - retail," said REI chief executive, David Fitzsimons.

‘‘The mix of measures proposed in the policies of Fine Gael and the Labour Party address the key issues of commercial rents and wage costs in the retail industry," he added.

‘‘They propose practical and straightforward measures that, if implemented, would provide a significant boost to many Irish retail businesses."

In particular, he welcomed campaign promises by Fine Gael and Labour to ban upward only rent reviews for legacy leases.

The outgoing government banned such clauses in new contracts, but said that the Attorney General’s advice was that intervention on existing leases would be unconstitutional.

However, Fine Gael has proposed that all tenants be allowed to call a review in 2011 and that the upward-only clause would not apply. The party has stated that it will defend its plans in the Supreme Court if necessary.

Labour has proposed legislation to ban upward-only rents altogether. It plans to appoint a commercial rents ombudsman who will have powers now only available to an examiner. Stephen Mackerel, chief executive of the Carphone Warehouse, which has 78 stores in Ireland, said the removal of upward only rent review clauses was a key issue for his business.

‘‘It is the only way you are going to get the economy moving again. Retail accounts for 50 per cent of GDP, so the economy is not going to kick on unless retail moves as well," he said.

REI’s legal advice, he said, was that retrospective changes to commercial leases was constitutional and he was confident there were ways around it.

Mackerel said the outgoing government was not interested in the issue.

Fianna Fáil TD John Curran, who is the party’s spokesman on justice, said any government had to rely on the legal advice it received. ‘‘The advice of the Attorney General was sought," he said.

‘‘Amendments were made to prohibit upward-only rent reviews on new leases, so that’s the future taken care of. But the strong advice at the time from the Attorney General was that wholesale interference with existing leases was not feasible. He said real legal and constitutional difficulties would arise if we were to try and deal with leases retrospectively.

‘‘It wasn’t that we weren’t sympathetic or didn’t think it should be done," said Curran. ‘‘It’s easy to make promises, but this issue has arisen and was dealt with seriously. The advice of the Attorney General was sought and was acted upon."

While opposition politicians have made pledges on the rent review issue, not all legal experts believe that changing legislation is the right course of action.

Professor Sandeep Gopalan, head of the law faculty at NUI Maynooth, cautioned against any rush to change private contracts and suggested that the courts was the proper forum to deal with the issue.

‘‘Alotof people have a kneejerk reaction that banning these clauses will solve all sorts of problems," he said. Gopalan said that state intervention in private contracts could bring other problems with it. It is a complex issue and one which the incoming government may not easily solve.

Other subjects which featured prominently on the agenda of retailers were Joint Labour Committees (JLCs), which set minimum wages for specific sectors. Again, REI has backed Fine Gael and Labour’s positions. Fianna Fáil announced a review of JLCs last week but, for some in the retail industry, this was too little, too late.

Paul Candon, corporate services director of energy company Topaz, which employs 1,400 people, said retail was ‘‘not well at all’’.

‘‘We are going to see far more store closures and far more jobs lost because of the lack of traction from the Fianna Fáil government," he said.

Candon added that the cut to the minimum wage was completely cosmetic, as the minimum wage was still 8 per cent higher than in Britain.

‘‘But we have our sectorial minimum wage so it means nothing to us," he said.

‘‘The message for the incoming government is that we must make this country a viable place to work and to do business.

And we must ensure that the same rules apply to all employers. JLCs are antiquated and need to be abolished." Businessman James Nolan, of the award-winning Nolan Butchers in Kilcullen, Co Kildare, said that top of his agenda was local authority rates.

‘‘The rateable valuation that I pay on my premises here was redone in 2006/2007 at the height of the Celtic tiger. It just isn’t a fair reflection of the economic times we are living in today," he said.

‘‘In tandem with that, the cost of things like ESB charges and waste charges are absolutely horrendous," said Nolan, a member of the Small Firms Association.

‘‘I’m a small business, but it is small businesses that are giving employment. There are 22 people working here and that is huge employment in a small town.

But before you even open the door you have huge rates." In this election, the retail sector - as with many others - is demanding more than ever before. Delivering results will no doubt prove extremely difficult for whoever ends up in power.

The underlying issue for all retailers is depressed consumer confidence, which is inextricably linked to austerity measures and the problems of the banking sector - both of which seem sure to cloud the horizon for some time to come.

This is a very contentious issue for both sides. In the private market, common sense generally prevails, but Institutional investors are very slow to alter their rental demands.

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