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.

via thepost.ie

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.

Posted via email from quirkeproperty's posterous

Bank takes action on buy-to-let customers | The Post

Permanent TSB has intensified its bid to move its buy-to-let mortgage customers away from interest-only mortgages.

However, it has no plans as yet to incentivise a similar move by owner occupiers. A number of the bank’s existing buy-to-let customers received letters in the last two weeks regarding changed terms for their interest-only mortgages.

Late last year, the bank started this initiative, writing to the owners of thousands of buy-to-let properties to advise them to start paying back the capital on their investment property loans or face losing their tracker-rate mortgages.

‘‘Customers retain their current tracker mortgage rate once they agree to move to interest plus capital repayments or, where they choose to remain on interest-only, they will be charged an extra 1 per cent on their current interest rate," a spokesman for the bank said.

He said that the bank had ‘‘engaged with about 1,000 customers’’ regarding buy-to-let, interest-only mortgages up to now.

The spokesman added that Permanent TSB’s bid to move interest-only investment customers to capital repayments was not affected by recent rate announcements by the bank.

‘‘This approach remains for these customers, regardless of other changes to our variable or fixed rate interest rates in the meantime," he said.

The spokesman also stressed that there were no plans for a similar move for homeowners with an interest-only mortgage.

‘‘Some owner-occupier customers do have interest-only mortgages, and there are no plans to extend this

project

to these customers," he said.

Last week Permanent TSB announced increases of up to 3pe r cent in its fixed rate for existing customers to whom the bank is obliged to offer a fixed rate. It is no longer offering fixed rates to new customers.

Earlier this month, the bank announced a 1 per cent increase in its variable rates.

via thepost.ie

Posted via email from quirkeproperty's posterous

Council expected to reverse Gormley on zoning - The Irish Times - Mon, Feb 14, 2011

FIONA GARTLAND

AN ORDER made by former minister for the environment John Gormley, which directed councillors in South Dublin to change the zoning on land at Carrickmines, is likely to be reversed at a meeting tonight.

The move follows on from a court case when development company Tristor Ltd challenged the legality of Mr Gormley’s order.

The Park Village lands at Carrickmines, close to the M50, had been rezoned to district centre by councillors in the course of drafting the Dún Laoghaire-Rathdown County Development Plan 2010-2016. District centre status would have allowed for greater development at the site.

But an order from Mr Gormley, made in March 2010, directed councillors to reverse the rezoning and return the site to neighbourhood centre status, which allows for smaller development.

In a very tight vote, councillors voted to accept the minister’s order. Tristor then took a judicial review of the decision and last November, the High Court ruled the minister had acted outside his powers and the council was no longer bound by his order.

Mr Justice Frank Clarke directed the council to reconsider the area development plan in light of its findings.

Tonight councillors will discuss legal advice provided by senior counsel Conleth Bradley.

In a document circulated to councillors in advance of the meeting, Mr Bradley advised that councillors had “no discretion to re-debate” the zoning of the land.

“The elected members are required to adopt a resolution, which reflects the lawful position prior to the invalid ministerial direction and nothing else,” he said.

The resolution, provided by county manager Owen Keegan, will effectively return the site to district centre status.

Meanwhile, Green Party TD Ciarán Cuffe has called on councillors to reject a proposal that would allow a retirement village to go ahead at the foot of the Dublin mountains, at Ticknock near Sandyford.

“Some councillors believe that we should revert to the short-term ‘all development is good development’ mantra of the past regardless of where it is located,” he said.

But local resident Fiona Capaldi said her father, who suffered a stroke last year, was in need of such a facility. She urged councillors to vote for it.

“If they developed a retirement village there it would give my parents and others like them some choice,” she said.

via irishtimes.com

Posted via email from quirkeproperty's posterous

Breaking free from the prison of negative equity - The Irish Times - Mon, Feb 07, 2011

CAROLINE MADDEN

PERSONAL FINANCE: Negative equity can prevent trading up or trading down, but in the UK lenders are now offering creative solutions to the problem. In Ireland, more informal agreements are sometimes available to help homeowers out of a locked-in situation

IRISH HOMEOWNERS trapped in negative equity may have read with envy that UK banking group Lloyds is now offering an escape route to customers with underwater mortgages through its new Equity Support Scheme.

The deal allows customers of Lloyds TSB, Halifax and Cheltenham Gloucester to use their savings as a deposit towards a new property, rather than using them to plug their negative-equity gap. No additional borrowing is allowed, but this niche product will assist people where a move is a necessity.

Although no such over-the-counter offering has been officially launched in the Irish market, some lenders are quietly facilitating customers on a case-by-case basis.

David Duffy of the Economic and Social Research Institute (ESRI) estimates that the number of borrowers in negative equity reached 300,000 at the end of 2010, based on a peak-to-trough fall in property prices of 40 to 45 per cent. The majority are first-time buyers who purchased close to the peak.

Because this group tended to take out 100 per cent mortgages, any dip in the value of their property immediately pushed them underwater. Many of these homeowners now wish to move on or trade up, but find themselves unable to do so because the proceeds from selling their property would be nowhere near enough to pay off their mortgage.

Last summer, it emerged that a number of lenders in Ireland were looking at introducing negative-equity mortgages. This typically allow borrowers to carry over the excess amount owed to their bank onto a new mortgage.

However, in July the Central Bank called a halt to this, contacting all mortgage lenders and requesting them to stop offering negative-equity mortgage products.

The Central Bank was concerned people could dig themselves further into debt, and end up overexposed and struggling to meet their repayments.

Most mortgage lenders informed the

Central Bank that they did not intend to introduce this type of product. However, a small number of lenders said where an existing customer approached them requesting some type of arrangement involving negative equity, they might consider advancing a mortgage but only on the basis that it would be in the best interests of the customer and the institution.

Strict criteria relating to net disposable income, loan-to-value ratios, income multiples, credit histories and so on would have to be met in any such cases and agreed in advance with the Central Bank.

The Central Bank has banned lenders from actively promoting or advertising this type of arrangement, but if a customer’s situation meets the necessary criteria they may be able to assist them.

There is anecdotal evidence that this is now happening, albeit on a limited basis.

Frank Conway, a director at the Irish Mortgage Corporation, encountered one woman whose marriage had broken down and her husband had moved out of the family home. As she was unlikely to be able to meet the full mortgage repayments on the property herself, she was looking at selling it.

The outstanding mortgage on the property was €380,000, but the house, which was bought at the height of the boom, had fallen in value to about €220,000. This would leave a negative equity hole of €160,000. She discussed the predicament with her lender, and they came up with a deal which would allow her to move on. If €220,000 were realised from the sale of the house, it would be offset against the mortgage. The balance of €160,000 would be converted into an unsecured personal debt, which she would be allowed to repay on the same terms as the original mortgage (ie, over 32 years, and at her existing tracker rate).

Conway was also contacted recently by a financial professional who had borrowed about €1.7 million to buy a house which he was now forced to sell because of a change in his personal circumstances. He was being offered just €900,000 for the property, which would leave him €800,000 underwater.

His lender offered to “cut him a deal” that took into account the fact he also owned multiple investment properties. The bank would allow him to sell his home and chip away at the resulting €800,000 deficit, repaying just €500 a month for 25 years. As this would only wipe out a fraction of the amount owed, he would have to make a large balloon payment at the end of the 25-year term to repay the balance. The deal was structured on the presumption that the customer’s circumstances would improve in the intervening years, but it was also secured on his investment properties, which could be sold if necessary.

According to Conway, banks are getting customers to submit detailed information on their income and expenditure and are “vetting” these figures “very thoroughly” to see if people are genuinely in difficulty, and that there is a real need to move on.

In his experience, banks are not writing off negative equity debt, but in situations where people are facing the type of circumstances outlined above, lenders “have little choice but to show some sort of ability to work” with the customer.

Ronan Lyons, economist with property website daft.ie, says the option to “bring the [negative equity] debt with you” should be available in the Irish market where appropriate, for instance, if an individual is in secure employment and is looking to move from a small apartment to a house because they have started a family.

“The new government should be looking to make sure that where possible negative equity isn’t a stumbling block to getting a new mortgage,” Lyons says.

He also says if the negative equity problem becomes “severe enough”, the government should consider introducing income-tax breaks for people who have to let out their home in order to rent another property that better suits their changed circumstances.

Duffy says while negative-equity mortgages can facilitate people who need to move house and therefore “add some mobility to the housing market”, they have to be looked at carefully as there can be downsides.

For instance, if the borrower is trading up, they can end up with an even higher loan-to-value ratio.

The Government’s expert group on mortgage arrears and personal debt has recommended that lenders should give further consideration to facilitating trading down by borrowers in negative equity, as this could reduce their mortgage debt and result in more affordable monthly repayments.

For the moment, though, lenders are constrained in what they can do.

The upshot is that for most homeowners trapped in negative equity, there are only three realistic options: use every spare penny to pay off the debt overhang; get tenants into their current home and rent another property; or avoid crystallising the loss by staying put.

The new government should be looking to make sure that, where possible, negative equity isn’t a stumbling block to getting a new mortgage

via irishtimes.com

Can't see why the Central Bank won't allow theses mortgages. At least, it will let people move to secure jobs.

Posted via email from quirkeproperty's posterous

Shutting up shop - The Irish Times - Mon, Feb 07, 2011

CONOR POPE

TROUBLE ON THE HIGH STREET: Retailers are under threat from all sides – consumers with less to spend; landlords and their punitive upward-only rents and out-of-town superstores looking to hoover up any available business. It’s tougher than ever for our shopkeepers

THESE ARE very tough times for Ireland’s shopkeepers. Just how tough, was illustrated by a report published last month which said that 400 shops would have to close for good during what was the worst January in living memory.

In the days after the report came out, some of what was contained within came to pass as high profile stores like Zhivago Records in Galway and Waterstone’s Bookshop in Dublin announced they were in serious trouble.

If there was one thing Irish shops did not need to kick-start 2011 was a weak January, coming as it did on the back of a nightmare before Christmas.

Pre-Christmas trade in Ireland was badly damaged by heavy snow at the start of the month and in the week before December 25th. The harshest budget in the history of the State and the gloom caused by the IMF bailout did not whet people’s appetite for a seasonal splurge either.

While weak consumer sentiment and bad weather hit retailers hard, what is causing many independent shop-owners more grief is the existence of upward-only rent agreements – leases which, effectively make it illegal for shop keepers to try to renegotiate their rents downwards, no matter how bad business gets or how low the value of the property they are renting falls to.

Imagine how hard it must be to own a shop on a busy street and watch your rent increase by as much as 500 per cent in 10 years because of upward only rent reviews, only to wake up one morning to find a shop selling almost exactly the same products has opened next door and is paying just 10 per cent of the rent you are, and charging prices you can never hope to match.

Such scenarios are playing themselves out across the State.

The report which said that 400 shops would close this month was published by Retail Excellence Ireland (REI). It represents more than 8,500 shops and has pleaded with any new government to take immediate steps to save the retail sector.

Its chief executive David Fitzsimons recently told Pricewatch that the outgoing Government had focused on the collapse of the banking sector at the expense of the rest of the country.

“The domestic economy is being left behind,” he says. “The retail sector accounts for 50 per cent of GDP and the reality is that the Government can not expect the economy to recover unless the retail sector recovers. I know we can’t improve consumer sentiment overnight, but a new government can address certain issues which may help the sector.”

Speaking as the REI report was launched, Stephen Mackerel, chief executive of the Carphone Warehouse and a member of the organisation, accused the outgoing Government of cronyism in failing to take on developers who were demanding inflated rents. He said that if retailers were in a position to renegotiate their rents downwards, prices for consumers could fall by between 6 and 8 per cent almost immediately.

Mackerel described January as the worst in the shop’s history. “Footfall was down at least 20 per cent on last year and last year was in itself a real shocker.” He said that of his 77 stores, landlords have only entered “into any sort of meaningful sort of negotiations” in seven of them. “The rest have just given us the two fingers”.

Mackerel says that if upward-only rent reviews were scrapped, the retail sector could provide 30,000 news jobs and drop their prices by between 6 and 8 per cent. He says, quite reasonably, that the most effective way to stimulate demand among would-be shoppers is to entice them through the doors with lower prices. While an incoming administration may look towards changing the rules, the outgoing one certainly did not.

One of the final acts of the last Oireachtas was the publication of a report into Ireland’s retail sector. At its launch, Willie Penrose, the chairman of the committee, said that although it had spent three years investigating the sector, it never got around to discussing the issue of high retail rents despite admitting it was one of the biggest threats facing Irish retailers and could cost tens of thousands of jobs.

Penrose accepted that the issue of upward-only rent reviews was a serious problem but claimed the committee had not discussed the issue formally because “we did not anticipate that the report would have to come out so quickly.”

Keeping rents high and forcing businesses to close does not, however, make sense for landlords, surely?

Yes and no. While no landlord wants to see a tenant vacate a premises because they have gone out of business, nor do they want to see the value of their investment decimated because the rental income falls off a cliff.

Industry sources say that some developers are massaging the figures. If they can convince Nama that they are getting €10,000 in rent for a property, but are actually only able to get a tenth of that, then theoretically that property is worth 10 times more than it otherwise might be. The problem is however, that first the retailer goes out of business, then the developer goes bust and finally the taxpayer picks up the bill. No-one wins.

While rent is one issue that threatens to kill Ireland’s indigenous retail sector, another shadow looms almost as large on the horizon in the form of massive supermarkets springing up on the outskirts of our towns.

On many levels such developments are to be welcomed as prices will fall – at least in the short term.

The downside ultimately will be a diminution of choice and the possible destruction of our town centres. In the US, Walmart has laid waste to many town centres. The same thing is happening in the UK with Tesco, Sainsbury’s and the Walmart-owned Asda opening huge supermarkets selling everything from flat-breads to flat-screen TVs and fresh fruit to washing machines and driving business away from towns out into the suburbs.

Things in Ireland are moving that way. The Tesco Extra stores sell toys, hardware, electronics, prescription drugs, clothes, groceries, alcohol, books and a whole lot more. While the prices are competitive, the service in such stores can be found wanting.

Last week, Pricewatch wandered the aisles of one such shop for quite some time looking for a staff member who could shed any light at all on the dizzying array of TVs on the shelves. There was no-one to be found.

According to Fitzsimons, there is “going to be a big shift in retailing and a big shift in power, with more and more of the money going to huge supermarkets on the outskirts of our towns and this could kill town centres completely.

“Our industry is going the way of the US where 70 per cent of the market is controlled by just three players. The big name multinationals can come in and demand their own terms and conditions when setting up and this can leave the smaller guys screwed.”

As smaller shops trade is swallowed up by hypermarkets, choice will be diminished as will customer service. Even now shops are being forced to make hard calls and many can’t afford to employ the extra staff to give customers that extra bit of service. “There are some electrical retailers who could afford to employ maybe 15 per cent more staff to offer advice and give them the edge over online retailers but can’t because high rents offer them no flexibility. So consumers are taking the hit twice in the form of worse customer service and higher prices,” says Mackerel.

via irishtimes.com

Posted via email from quirkeproperty's posterous