In the recent Irish High Court case of Reox Holdings plc v David Cullen and Simon Davidson (High Court, July 2012), it was held that a guarantor who takes over responsibility for a lease entered into before February 2010 can avail of the statutory ban on “upwards only” rent review provisions which came into force in respect of leases entered into after that date.
Section 132 of the Land and Conveyancing Law Reform Act 2009 came into force on 28 February 2010 and provided that any clause allowing for the review of rent in a lease could be interpreted as permitting the upwards or downwards review of such rent, irrespective of the terms of such provision. Section 132 applies to all commercial leases entered into on or after the 28 February 2010.
The High Court held in the Reox case that where a guarantor steps into the shoes of a defaulting tenant and enters into a replacement lease after February 2010 on the same terms as the original lease, the restriction on upwards-only rent reviews will apply to the replacement lease even where such original lease was entered into prior to February 2010.
The decision is likely to be of interest to those bound by leases which contain “upwards only” rent review provisions and to guarantors generally.