January 8, 2013

Last day of Korkys Grafton Street

Hi,
Korky’s , 47 Grafton Street,will cease trading at close of business tomorrow the 8th January 2013. We have traded in the street for the last twenty years. Since our rent review in April 2005 when our rent was increased to 445,000 euro p.a. we have struggled to survive. The dispute between ourselves and Canada Life,our landlords, resulted in the ending of upward-only rent reviews in all future commercial leases in Ireland and the Euro zone. Below is the reference in Wylie’s book “The Land and Conveyancing Law Reform Act 2009; Page 318
“At the final Dáil Report Stage the Minister for Justice,Equality and Law Reform introduced a provision to ban upward-only rent reviews. Previously the Master of the High Court had called into question the appropriateness of such clauses in the current state of the property market  (in a decision on the application for the appointment of an arbitrator,Kidney V Charlton(22 January 2009), HC). There was a campaign to ban such clauses by retail tenants who claimed that such clauses forced them to continue paying rents well above the going market rate. A dispute over the refusal by a landlord to reduce the rent on a small shop on Grafton Street, Dublin brought the controversy to a head. The Minister was responding to this”

DSC01398


John Corcoran
Korky’s shoes
47 Grafton Street
Dublin 2

December 31, 2012

Korkys Grafton Street shuts up shop

1_March_2010John Corcoran of Korkys who is closing down his Grafton Street store having failed to get a reduction on his rent of €450 thousand per year. His lease, like 99% of all leases prior to 2010  included the upward only rent review clause.  Consequently the rent was reviewed to €140k in 1995 increasing to €210k in 2000 and to €450k p/a in 2005.  Mr. Corcoran  knew this figure was unsustainable in 2005 and has been trying since then to get a reduction.  Other tenants in the same boat got behind him and this resulted in the banning of upward only rent clause in all future leases in March 2010.  However this left all pre 2010  tenants the length and breath of Ireland, still prisoners of their UORR leases. The Government promised to deal with current leases prior to election but broke their promise as soon as they were elected.

In 2010 Mr. Corcoran speaking on behalf of the Grafton Street Tenants Association stated: “Over the past ten years rents on Grafton Street have surged to a level where they are now the fifth highest in the world. These absurd rents are unsustainable in a small country like Ireland. We have seen many well regarded retail businesses fail in recent times as a result of intransigent landlords and excessive rents, including O’Brien’s Sandwich Bars, 3G, Vero Moda, Adams childrens, Guess, La Senza, In store, Hughes and Hughes, and many more. All these companies cited rents as the primary reason for their closure.

The UORR lease clause played a very substantial role in bubble rents which in turn created bubble commercial property prices, which ultimately led to our current economic collapse. Those large institutions that used this notorious lease clause, which no other euro zone member state would tolerate, must take responsibility for their actions. The directors of these companies should immediately agree the removal of these clauses from existing leases or make way for directors who are capable of moving with the times and have the flexibility and capability to follow the Government’s lead. The UORR clause is an aberration which must go.”

Mr. Corcoran urged the Government with the support of the opposition, to finish the job, complete the task and devise a mechanism to oblige the landlord to accept a market rent in all existing leases.

Two years later there is still no sign of any action from the Government who seem happy to let good businesses close down every day with the loss of thousands of jobs.

Mr.  Corcoran confirmed today that all other Korkys branches will continue trading.

 

Rough List of the closures that made the papers AND many more small independent  and family traders throughout Ireland that did not make the list because they close down unnoticed and unremarked every day.

A-Wear
Adams Childrens Wear
Alain

Arnotts ( outlying branches )

Atlantic Home care (some branches

Bad Ass Cafe

Barrets Shoes

Birthdays Card Shops

Blarney Woollen Mills

Blacktie- Dawson Street and Blackrock
Budget Travel

Byrnes World of wonder

Celtic Bookmakers

Comet records
Chartbusters

City Mode Middle Abbey Street

David Marshall Hairdressers

Dolls Hospital

Dolphin discs

Excell  furniture Store Capel Street

Formes
Footlocker

Foodplus Capel Street

Gamestop -some branches
Game stores

3G

Golden Discs –some branches
Guess

Guineys

Gruel

Habitat

Harvey Norman – Mullingar

Helen Modes Crescent shopping centre Limerick
Hughes&Hughes – reopened one shop
Henry Jermyn
Halifax Bank
Harvest pub chain Galway

Homestore

Instore

Jane Norman
Jay Bourke Restaurant
Jessops

JJB Sports  – 6 branches

Kennedy and McSharry

Korkys Grafton St.

La croissanterie

La Senza

Laura Ashley Grafton St.
Louis Mulcahy
Mao Rerstaurant
Mermaid Restaurant

Monica John
Motion Picture

No Name

O’Briens Sandwiches

Oriel Gallery

Paco,

Peats/Sony stores -11 stores
Pia Bang
Pixels
Pepe jeans,

Pulse Accessories – 27 stores

Richard Allen

4 Star Pizza

Shebeen Chic
Sasha

Searsons Pub

Spectra

Sony

Tie Rack

Toni&Guy

Total Fitness Gyms

Thomas Cook

Vera Moda/Bestsellers – has reopened some shops

Venu brasserie

Waterstones

West Jewellers

William Hill

Wolfes Irish Artisan Bistro

X-tra Vision – some branches

Zavvi Records
Zerep Shoes
Zumo Juice Bars

October 6, 2012

Tenants should write a letter of complaint to the European Commission

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 There is strength in numbers.

We urge all tenants to follow John Corcoran’s lead and to write to the European Commission making a complaint about the property cartel at work here in Ireland, which uses the upward only ratchet rent to maintain rents above market level. The more information the Commission receive the more likely they will launch an investigation. Write to the European Commission at:
Competition DG

Markets and cases V: Transport, post and other services
Antitrust: Transport, Post and other services
Bruxelles, 0 5 OKT, 2012
COMP Fl/AD/sp/D2012/1 05383“Market information, such as the one you have given us, is often not in itself sufficient to give rise to an investigation. However, information from various sources may form a pattern which might lead the Commission to initiate a full scale investigation at a later stage.”
The full reply to Mr. Corcoran’s letter of complaint is below:
EUROPEAN COMMISSION Competition DG
Markets and cases V: Transport, post and other services
Antitrust: Transport, Post and other services
Bruxelles, 0 5 OKT, 2012
COMP Fl/AD/sp/D2012/1 05383

Mr. John Corcoran
Irish Commercial Tenants AssociationSubject: HT1558 — The Irish Commercial Property Cartel — Organised white collar criminalsDear Mr Corcoran,
Thank you for your letter of 23 September 2012, in which you make the allegation that the Irish commercial property market is a criminal cartel supported by a tenant unfriendly lease law.
As I already mentioned in my letter of 1 December 2011, EU competition law prohibits anticompetitive agreements and abuses of dominant position. In particular, Article 101 of the Treaty on the Function of the European Union (TFEU) prohibits agreements and concerted practices (including cartels) among companies which prevent, restrict or distort competition, insofar as they may affect trade between Member States. Article 101 applies to undertakings’ behaviour which would have a significant effect upon trade between EU Member States. However, your letter provides insufficient evidence of such an infringement and therefore will not lead to any follow-up by the Commission.
The EU competition rules are applied not only by the Commission, but also by the national competition authorities. Since the alleged infringement relates to Ireland, you also have the possibility to inform the Irish Competition Authority about your concerns as regards a possible cartel. However, I should inform you that neither the Commission nor the Irish Competition Authority is in a position to judge the merits of the commercial lease law of the Republic of Ireland under competition rules.
For the avoidance of doubt, it should be stated that we regard your information as market information and not as a formal complaint. A formal complaint has to comply with certain legal requirements which are set out in Article 5 of Commission Regulation No 773/2004. Market information, such as the one you have given us, is often not in itself sufficient to give rise to an investigation. However, information from various sources may form a pattern which might lead the Commission to initiate a full scale investigation at a later stage. 
We therefore appreciate that you have chosen to inform us of these issues and we have taken note of your concerns.
Yours sincerely,Hubert de Brocca
Head of Unit

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October 6, 2012

Minister Noonan’s announcement on budget day that the A.G.’s opinion states that they cannot legislate for existing UORR leases.

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This letter was posted to Minister Noonan by registered post this week.

Dear Minister Noonan, 
Below is a summary of the distinguished Irish constitutional lawyer Gerard Hogan’s SC opinion on the banning of the ratchet upward-only rent review lease clause in legacy commercial leases. This appears to conflict with what you stated in the Dáil on Budget day 6th December 2011.
The summary reads as follows; 
“A. Any legislation which rendered void pre-existing contractual commitments providing for upwards-only rent review would deprive the landlords of a valuable contractual right without compensation. This, however, is not a dispositive consideration, since legislative interference with contractual rights along these lines is not uncommon, i.e., the very point which Costello J. made in Cafolla.

B. The critical question is rather whether such legislation would be proportionate and objectively justifiable. For the reasons set out in this opinion, there are far reaching policy reasons why the Oireachtas might think that the prohibition of such clauses is necessary in the public interest. Not the least of those reasons is that the Oireachtas might consider that such clauses artificially maintain unrealistically high rental levels in the retail sector, thus hindering the recovery of the retail sector. Of course, given the high importance of the retail sector to the volume of economic transactions and consumer confidence, the economy as a whole cannot fully recover from an economic crash without the recovery of that sector.
C. In my view, any such proposed legislation is no different in principle from many other forms of legislation which preclude or render void pre- existing business practices provided for by contract. The proposed legislation satisfies the proportionality test in that –
i. It is rationally connected to an objective of sufficient importance (i.e., recovery in the retail sector) to warrant interference with a constitutionally protected right and, given the serious social problems which they are designed to meet, they undoubtedly relate to concerns which, in a free and democratic society, should be regarded as pressing and substantial.
ii. Such legislation would also impair those rights as little as possible and their effects on those rights are proportionate to the objectives sought to be attained in that it would simply provide a mechanism whereby rents could be assessed by reference to prevailing market conditions and deflation.
iii. Critically, such legislation would not attack the essence of the contractual right, namely, the right to receive a market rent and, unlike cases such as Blake, it would not involve one sector of society (namely, landlords) being expected unfairly to bear the burdens from other sectors of society are exempt.
D. No difference in principle can be drawn between the proposed legislation and the FEMPI Act. Certainly, if the Oireachtas can constitutionally take steps drastically to interfere with existing contractual rights of service providers and public servants without compensation (as the High Court has already held in the JJ Haire case), then the proposed legislation of this kind would equally seem to be constitutionally valid.” Gerard Hogan

There appears to be some confusion. Perhaps you might consider
publishing your legal opinion, if it’s in order.

Yours sincerely
John Corcoran

 

 
October 5, 2012

Political Corruption in Ireland

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The Primary Care Centre policy was always about property and not about health care.
It relied upon the upward only rent lease to extort rent from tenants, in this case, the state as tenant. In 2010 thanks to a campaign led by the Grafton Street Tenants Association, upward only rent review leases were banned in all future leases and consequently the wheels came off the primary care policy because developers saw no possibility of extorting ratchet rents from the state. In the present  case the government can easily clear Minister Reilly’s named by publishing the detail of the HSE lease agreement with Mr. Murphy/Nama.  Instead it will use very excuse in the book not to do so.  This, despite the governments promise to publish a commercial lease database under the Property Registration Authority to ensure transparency in a corrupt industry.

In Ireland the interface between private property and the public sector is where much political corruption occurs. Two examples are the planning process and state commercial leases.
The findings of the Mahon Tribunal were–”Corruption in Irish political life was both systemic and endemic”.
In the Moriarty Tribunal the findings were ” What was attempted on the part of Mr Dunne and Mr Lowry (In relation to the 42 year lease of the Eircom building) was profoundly corrupt to a degree that was nothing short of breathtaking”.
Former Taoiseach Mr Haughey was a corrupt politician who required millions to finance his, and his family’s lavish lifestyle. Many of Mr Haughey’s bagmen were state landlords– this was the pay back. Many Irish politician’s families, friends and bagmen are state landlords. This was and is institutionalised political corruption. No other government in the world would have signed these commercial leases. Reckless Irish banks lent tens of billions against these ruinous leases, not against the properties, and created the greatest commercial property bubble and crash in the history of mankind.
We, the tenants/businesses trapped in the old leases have been deemed not worthy of rescue by this government and are left to be exterminated.  All these jobs lost  to prop up the dying property industry- just collateral damage of a land/rent grab.
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September 17, 2012

Bruton’s investment in UK property wiped out

 

Minister Bruton checking out the property pages

 

Minister Bruton commercial landlord

Yet another Minister with commercial property interests aka a LANDLORD destroying viable businesses. No wonder the present government reneged on their promise to abolish Upward Only Rent Leases. They did not just cave in to the vested interests, they ARE the vested interests. How many more of the cabinet are commercial landlords?  How can this cabinet govern when they do not come to major issues with clean hands?  What we need now is not just  a list of members interests but also a list of members debts and company interests.

Bruton’s investment in UK property wiped out.

 

Richard Bruton  Listed members interests -2012 

 

BRUTON, Richard (Dublin North-Central)
1. Occupational Income …….. Setting farmland: Woodtown, Drumree, Co. Meath.
2. Shares …………………….. (1) AIB: Ballsbridge, Dublin 4: banking; (2) Bank of
Ireland: Lower Baggot Street, Dublin 2: banking; (3)
Anglo Irish Bank: St. Stephen’s Green, Dublin 2:
banking; (4) Fifth Belfry Properties (UK) plc.: 5th Floor,
Beaux Lane House, Mercier Street Lower, Dublin 2:
property; (5) Irish Life and Permanent, Lower Abbey
Street, Dublin 1: finance; (6) IAWS, 151 Thomas Street,
Dublin 8: food; (7) CRH: Belgard Road, Dublin 22:
building products; (8) Kingspan: Castleblayney,
Monaghan: building products; (9) Smurfit Kappa Group:
Clonskeagh, Dublin 4: packaging; (10) FBD Holdings:
Bluebell, Dublin 12: insurance; (11) AIB Investment
Fund: c/o Ark Life Assurance, Hatch Street, Dublin 2:
unit fund.
3. Directorships……………… Nil

4. Land ……………………… (1) 175 acres, Newtown, Dunboyne, Co. Meath:
farmland; (2) 50 acres, Woodtown, Drumree, Co. Meath:
farmland.
Other Information Provided: (1) Part owner with my
father.
5. Gifts ……………………… Nil
6. Property and Service …….. Nil
7. Travel Facilities ………….. Nil
8. Remunerated Position ……. Nil
9. Contracts …………………. Nil
 

COVENEY, Simon (Cork South-Central)  Commercial landlord

1. Occupational Income …….. Landlord: (1) No. 17 The Moorings, Hartys Quay,
Rochestown, Cork; (2) Apartment No. 8, Simon Stevin,
Rue Stevin, Brussels, Belgium.
2. Shares …………………….. Share holding: (1) Retail Properties Ltd., Private Wealth
Managers, 72 Merrion Square, Dublin 2: Irish property
investment; (2) Bonds: IIB Bank, Sandwith Street,
Dublin 2: investment bonds; (3) Shareholding: Coveney
Family Investment Club, Davy, 49 Dawson Street,
Dublin 2: family investment fund.
3. Directorships……………… Member of Board: Cork Printmakers, Wainsford Quay,
Cork: artists co-operative.
Other Information Provided: Non-paid voluntary
position.

September 13, 2012

OPINION OF COUNSEL RE: PROHIBITION ON UPWARD ONLY RENT-REVIEW CLAUSES

High Court judge Mr Justice Gerard Hogan author The Origins of the Irish Constitution 1928-1941and Enda Kenny, Sept 13, 2012

RE: PROHIBITION ON UPWARD ONLY
RENT-REVIEW CLAUSES
OPINION OF COUNSEL  Mr. justice Gerard Hogan
Preliminary
1. The present decline in consumer confidence and retail spending is, unfortunately, without parallel in our lifetimes. This has given rise to huge pressures in the retail sector. Many of these rents were fixed at a time of high growth rates when demand for retail outlets was intense and when a downturn of this intensity was not reasonably foreseeable. The downturn has left such retailers saddled with inappropriately high rents in the same way as the Government has been left with inappropriately high public sector pay rates and other costs. Nearly all of these commercial leases provided for upwards only rent review clauses – this was not only the norm at the time, but retailers leasing retail space had little option but to comply with such demands. 

2. The question which now arises is whether the Oireachtas could validly introduce new legislation which provided that such rents would be pro tanto amended to enable an arbitrator to have regard to changing market conditions so as to enable (where appropriate) the rents to be reduced. The Labour Party introduced a Private Member’s Bill to this effect, Land and Conveyancing Law Reform (Review of Rent in Certain Cases)(Amendment) Bill 2010, but this was opposed by the Government parties on the basis that the measure was likely to be unconstitutional. The issue which I am now required to consider is whether legislation of this general kind would be likely to be found to be unconstitutional.

Articles 40.3.2 and Article 43 of the Constitution: Some Basic Principles

3. While there is a vast case-law on property rights (Article 40.3.2 and Article 43 of the Constitution), we can nonetheless start by articulating some basic and unexceptionable propositions.

4. First, a contractual right of this kind is a property right for the purposes of Article 40.3.2 of the Constitution.1 Of course, the fact that a contractual right of this kind comes within the ambit of the protection of property rights does not mean that it is sacrosanct or free from legislative interference, for nearly all legislation interferes with contractual freedom in one shape or another.

5. Second, in order to withstand constitutional scrutiny, any legislative interference with such a property right must be proportionate and capable of objective justification and must meet a pressing social objective. Any legislative interference with these rights must be necessary to meet key social and public policy objectives which are necessary in a democratic society.3  Thus, in Re Article 26 and Part V of the Planning and Development Bill 19994, Keane CJ, giving the judgment of the Supreme Court in determining whether the statutory provisions constituted an “unjust attack” on property rights, stated that Part V of the Planning and Development Bill 1999, contains provisions which:- “…are rationally connected to an objective of sufficient importance to warrant interference with a constitutionally protected right and, given the serious social problems which they are designed to meet, they undoubtedly relate to concerns which, in a free and democratic society, should be regarded as pressing and substantial. At the same time, the court is satisfied that they impair those rights as little as possible and their effects on those rights are proportionate to the objectives sought to be attained.” In that case it was held that the Bill which proposed that landowners wishing to develop land were obliged to cede 20% of the land (or the equivalent value thereof) to the local authority did not constitute a disproportionate interference with the land owner’s property rights.

6. Third, the State’s duty to protect property rights is not absolute, as the wording of Article 40.3.2 itself makes clear. This point was classically made by O’Higgins CJ in Moynihan v. Greensmyth6: “It is noted that the guarantee of protection given by Article 40, s. 3, sub-s. 2, of the Constitution is qualified by the words ‘as best it may’. This implies circumstances in which the State may have to balance its protection of the right as against other obligations arising from regard for the common good.”

7. It follows that the State is entitled to balance the protection of property rights against other considerations. Thus, for example, even fully retrospective interference with the right to sell the family home might be justified by reference to the State’s obligation to protect the family (Article 41 of the Constitution): see the comments of Henchy J. in Hamilton v. Hamilton8. Likewise, even where the State destroys perfectly healthy animals in order to contain the spread of lethal animal disease, this does not mean that it is obliged to compensate farmers for all losses as a result.

8. It is, moreover, clear that the State is entitled to have regard to present economic conditions which assessing the extent of its duty to protect property rights. This very point was made by McMahon J. in JJ Haire & Co. Ltd. v. Minister for Health and Children10:“[T]he word “unjust” in “unjust attack” [in Article 40.3.2], must be read in the light of the unusual economic crisis that necessitated the introduction of the 2009 Act. All the evidence before the court was to the effect that the State is facing an unprecedented economic crisis, whereby the State is forced to introduce drastic economies and cuts across the board. These economic realities must inform the interpretation of the constitutional phrases in assessing what the State can do and what distributive measures it must take to ensure not only the stability of the economy, but the stability of the State itself.”

9. This leads us to directly to the question of whether such an interference would be capable of objective justification. While this argument is set out in more detail later in this opinion11, the key consideration here is that upward-only review clauses were negotiated in a different economic era where, inter alia, the spectre of deflation was not foreseen. More to the point, the existence of such clauses might be thought to be inflicting widespread damage to the retail sector, because they are artificially blocking the  achievement of an “internal” devaluation in that sector, i.e., a situation where rents, income and wages would reflect true economic conditions, instead of the artificiality created by bubble conditions at the end of the Celtic Tiger period. This is not only critical to the recovery in that sector, but is a vital feature of national economic well-being, given that consumer spending represents some 50% of Irish GDP.

10. In these circumstances, such legislation would seem in principle to be more than capable of objective justification.

11. Third, the fact that the legislation affects existing contracts is certainly a factor to which very considerable regard must be had in assessing the constitutionality of the measure. There is no doubt at all but that, so far as the landlord is concerned, an upward-only rent review clause was a key element of the contractual bargain. 12. Yet, if one surveys the case-law to examine the cases where the legislation affecting property rights was found to be unconstitutional, nearly all of the cases share a common theme, namely, that the legislation in question was inherently arbitrary, disproportionate or unfair. Two of the classic authorities may serve to make this point. In Blake v. Attorney General12 the Supreme Court held that Part II of the Rent Restrictions Acts was unconstitutional, precisely because it was found to operate in an “unfair and arbitrary” manner. The legislation applied in a selective manner; the legislation froze rents at a very low level and yet failed to take account of rampant inflation or the respective means of the landlord and tenant. Likewise, in Brennan v. Attorney General13 Barrington J. and the Supreme Court held that the farmers’ rates legislation was unconstitutional because it was based on the Griffith  Valuation which was conducted in the immediate aftermath of the Famine. That Valuation was hopelessly outdated and was riddled with anomalies and it was on that basis that the Court concluded that the legislation was unconstitutional.

13. Subject to the question of retrospection – to which I will presently return – no question of unfairness or arbitrariness arises in the present case. The legislation will apply generally to all commercial leases and will, in effect, permit property arbitrators to have regard to the impact of deflation in the economy. In effect, therefore, the Oireachtas would be removing an impediment to the market finding its true levels of rent. This would not simply be in the private interests of the retail tenants, because it is vital to the economic health of the nation that the retail sector recovers and removing upward-only clauses may be thought to be essential for this general purpose. For these reasons, subject only to the question of retrospectivity, I am clearly of the view that general legislation of this kind could be justified, certainly having regard to the prevailing economic conditions.

14. Against that background, we can now proceed to examine the reasons offered by the Minister for Justice as to why such legislation would be likely to be found to be unconstitutional.

The reasons advanced by the Minister for Justice to oppose the 2010 Bill

15. In the course of the Dail Debate in March of this year, the Minister for Justice (Mr. D. Ahern TD) gave two reasons as to why the 2010 Bill would be unconstitutional. First, he said that: “If that benefit14 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.”

16. This reasoning invites the following comments. It is true that the Oireachtas would be depriving individuals and companies of an important contractual right without compensation, but this is, in fact, a not infrequent consequence of regular and ordinary legislative activity. As Costello J. noted in Cafolla v. Attorney General15: “But laws having such an effect do not necessarily conflict with the Constitution. Laws may, for example, with constitutional propriety prohibit fishermen from fishing at certain times and limit the nature and size of their catches, restrict the hours of trading in licensed premises, fix the price at which goods can be sold or services remunerated, all of which adversely affect the livelihood of those engaged in the activity concerned. Laws may even prohibit an existing business activity, as was shown in Private Motorists Provident Society v. Attorney General16…….”17 14 I.e, the upwards-only rent review clause.

17. As Costello J. pointed out in Cafolla, the real question is whether the restriction on the exercise of property rights is capable of objective justification by reference to the exigencies of the common good (to use the language of Article 43). If it is, then the restriction will be upheld even though some appreciable interference with contractual freedom will be entailed. In Private Motorist Provident Society the Supreme Court upheld the constitutionality of legislation prohibiting (without compensation) an industrial and provident society from operating a banking business at the end of a five year transition period. That legislation doubtless deprived those plaintiffs – to use the Minister’s words – of “an important contractual right without compensation”, but this was not seen by the Supreme Court as constitutionally objectionable, given that the evidence in the High Court was (not surprisingly) to the effect that such regulation and control was desirable in the public interest.

17. The critical question is, therefore, not so much whether a contractual right will be interfered without compensation, but rather whether the end result is proportionate and objectively justifiable. Most legislative interferences with contractual rights do involve abrogating or significantly altering that right without compensation. While these are important considerations, they are far from being decisive. If that were so, then the constitutionality of the significant reductions in professional fees effected by the FEMPI Act 2009 could never have been upheld by the High Court in the JJ Haire case.

18. Nor can I agree that such legislation prohibiting upward-only rent review clauses would be arbitrary and discriminatory. If the Oireachtas were to focus via such legislation on prohibiting such clauses in the commercial sector, it would be simply because of the damage which was clearly been done to that sector by the existence of such clauses and given the importance of this sector to the generation of consumer confidence, economic transactions and wealth creation. One might well as contend - as indeed the plaintiffs in the Private Motorists Provident Society case did – that the legislation in that case was also arbitrary and discriminatory. The reality, however, is that legislation prohibiting such clauses in the commercial sector would be perfectly general in its operation and it is, frankly, difficult to see how it could be regarded as arbitrary or discriminatory in the sense of cases such as Blake.

19. The second key point which the Minister made was that:
“It has been suggested that intervention in this area is possible on the basis of the justifications recited in the Financial Emergency Provisions in the Public Interest Act 2009. However, the 2009 does not give the Legislature the freedom to interfere in an arbitrary way with property rights in general. The legal issues raising under the 2009 Act are entirely different and the same financial imperatives do not apply.”

20. With great respect, I fundamentally disagree with this analysis, since I see no difference in principle between the position of the State and its suppliers on the one hand and the position of private parties on the other. In each case, the problem is essentially the same.

21. In the case of the State, it agreed to pay (what ultimately transpired to be) inflated prices for a range of professional services at a time when the market was overheated. These were doubtless the prevailing market prices at the time, but that market was at unrealistic levels in the longer term. When the market subsequently crashed, the State nonetheless found itself paying prices for professional services which it could no longer afford, not least given that its revenue base had significantly contracted. This problem was solved at one stroke by the State with the enactment of the Financial Emergency Measures in the Public Interest Act 2009 (“FEMPI”) This enabled the relevant Ministers to make orders which reduced the level of payments in respect of these services.

22. The striking thing about the FEMPI legislation, of course, is that it interfered retrospectively with an existing contract in the sense that it enabled the Minister to override unilaterally the terms of a contract freely entered into between the parties prior to that date and to fix the price at which such services would now be remunerated. Such contracts also provided for guaranteed income streams for the professionals concerned and they, presumably, entered into other contractual commitments (such as, for example, the leasing of premises) on the understanding and belief that this income stream would continue.

23. The situation with regard to private retailers is very similar. The property bubble had the effect of inflating rental demand and rents generally. The retailers concerned entered into such commitments at these (inflated) rental levels, simply because they had no choice but to do so if they wanted to compete in that market at that time. It is true that they freely entered into contractual commitments which bound them to upwards only rent reviews, but then so did the Government when it entered into agreements with its third party service providers.

24. Thus, a critical question here is whether a distinction can be drawn between the State on the one hand and the private parties to a landlord and tenant relationship on the other. I do not think that any such distinction can in principle be made. The very unreality of such a supposed distinction can be illustrated by the following example. Suppose that in 2006 (at the height of the boom) Pharmacist A enters into a community pharmacy contract with the HSE which (more or less) guarantees a fixed income stream at contractually agreed levels. Having signed this contract, Pharmacist A agrees to rent retail premises from B at a particular rate, with an upwards only rent review clause. Of course, it might be said B would not have agreed to lease the premises to A without this clause, but it can equally be said that A would not have agreed to take on this commitment unless he was confident of his own income stream from the HSE. If the State can constitutionally reduce A’s income stream under FEMPI, then why can the Oireachtas equally not act to void a term of a contractual position (upwards only rent review clauses) which would have the (admitted) effect of reducing B’s income stream from A?

25. It is difficult to see how there could be any difference in principle between the two situations. In both cases, the paying party agreed to pay at a level which is greater than is now justified by the present post-crash market and in both cases, these parties are struggling to make these payments due to a recession-induced contraction. The public policy considerations are, moreover, the same: the decline in income of the paying party, coupled with the presence of deflation – a phenomenon which has not been seen in the Irish economy since the early 1930s – which has artificially boosted the real value of the payments for the professional services and rent alike.

26. Indeed, if anything, the FEMPI legislation goes further than what is at issue here in that the existing service payments under contract were reduced unilaterally by ministerial order made under FEMPI, so that the Minister determined the amount which he or she was going to pay for such professional services. All that is at stake here with the proposed legislation is that a clause which precludes a property arbitrator from reducing the rent having regard to existing market conditions is rendered void. It would not necessarily follow the rent would be reduced as a result, although one must concede that this would probably happen in many cases. All that would occur is that the property arbitrator would be entitled to have regard to prevailing market realities, including deflation. In effect, insofar as the upward-revision clause gives protection to landlords, it is to protect them against the impact of then severe deflationary pressures presently operating in the retail sector. But why should the public interest, for all the reasons mentioned above?

27. Besides, the Oireachtas has frequently legislated with retrospective effect in a way which fundamentally affects existing contractual rights. Thus, for example, spouses who were the owners of a family home prior to July 1976 found that after the passage of the Family Home Protection Act 1976 they could no longer sell such property without the consent of their spouse. Likewise, many (heretofore) lawful agreements, decisions and concerted practices were rendered void by the passage of the Competition Act 1991.18

28. Another example from the retail arena may be found in section 64(9) of the Pharmacy Act 2007. This provision enables the Minister for Health to make an order, the effect of which, broadly speaking, would be to prohibit pharmacists and general practitioners sharing the same general premises. There were, of course, many such arrangements in existence prior to the commencement of the section in August 2009 and the Minister has now made such an order under section 64. This will presumably significantly disrupt the arrangements presently enjoyed by many pharmacists and general practitioners alike. There are doubtless dozens of instances where pharmacists and general practitioners have entered into contractual commitments of this nature, yet the effect of the making of such an order will be to deprive these parties of a valuable contractual right without compensation. In all of these cases, the Oireachtas interfered retrospectively with existing contracts in the public interest, in the sense that a pre-existing contractual provision was rendered void with prospective effect after a particular date.19

Conclusions

29. In summary, therefore, I am of the view that:
A. Any legislation which rendered void pre-existing contractual commitments providing for upwards-only rent review would deprive the landlords of a valuable contractual right without compensation. This, however, is not a dispositive consideration, since legislative interference with contractual rights along these lines is not uncommon, i.e., the very point which Costello J. made in Cafolla.

B. The critical question is rather whether such legislation would be proportionate and objectively justifiable. For the reasons set out in this opinion, there are far reaching policy reasons why the Oireachtas might think that the prohibition of such clauses is necessary in the public interest. Not the least of those reasons is that the Oireachtas might consider that such clauses artificially maintain unrealistically high rental levels in the retail sector, thus hindering the recovery of the retail sector. Of course, given the high importance of the retail sector to the volume of economic transactions and consumer confidence, the economy as a whole cannot fully recover from an economic crash without the recovery of that sector.

C. In my view, any such proposed legislation is no different in principle from many other forms of legislation which preclude or render void pre- existing business practices provided for by contract. The proposed legislation satisfies the proportionality test in that –
i. It is rationally connected to an objective of sufficient importance (i.e., recovery in the retail sector) to warrant interference with a constitutionally protected right and, given the serious social problems which they are designed to meet, they undoubtedly relate to concerns which, in a free and democratic society, should be regarded as pressing and substantial.
ii. Such legislation would also impair those rights as little as possible and their effects on those rights are proportionate to the  objectives sought to be attained in that it would simply provide a mechanism whereby rents could be assessed by reference to prevailing market conditions and deflation.
iii. Critically, such legislation would not attack the essence of the contractual right, namely, the right to receive a market rent and, unlike cases such as Blake, it would not involve one sector of society (namely, landlords) being expected unfairly to bear the burdens from other sectors of society are exempt.

D. No difference in principle can be drawn between the proposed legislation and the FEMPI Act. Certainly, if the Oireachtas can constitutionally take steps drastically to interfere with existing contractual rights of service providers and public servants without compensation (as the High Court has already held in the JJ Haire case), then the proposed legislation of this kind would equally seem to be constitutionally valid. 

I can advise further if required.

Gerard Hogan SC,
Law Library Building,
149-151 Church St.,
Dublin 7
April 16, 2010

September 13, 2012

Government pays €1.18 million p/a for Forfás empty offices

Unlucky taxpayers stuck paying €1.18 million rent per year until 2034 to keep this office empty for state owned Forfás. There is a chance for Minister Richard Bruton to save a few bob right here. Maybe he should get Forfás to write a 299 page report recommending repudiating the lease as the country is bankrupt. Or he should ask Minister Noonan for help in seeking a rent reduction from NAMA.  After all Minister Noonan announced with great fanfare recently that 99% of tenants of Nama have been offered a rent reduction.  Total lies and spin, any tenant could tell the Minister that Nama  are worse to deal with if that is possible then institutional or private landlords.  If everyone is getting rent reductions as he says how come the state are continuing to pay these crazy rents when the country is bankrupt.

“State agency Forfás is locked into an unusual 65-year lease which does not run out until 2034. The agency pays an annual rent of €1.18 million for the 43-year-old hexagonal block which extends to 2,957sq m (31,823sq ft) and includes 65 car-parking spaces.The current rent of €377 per sq m (€35 per sq ft) was set in 2004 and is subject to seven-year upwards-only rent reviews with no break options.Apart from the fifth floor which is rented by the Embassy of Israel, the building has been largely unoccupied since 2005. The embassy’s 35-year sublease dates from 2005 and gives it break options every five years. DTZ Sherry FitzGerald is quoting €15 million for Carrisbrook House, an eight-storey over basement office building across the road from the former Jurys Hotel on Pembroke Road. It was bought early in 2007 for €46 million.”
Irish Times 12th September 2012 Jack FaganThe state by signing the UORR leases were complicit in bankrupting the country. They ensured that every other business in the country would be condemned to the same lease style.  Thus businesses are closing the length and breath of Ireland every day. The Government should publish the legal advice they say they received from the AG, stating that they could not legislate to end these leases.  Gerard Hogan esteemed constitutional lawyer and High Court Judge gave a full opinion stating that the state could interfere in these contracts, which was furnished to the Government.  Instead they caved to pressure from property vested interests and betrayed their electoral promise.  - see  next post  for the Hogan full opinion

State paying €1.18 million every year to keep this building empty for Forfás. The state are locked in to an upward only lease that does not run out until 2034

July 19, 2012

Brian Hayes legally and morally obliged to ask Nama for rent reductions.

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Nama should give the state rent reductions. Brian Hayes  minister in charge of OPW is legally and morally obliged to ask for rent reductions for the state which is bankrupt. Any rent reductions given should be visible to all under Freedom for Information Act. Nama claims to be have agreed to 98% requests . Have the Board of Works asked Nama for a reduction?  As usual the property vested interests hide behind confidentiality clauses.  OPW will say they have achieved rent reductions but what they will not say is that as they have so many leases inevitably some will be coming to the end of their term and will open to renegotiation at market rent.  What we – the Irish Citizen – would like to know is how many current leases have had a reduction in rent.  Many of the rents the Government is paying are a huge multiple of market rents having been ratcheted up using the upward only rent review clause. The Government can no longer hide behind confidentiality as they have announce the introduction of a property register for commercial leases in recognition of the lack of honest information available.

http://namawinelake.wordpress.com/2012/07/19/one-quarter-of-state-property-rent-bill-goes-to-nama/

One quarter of State property rent-bill goes to NAMA

July 19, 2012 by namawinelake

It may be a couple more weeks before the Office of Public Works produces its annual report on rent payments made by State agencies to private landlords, but in the Dail on Tuesday, it was revealed that we are paying approximately €30m per annum to NAMA and its developers, and that sum compares with the €129m in total paid to all private landlords in 2010 – in other words, nearly one quarter of all rent payments by the State are going to NAMA.

Surprising? I actually thought it would be a higher proportion. Remember that NAMA paid €9.25bn for Irish commercial property loans by reference to November 2009 values.  And given the propensity for landlords to release equity in their property during the boom for further development/speculation, I would have expected far more than a quarter of all State rent payments to have been to NAMA and its developers. But even 25% shows the colossal role NAMA has in the commercial property market in this State.

Alas, there will now not be any more Parliamentary Questions until September 2012. with the Dail breaking up for the Summer recess today, but it would be interesting to know what percentage of the €30m is actually paid to NAMA or to NAMA’s benefit. Recently at the public accounts committee hearing, NAMA disclosed that more than two years after it started acquiring developers’ loans, only 86% of rents received by developers were in fact paid over to NAMA or to NAMA’s benefit. NAMA says that it hopes that by the end of this year, that will have risen to 100%.

Information detailing the properties rented by the State from NAMA and its developers arose from a question from Deputy Pat Deering to Minister for Finance Michael Noonan. The full exchange is here.

“Deputy Pat Deering:  further to Parliamentary Question No. 50 of 6 June 2012, if he will provide the number of properties owned by the National Asset Management Agency that are rented by the State; and the total amount of rent paid annually on a county basis. [34483/12]

Minister for Finance, Michael Noonan: I am advised by NAMA that it does not own nor does it manage properties securing its loans and that the properties to which the Deputy refers are under the control of its debtors and receivers. NAMA advises that the income arising from the rental by state bodies of approximately 82 NAMA debtor and receiver properties is of the order of €30 million per annum. NAMA advises that 48 properties are located in Dublin and the neighbouring counties of Wicklow, Kildare and Meath; these account for 76% of total annual rental income. There are 24 properties located in counties Limerick, Cork and Galway and these account for a further 21% of total income. The residual 10 properties are located throughout the rest of Ireland and account for 3% of rental income. The further breakdown by number and county sought by the Deputy would lead to the identification of specific properties, breaching Sections 99 and 202 of the NAMA Act, under which NAMA is prohibited from disclosing confidential details relating to its debtors or their properties, and the obligation on its debtors and receivers to uphold the confidentiality of agreements entered into with third parties.”

July 16, 2012

Annual State Property Bill

It is impossible to get a comprehensive list of  the states Property Bill despite many questions in the Dáil, as each Department has its own arrangements and some offices come under the quangos and semi state heading.  Here are two lists which we will add to from time to time.  The state say that it is reducing its rent exposure but what they never say that it is not because they seek or obtain rent reductions but because with the huge number of leases inevitably, some will end each year and will be exited or renegotiated.

List 1 

The Sunday Independent reported on the State’s €129m annual property rent bill. This entry links to the full list (available here , courtesy of the Office of Public Works)

List 2

The state may be the landlord or the landlord and tenant

Written Answers – State Properties Dáil Éireann

Tuesday, 5 July 2011

Rented Buildings — Monies billed by OPW

COUNTY LOCATION BUILDING RENT PA € TENANT
CARLOW CARLOW No 4 Court View Carlow 8,894 National Education Welfare Board
CAVAN CAVAN Elm House Kinnypottle Cavan 3,631 National Council for Special Education
CORK CORK 3/F Hibernian House Cork 20,677 Family Support Agency
CORK CORK 4/F Hibernian House Cork 18,284 Family Support Agency
CORK CORK Heritage Business Park Mahon Co Cork 4,992 National Council for Special Education
CORK CORK Mahon Co Cork 43,284 National Education Welfare Board
DONEGAL LETTERKENNY Letterkenny 2,602 National Education Welfare Board
DONEGAL LETTERKENNY Pearse Rd Letterkenny 4,185 National Council for Special Education
DUBLIN BLACKROCK 2/F Trident House Main St Blackrock Co Dublin 26,190 National Council for Special Education
DUBLIN BLACKROCK 4/F Trident House Blackrock Co Dublin 135,700 Rail Safety Commission
DUBLIN DUBLIN 01 16 Parnell Sq Dublin 1 322,329 National Economic and Social Development Office
DUBLIN DUBLIN 01 4th Floor 89/94 Capel Street Dublin 1 115,864 Crisis Pregnancy Agency
DUBLIN DUBLIN 01 77 Upper Gardner Street Dublin 1 243,440 Health Service Executive
DUBLIN DUBLIN 01 Findlater House 29/32 O Connell St Dublin 417,450 Dept of Foreign Affairs
DUBLIN DUBLIN 01 ILC Abbey St 900,000 Commission for Communications Regulation
DUBLIN DUBLIN 01 Millenium Hs 52/56 Great Strand St D1 265,675 Ombudsman for Children
DUBLIN DUBLIN 01 Parnell Sq Dublin 1 19,865 National Council for Special Education
DUBLIN DUBLIN 02 1/Floor St Stephens Green House Dublin 2 171,661 Family Support Agency
DUBLIN DUBLIN 02 17 Andrews Street Dublin 2 340,000 Unesco/Cultivate ECO
DUBLIN DUBLIN 02 2/F St Stephens Green House Dublin 2 262,407 Commission to Inquire into Child Abuse
DUBLIN DUBLIN 02 24 Merrion Sq Dublin 2 269,000 National Council for Curriculum and Assessment
DUBLIN DUBLIN 02 3 New St Killarney Co Kerry 55,788
DUBLIN DUBLIN 02 4th Floor St Stephens Green House Dublin 2 221,638 Family Support Agency
DUBLIN DUBLIN 02 Clonmel Place 2/3 Clonmel Street Dublin 2 201,125 Irish Youth Justice Service
DUBLIN DUBLIN 02 Clonmel Place 2/3 Clonmel Street Dublin 2 201,125 Equality Authority
DUBLIN DUBLIN 02 D Olier House 162,844 FÁS
DUBLIN DUBLIN 02 Dunsceine Harcourt Rd Dublin 2 500,000 National Transport Authority
DUBLIN DUBLIN 02 Frederick House Frederick St Dublin 2 188,050 Residential Institutional Redress Unit
DUBLIN DUBLIN 02 Harcourt Road Dublin 2 138,872 National Consumer Agency
DUBLIN DUBLIN 02 Harcourt Road Dublin 2 393,876 National Consumer Agency
DUBLIN DUBLIN 02 Joyce House Lombard Street Dublin 135,128 Health Service Executive
DUBLIN DUBLIN 03 Bond Road Extension East Wall Dublin 3 336,380 Dept of Agriculture,Fisheries and Food
DUBLIN DUBLIN 03 Dublin Port Crosby Court Dublin 2 86,878 Dept of Agriculture,Fisheries and Food
DUBLIN DUBLIN 04 1/F St Martins House Waterloo Road Dublin 4 570,000 Mental Health Commission
DUBLIN DUBLIN 06 Canal House Canal Road Dublin 6 129,389 Health Insurance Authority
DUBLIN DUBLIN 07 George Court Georges Lane Smithfield D 7 655,940 Health Information Quality Authority
DUBLIN DUBLIN 07 Manor Street Business Park Dublin 85,000 National Council for Professional Development of Nursing and Midwives
DUBLIN DUBLIN 08 Directors House Kilmainham Dublin 8 7,200 Irish Museum of Modern Art
DUBLIN DUBLIN 08 Floor 3 Phoenix House Conyngham Rd Dublin 8 70,818 Health Service National Partnership Forum
DUBLIN DUBLIN 11 Finglas Shopping Centre 39,500 FÁS
DUBLIN DUBLIN 14 1/F Aras Ui Dhalaigh Inns Quay 208,572 Court Service
DUBLIN DUBLIN 15 1/F Block 3 Grove Court Blanchardstown D 15 23,386 National Council for Special Education
DUBLIN DUBLIN 15 Blanchardstown 38,119 National Education Welfare Board
DUBLIN DUBLIN 15 Top Floor Block A Westend Office Park Blanchardstown D15 153,858 Irish Sports Council
DUBLIN DUBLIN 15 Westend House Office Park Blanchardstown D15 28,524 Citizens Information Centre
DUBLIN DUBLIN 15 Westend House Office Park Blanchardstown D15 71,476 FÁS
DUBLIN DUBLIN 15 Westend Office Park Blanchardstown Dublin 15 18,075 Family Support Agency
DUBLIN DUBLIN 24 Block 1 Floors 4/5 The Exchange Tallaght 188,554 Personal Injury Assessment Board
DUBLIN DUBLIN 24 County Hall Belgard Sq North Tallaght 12,275 National Council for Special Education
DUBLIN DUBLIN 24 County Hall Belgard Sq North Tallaght 24,095 National Education Welfare Board
DUBLIN SWORDS Ballyheary Road Swords Co Dublin 1,000,000 National Museum
DUBLIN SWORDS Unit A Swords Business Campus Swords Dublin 231,444 Inland Fisheries Ireland
DUBLIN SWORDS Unit C Swords Business Campus Swords Dublin 173,227 Inland Fisheries Ireland
GALWAY GALWAY The long Walk Galway 41,722 Irish Water Safety
GALWAY GALWAY Victoria Place Eyre Sq Galway 9,540 National Council for Special Education
GALWAY NEW INN Fenian Street carpark 32,748 Foras na Gaeilge
GALWAY SPIDDAL Technology Park An Spideal Co Galway 55,867 Coimisiner Teanga
KILDARE NAAS Block A Maudlins Hall Naas Co Kildare 18,036 National Council for Special Education
KILDARE NAAS Government Offices Maudlins Hall Naas 13,794 National Education Welfare Board
KILDARE NAAS Willow House Millenium Park Naas Co Kildare 119,163 Irish Auditing & Accounting Supervisory Authority
LAOIS PORTLAOISE Eircom Building Knockmay Portlaoise 191,000 Dept of Agriculture,Fisheries and Food
LAOIS PORTLAOISE Gratten House Portlaoise Co Laois 3,641 National Education Welfare Board
LAOIS PORTLAOISE Gratten House Portlaoise Co Laois 4,655 National Council for Special Education
LAOIS PORTLAOISE Kilminchy Portlaoise Co Loais 83,259 Dept of Agriculture, Fisheries and Food
LIMERICK LIMERICK Punches Cross Limerick 23,129 National Education Welfare Board
LIMERICK LIMERICK Rosbrien Road Punches Cross Limerick 12,725 National Council for Special Education
LOUTH DROGHEDA CCO Hs Ind Estate Drogheda 9,796 National Council for Special Education
MEATH NAVAN Government Offices Kilcairn Navan Co Meath 10,728 National Education Welfare Board
MEATH NAVAN Government Offices Kilcairn Navan Co Meath 4,016 National Council for Special Education
MEATH TRIM Mill St Trim Co Meath 87,646 National Council for Special Education
SLIGO SLIGO Beulah Buildings Sligo 4,928 National Council for Special Education
SLIGO SLIGO Sligo 6,870 National Education Welfare Board
WATERFORD WATERFORD Johnstown Business Park Waterford 11,360 National Council for Special Education
WATERFORD WATERFORD Johnstown Ind Estate Waterford 12,705 National Education Welfare Board
WESTMEATH MULLINGAR Friars Mill Road Mullingar Co Westmeath 11,234 National Council for Special Education
WESTMEATH MULLINGAR Government Offices Friars Mill Rd Mullingar 5,235 National Education Welfare Board

Owned Buildings — Monies billed by OPW

COUNTY LOCATION BUILDING RENT PA € TENANT
CORK CORK Cork Gov Off Irish Life Bldg 15,999 Health & Safety Authority
DUBLIN DUBLIN 02 Fitzwilliam Pl 31Advanced Stud 58,090 Dublin Institute of Advanced Studies
DUBLIN DUBLIN 02 Merrion Square 5 Inst/Advan Stud 5,022 Dublin Institute of Advanced Studies
DUBLIN DUBLIN 02 Merrion Square 7 Bd na Gaelilge 350,000 Foras Na Gaeilge
DUBLIN DUBLIN 04 Burlington Road 10 50,167 Dublin Institute of Advanced Studies
DUBLIN DUBLIN 05 Coolock Civic Centre 71,306 FAS
DUBLIN DUBLIN 11 Dunsink Observatory 330 Dublin Institute of Advanced Studies
DUBLIN DUBLIN 24 Tallaght SWO / FÁS / HSE 29,598 FÁS
DUBLIN DUBLIN 24 Tallaght SWO / FÁS / HSE 54,102 HSE
DUBLIN DUN LAOGHAIRE Dun Laoghaire BIM 835,000 Bord Iascaigh Mhara
LEITRIM CARRICK ON SHANNON Carrick-on-Shannon Gov Office 8,229 FÁS
LIMERICK NEWCASTLEWEST Newcastlewest Government Offices 5,714 FÁS
MAYO CASTLEBAR Castlebar Government Offices 40,378 Coillte
SLIGO SLIGO Sligo Gov Off-Cranmore Road 27,960 Coillte
SLIGO SLIGO Sligo Gov Off-Cranmore Road 33,836 FÁS
TIPPERARY CLONMEL Clonmel Former SWO 5,000 South Tipperary VEC
WATERFORD WATERFORD Waterford Gov Off-The Glen 3,719 Health & Safety Authority
WICKLOW ARKLOW Arklow Government Offices 7,618 FÁS


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