IRELAND - The Irish agency set up to manage real estate assets underpinning non-performing loans has issued guidelines on rent reviews, following the a government decision not to ban upward-only rent reviews.

Guidelines issued on Thursday urged a "mutually agreeable process" between tenant and landlord over rent reviews. However, the National Asset Management Agency (NAMA) acknowledged that it could not "of its own volition effect a rent review process or reduction in rent" because it does not directly own the assets underpinning the loans.

A relieved property industry has broadly welcomed the government's decision to relent over its earlier commitment to retrospectively rewrite rent review provisions in existing business leases. Finance minister Michael Noonan said in his budget speech Tuesday that such a policy would be subject to legal challenge after NAMA estimated the potential cost of abolition at €2bn.

Although CBRE said property consultants were disappointed that the budget announced this week was unlikely to boost economic growth "to any significant degree", the rent-review decision would be enough to stabilise values and enable NAMA to start shifting assets. 

The decision is likely to resulting an immediate revival of activity in a real estate market that has been moribund for most of the year. IPD figures for the third quarter revealed a 4.6% decline in values in the three months to September and an overall market return of -2.3%. The data showed no transactions since Q1.

CBRE executive director Marie Hunt said the decision announced this week would undoubtedly improve transaction volumes after a period of uncertainty throughout much of 2011. 

"Overseas institutions have been hovering and looking for opportunities but they've been unable to proceed because of the uncertainty," she said, pointing not only to the rent review issue but a reduction in stamp duty from 6% to 2%, and new rules that will waive capital gains tax on assets acquired between now and the end of 2013.

The effective face-off between investors and the government stalled the market despite confidence-building measures that included NAMA offering 70% financing to investors willing to take on repackaged commercial portfolios.