Business lease agreements

Introduction

In a lease, the business of the tenant is less important than the type of property being let. So, our agreements differ with each other through the inclusion or exclusion of terms relating to features of the building, such as those dealing with rights to display signs, rather than by who the tenant may be.

Choose the right agreement by selecting the one whose description most closely matches that of your premises.

These are full agreements, drawn to a higher standard than most solicitors would provide. Despite the breadth of options we provide, editing is straightforward, regardless of whether you have prior experience or not of this type of legal agreement.

We provide extensive drafting notes explaining each paragraph, and we send you a guide on how to deal generally with editing and completion.

What is a commercial lease?

A commercial lease is a lease between a landlord and tenant for retail, office space or industrial use.

Commercial leases are signed between the parties when a business rents a commercial property for the reason to conduct business from that property. It gives the business tenant rights to use the property for business purposes or commercial activities for a lease term in return for the rent and both parties have the rights and obligations during the term of the lease.

What terms are included in a commercial lease agreement?

Commercial leases contains:

• Landlord and tenant details
• Property details
• Lease term (5 years or under, often called a short-term lease), rent amount and other charges
• Security deposit
• Condition and repair
• Advertisements and signs
• Tenant’s obligations
• Prohibited activities on the property
• Guarantor provision
• Transfer or assignment of lease
• Sub-letting
• Insurance payments
• Break clause for premature termination by the tenant
• Options for rent reviews
• Matters relating to planning permission, service charges

The terms of the commercial lease agreement are negotiable as they need to reflect the usage of the property in terms of the tenant’s business. Considering we provide documents relating to all kinds of commercial property, be it a shop, an industrial unit or office buildings, the lease will cover everything relevant to your situation.

The law in these lease documents

In Ireland, the governing law of business leases is regulated primarily by:

• the Landlord and Tenant Acts 1860-2005
• the Landlord and Tenant (Amendment) Act 1980; and
• the Landlord and Tenant (Amendment) Act 1994

In balancing the codes with the law and the interest of the Landlord, we have followed the codes where reasonable, but have preferred the interest of the Landlord where there may be a difference.

Traditionally, it is the landlord who puts his draft to his proposed tenant. He is the owner of the land, so he can decide the terms on which he will let it. Statute law redresses this imbalance of power, but our leases have been drawn to prefer the interest of the landlord rather than the tenant.
These documents are not suitable for residential leases. These documents are only suitable for commercial space and commercial tenants.

What checks should I carry out before finalising the commercial lease?

You should ensure that all your requirements are met before you enter into a commercial lease agreement with the landlord. Some important inquiries are:

• Whether or not the landlord has the title to grant the lease. You should ask the landlord to show you evidence.
• Whether the landlord has proof that there is planning permission for the relevant use of the property or what the planning status is.
• Hire a commercial surveyor to assess the value and structure of the property so you are aware of your money’s worth.
• Look around the neighbourhood for any potentially disruptive neighbours.
• The amount of stamp duty payable on the property

What is a break clause in commercial lease agreements?

Otherwise known as a “premature termination”, a break clause is a provision for the tenant to give written notice at some particular time to terminate the lease then or shortly afterwards. In that way, the tenant has the benefit of as long a lease as he chooses, but without the risk that he will want to move on and be stuck with the rent payment. Whether or not a landlord is prepared to accept a break clause depends on the importance of the transaction generally. A landlord presented with a break clause proposal should consider the reduction in the capital value of his property resulting from the break clause and ask for a higher rent to compensate.

Do I have to register the commercial lease agreement?

Yes, the tenant has an obligation to register their commercial lease agreements with the Property Services Regulatory Authority under the Property Services (Regulations) Act 2011. In addition to this, the tenant also has to provide:

• Address and description of the rental property
• Date of the lease
• Lease term
• Rent of the property
• Any other details required under section 88 of the Property Services (Regulations) Act 2011
• Further details required under any regulations.

Can I grant a sublease under my lease?

You can grant a sublease if your lease agreement allows you to do so as it is better to have written consent of the landlord. A sublease is a lease between a head tenant and subtenant, usually allowed to exist under an original tenancy agreement. From a commercial standpoint, it is important for the investor that a sublease does not undermine the original tenancy so it will contain detailed provisions relevant to a sublease.

We offer two subleases. This version will be used for most situations. The alternative is for circumstances where the head landlord has required deeper and more detailed involvement in the relationship between himself and the new subtenant. You may be interested to look at this document.

Can the terms of the lease be changed once it is signed?

Yes, the landlord and tenant can mutually agree to change the lease terms. You can use our deed of variation to change the terms of your lease. Like the original lease, this agreement is between the landlord and the tenant. The lease can be for any type of property but you should keep in mind that if you want to make a change to the core terms of the lease, for example, to add an additional property or an additional tenant then you should not use this document.

Can I renew my commercial lease?

The Landlord and Tenant (Amendment) Act 1980 gives an automatic right of renewal to leases of more than 5 years. A lease of under five years is called a short-term lease. If the landlord renews the tenancy after the expiry of the short-term lease then the lease will be automatically qualified as long-term lease. In the case of leases that are created for less than five years, there is no automatic right of renewal at the end of the term and a common lease for say four years and nine months, ensures that the landlord can take vacant possession at the end of the term. Although there is clearly more flexibility for a tenant (especially in the case of a start-up business), there also tends to be more frequent rent reviews and less incentives can be negotiated with the landlord.