Ten things to know about a commercial lease
1. A Lease is a contract between a landlord and a tenant in respect of a Premises for a Term at a specified Rent subject to covenants and conditions.
2. The primary legislation dealing with commercial Leases is the Landlord and Tenant (Amendment) Act 1980. The Act provides that provisions in a Lease which absolutely prohibit alienation, the user and carrying out improvements are all subject to the proviso that a Landlord shall not unreasonably withhold its consent to applications by a Tenant in connection with these three items.
3. There are no regulations on minimum and maximum terms of Leases. Nor are there any regulations governing security deposits.
4. The following provisions are typically included in Leases:
- name and address of the Landlord and Tenant;
- the Term (i.e. duration) of the Lease;
- annual rent (and any other payments such as insurance payments to be reimbursed to the Landlord and service charge) payable by the Tenant during the term and a rent review mechanism; (Value-added tax may be payable on rental income).
- description of the Premises demised to the Tenant by reference to a map;
- permitted use;
- repairing obligations;
- alienation; and
- insurance. There are no statutory insurance requirements. However, a Lease will generally provide that the Landlord insures the property and recovers the cost from the Tenant.
5. Some Long-term Tenants acquire statutory rights :-
- A Tenant who is in continuous occupation of a business premises for an uninterrupted period of five years acquires a statutory entitlement to a new tenancy. However, a Tenant can always execute a deed of renunciation of renewal rights when signing the initial lease.
- A Tenant who is in continuous occupation of a residential premises for an uninterrupted period of twenty years acquires a statutory right to a new tenancy.
6. Upward only rent review clauses in Ireland are currently prohibited by virtue of Section 132 of the Land and Conveyancing Law Reform Act 2009.
7. If the Landlord acts in breach of the terms of a Lease, a Tenant may, depending on the terms of the Lease and other circumstances, withhold rent payments.
8. A Landlord will typically consent to a sub-letting subject to:
- a Tenant providing confirmation that the strength of the sub-Tenant’s covenant is no less than the Tenant’s; and
- a sub-Tenant entering into a direct covenant with the Landlord to perform the obligations on the part of the Tenant in the Lease.
9. The Landlord is generally responsible for:
- ensuring that the Tenant is given ‘quiet enjoyment’ of the premises (i.e. not to interfere with the Tenant’s use and enjoyment of the premises);
- insuring the premises; and
- in multi-unit Buildings and Developments, repairing and maintaining the external and structural parts of the premises.
In the event of the Landlord being in breach of its obligations, a Tenant may:
- apply to court for a specific performance order; or
- seek damages for loss suffered.
10. The Tenant is generally responsible, among other things, for paying the rent and maintaining and repairing the internal non-structural parts of the property. In relation to “repair” obligations in general great care should be taken to ensure that the tenant is not obliged to place the property in a greater state of repair than currently exists.
In the event of the Tenant being in breach of its obligations, a Landlord may:
- forfeit the Lease;
- apply to court for a specific performance order;
- seek damages for loss suffered; and
- seek an order for possession of the property.
The terms of a Lease will generally describe the basis on which the Landlord may evict the Tenant. Ultimately, a Landlord may have to apply to court to obtain an order for possession.
The content of this article is provided for information purposes only and does not constitute legal or other advice.