Are you a business owner looking to rent offices/retail space or industrial units? The aim of this article is to set out some of the important issues that you may face when signing up a commercial lease.

A FRI lease often is quite onerous for a tenant for obvious reasons – it is drafted by the landlord’s solicitor and of course, they want to be able to lay as much responsibility at the tenant’s door as possible. Good business solicitors Limerick, acting for a tenant, look at very specific things when examining a commercial lease. The ultimate objective is to ensure that the lease reads as favourably as possible for that tenant and limit their exposure to liability where possible.

Some of provisions that would be examined in more detail include:-

1. Rent: Is the rent fixed or is it a percentage of the turnover? Is vat payable in addition to the rent? Is there a rent free period? Is there a rent review? In relation to rent review, provisions can no longer require upwards only rent.
2. Repair clauses: Are the repair clauses in the lease fair and reasonable? Are they too onerous? Often repair clauses can create obligations for a tenant to restore the property to a better condition that it was in on taking the lease. Words such as to “keep” or “put” can result in such an obligation. To deal with this a good solicitor in Limerick will advise a tenant to engage an engineer and have a schedule of dilapidations (i.e. list of defects in the property) carried out on the property prior to entering into a lease. This schedule is then attached to the lease. This will prevent a landlord subsequently claiming that a tenant is responsible for defects in the property where those defects have been identified and listed on the schedule. Without this schedule, it would be open to a landlord, under the provisions of a lease, to demand that the tenant “repair” the defect. This could be a significant cost to a tenant.
3. Insurance: who is liable to pay for the buildings insurance? Is the tenant required to pay a contribution towards this or will the landlord insure the building, simply requesting the tenant to pay the premium for this? It is normal for a tenant to have responsibility for taking out other insurance like public liability, employer’s liability and contents insurance.
4. Assignment/sub-leasing: it is quite common to see provision in leases to the effect that a tenant is not allowed to sublet a lease or assign it onto a third party without the landlord’s written consent. These provisions can be quite onerous but with proper drafting by an experienced business lawyer, the clause can be amended setting out the basis in which a landlord will provide his consent.
5. Break clauses: as with any start up business, the hope is for success but it is always nice to have a net to fall into in case things are not working out. This is where a break clause is important. It will allow a tenant break from the lease usually around half way through the term of the lease. But you can choose when you want this exit to be from.
6. Termination: where there is a breach of any of the conditions of the lease there is provision for a landlord to go to court to remedy the situation. Where rent is not paid, a landlord can peacefully re-enter the premises.

Other important matters that a business lawyer will be looking to make sure are in order from a tenants perspective include:-

1. Rates: Are the water and commercial rates paid up to date by the landlord? Where a tenant takes occupancy of a building and the commercial rates are outstanding by a landlord, the current tenant becomes responsible for those outstanding rates. This can be thousands of euros.
2. Tax: Taxation will need to be looked at and whether VAT applies or not to the transaction.
3. Title: Does the landlord have title to give the lease?
4. Planning: Does the property have planning permission for the use intended by the tenant? If not, does this pose a problem or is it possible for agreement to be reached where a tenant enters into an agreement to lease and prior to taking on the full lease applies for the planning permission?

Like any commercial contract you would be best advised to seek out some expert advice on whether the terms contained in that lease are fair and reasonable.

This article is general in nature and cannot be regarded as legal advice.  It is general commentary only.  You should not rely on the contents of this article without consulting one of our Solicitors.  If you would like advice regarding how the law applies to your individual circumstances, then please contact Roisin O’Connell Solicitors.