IRELAND Law and Practice Contributed by: Diarmuid Mawe, Craig Kenny, Katelin Toomey and William Fogarty, Maples Group
6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time A person or entity may enter into either a lease or a licence with the owner of a property to occu - py and use the property, without acquiring the property outright. A licence is more suitable for shorter-term arrangements. A licensee under a licence does not obtain exclusive possession of the property, but rather has mere permission from the owner to enter the property. In contrast, a lease confers a legal interest in the property to the tenant, and this interest may typi - cally be assigned or transferred, subject to the requirement to obtain consent from the landlord. 6.2 Types of Commercial Leases There are two main categories of commercial leases: • a lease on a short-term basis for a term of up to five years; or • a lease on a medium- to long-term basis, usually for ten years to 15 years. 6.3 Regulation of Rents or Lease Terms Commercial leases are freely negotiable, subject only to statutory provisions. Certain areas in Ireland have been designated as Rent Pressure Zones (RPZs). RPZs are located in parts of Ireland where rents are highest, and where households have the greatest difficulty finding affordable accommodation. RPZs now cover most urban areas in Ireland. Under cur - rent legislation, any increase in the rent charged on residential property cannot exceed general
inflation, as recorded by the Harmonised Index of the Consumer Prices, or 2% per year pro rata, whichever is lower. RPZs are due to expire at the end of 2025. It remains to be seen whether the government will extend their application or replace them with an alternative system. 6.4 Typical Terms of a Lease It is now unusual to have a lease with a term in excess of 15 years in the Irish market. Previously, it was not unusual to have leases with terms of between 20 and 30 years. In general, commercial leases in Ireland are full repairing and insuring leases, and a tenant will have full repairing obligations. The obligations are imposed directly by a repair covenant in the lease or, in the case of a multi-let development such as an office block, shopping centre or busi - ness park, the obligations may be imposed indi - rectly through a service charge that imposes an obligation on the tenant to reimburse the land - lord for repair works carried out to the structure and common areas of the development. Payment obligations are subject to agreement between the parties, although the most common payment obligation is quarterly in advance. With the increased focus on ESG factors in real estate transactions, green leases are becoming increasingly important and incorporate clauses that promote the sustainable operation and management of buildings. 6.5 Rent Variation Usually, a commercial lease will provide for a rent review periodically throughout the lease, generally at five-yearly intervals. The rent may be either increased or decreased (the 2009 Act pro - hibits “upward-only” rent-review clauses from February 2010, but not with retrospective effect).
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