Business Leases – Contracting out of business equity rights – a note on Irish legal matters

Dec 1, 2014

Landlords and Tenants alike must feel their prayers were answered with Section 47 of the Civil law (Miscellaneous Provisions) Act 2008 ( which we will call from now on the “2008 Act”).

Section 4 of the1994 Act was amended by Section 47 of the 2008 Act, which came into being on the 1st July, 2008. The 2008 Act allows all business tenants, regardless of user, who have a tenancy pursuant to Section 13(1) (a) of the 1980 Act, to contract out of their right to renew their tenancy, after five years occupation in the premises.

For this provision to apply the tenant must renounce his or her right to a new tenancy, in writing, and must receive independent legal advice in respect of the implications of the renunciation. There is no requirement that this renunciation should be executed prior to the commencement of the tenancy (as was required under Section 4 of the 1994 Act), which means a tenant can agree to renounce his or her rights during the currency of the lease.

 It is regarded as best practice to do the renunciation before the Tenant commences occupation, or as early in the Lease as possible.

Up to 2008, Landlords were very reluctant to grant any more than a Lease of under 5years as they feared the Tenant would, after the five year period, obtain an entitlement to a long lease of up to 35 years. Tenants who wanted a longer term were, thus, deprived of negotiating for terms in excess of five years.

Thus, Section 47 of the 2008 Act provides greater flexibility and freedom to both landlords and tenants when negotiating the term of the lease. It allows the landlord and tenant the chance to agree on a tenancy term which is in keeping with their requirements and commercial realities without the landlord being statutory obliged to renew the lease. The “contracting out” provisions as set out in the 2008 Act applies not only to a lease for office use but also includes retail, industrial and other business sections.

 – from Kilkenny based solicitors Holland Condon

 

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