Key Clauses in Commercial Leases

Key Clauses in Commercial Leases 

INTRODUCTION

Commercial Leases are lengthy documents and it is extremely important that both the landlord and
tenant are fully aware of what the lease contains particularly in the case of a tenant where some
obligations can be drafted to be quite onerous. I have set out some brief points in relation to the
main clauses which cause concern in a commercial lease:

RENT

There are a number of considerations to be had in relation to rent:

. Fixed amount or a percentage? Rent in the retail sector is increasingly being determined as
a percentage of turnover or a basic plus percentage of turnover. The clauses around this
turnover rent can be quite complex and a tenant needs to careful regarding the calculation
provided in the lease.
. Will Vat be payable in addition to the rent?
. Rent free period (s)
. Rent reviews? Although upwards only rent reviews have been banned in relation to new
leases careful consideration must still be had on the rent review provisions of a lease.


REPAIR CLAUSE

A commercial lease will contain a clause in relation to repairs of the property. There can be provision
made for a fully repairing and insuring lease (FRI) which means that where a single tenant lets a
property they pay for the full insurance premium and are obliged to carry out all repairs to the
property.

The wording of this clause is extremely important as an obligation can be inserted into the lease to
“put” the property into good repair.

Limitations can be placed on this repair clause with the correct drafting such as a limitation to
internal repairs only or the use of a schedule of condition at the commencement of the lease
otherwise this can be an expensive issue for a tenant .

INSURANCE

A tenant needs to be mindful of the insurance provisions in a lease. A tenant should be obliged to
obtain employers and public liability insurance. In addition to this a tenant may be obliged to obtain
insurance cover for the property and provide a copy to the landlord however it is usually provided
that a landlord will insure the property and the tenant will pay the premium. Careful drafting is
required from a tenant’s point of view in relation to:

– Calculation of the insurance premium in a multi-unit property
– Waiver of subrogation rights
– Reinstatement of the property
– Payment of rent during insurance works

ASSIGNMENT AND SUBLETTING

A commercial lease will contain a clause whereby a tenant is restricted from assigning or subletting
the property without the landlord’s prior consent. Again this is an important clause for a tenant to
note and proper drafting around this condition will ensure that the conditions upon which the
landlord will grant his consent are not too onerous.

BREAK CLAUSES

Break clauses often contain strict criteria which must be carefully reviewed by a tenant to ensure
that if such a break is required in the lease that he will be in a position to fulfil the criteria set out.
Generally strict notice periods are contained in a lease and if carefully drafted by a landlords solicitor
the break option can be lost if the notice period is not adhered to.

TERMINATION OF LEASE

A lease will generally provide that in the event that a tenant is in breach of any of the covenants the
landlord can terminate a lease.

In the case of a breach of covenant a landlord will usually have to give the tenant notice of the
breach and time to remedy it before bringing an application to court.

It should be noted that the one exception is where the breach is failure to pay rent. A lease will
usually contain a covenant allowing for the Landlord to peacefully re-enter a property if a tenant
fails to pay his rent within a specified time.

As mentioned the above is a short summary of some of the main clauses in a lease however all
leases are different depending on the clients and the circumstances involved. For further advice please contact:

Susan Cosgrove
Cosgrove Gaynard Solicitors
1 Westland Square
Pearse Street
Dublin 2

Phone : 01 613 9191
Fax: 01 613 9190
Email: info@cgsolicitors.ie

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