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What Is a Commercial Lease in Ireland in 2023?
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If you’re looking for a place to help set up your company, you’re likely going to need a commercial lease if you don’t have the money to buy a place of your own. Commercial leases can be different from regular domestic leases so you should take the time to research them to know what to expect. Read our comprehensive commercial lease guide to learn more!
How Does a Commercial Lease Work?
A commercial lease is a contract between a landlord and a business tenant that allows for the tenant to set up their business at the property. Commercial leases are quite complex and are not as straightforward as residential leases, but the basics are easy to understand in a simple guide like this one.
What’s in a Commercial Lease?
A commercial lease is comprised of a number of elements that outline the legal situation between the business tenant and the landlord. Some of these elements are similar to what you’d find in residential leases however there are some very alien aspects that you might not have come across before.
- Property Type and Description
Your commercial lease will usually outline the details of the property. This will usually include basic contact information such as the address and floor plan as well as more detailed descriptions such as a the fixtures, fittings and facilities that are already at the property. It will also include whether the property is freehold or leasehold. - Business Activity Permissible
The kind of commercial activity you can use the property will be defined in the contract. Some landlords might want to disallow certain types of businesses that they regard as either too risky (possibly from past experience) or that aren’t suitable for the property. You should double check you’re getting the property you need before you sign a commercial lease. - Business Tenancy Term
The tenancy term will also be covered in the contract which can either be a short term or long term depending on the contract. The commercial lease will also specify whether the contract is automatically renewable or not. - Rent Amount
How you need to pay the rent and how much you need to pay will be defined in the commercial lease. The rent amount is often negotiated and there’s no standard price that is paid so it’s a good idea to consider hiring a solicitor to help you out. In addition, you might have extra costs if you sign a Full Repairing and Insuring (FRI) lease where you might have to take out extra insurance for the property. Commerical lease tend to include rent reviews as well. - Deposit
Like a residential lease, the deposit is paid up front to the landlord and is to ensure that the rules of the agreement are respected. If there are any damages or problems after the business tenancy ends, you might have the deposit deducted when it’s refunded to you. - Ending the Lease
The way in which you can end a commercial lease will also be in the agreement. The agreement will include how much notice you’ll need to give and whether you have a break clause in the contract that allows you to end it early after a certain amount of time has passed.
What is an FRI lease? A Full Repairing and Insuring (FRI) lease means that you as the business tenant will be responsible for the maintenance and repairs of the property instead of the landlord. This means that you’ll need to make sure you’re insured against damages since it’ll be your responsibility. This can cut both ways since, although the costs of repairs is on you, a FRI lease can mean lower rent to pay whereas you can save by finding a good insurance deal! In the reverse case, the landlord would usually have to look for landlord insurance.
Do Commercial Leases Have To Be Registered?
All commercial properties need to be registered on the Property Services Regulatory Authority (PSRA) which regulates the property services sector in Ireland. As the tenant of the commercial property, the legal obligation to register the property is on you. This means that once the commercial lease is finalised and signed, you will need to make sure you provide the PSRA with the following information:
- The address of the property
- Date of the commercial lease
- Tenancy term of the commercial lease
- How much the rent is
How Do I Register a Commercial Lease with the PRSA?
The quickest way to register a commercial lease is online on the PRSA website where you will find the information related to commercial leases dating back to 2010. You should make sure to register the lease or you can end up in trouble for not doing so.
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What Is the Normal Term for a Commercial Lease?
Commercial leases in Ireland generally have two types: short term or long term. Both offer different advantages and disadvantages so you should consider what it is your after before you dive into the negotiation:
- Short Term Lease
Short term leases are usually under 5 years in length and traditionally were offered for 3 and a half years or 4 and a half years. Short term leases are usually much shorter documents and much more straightforward and generally the landlord will still maintain possession of the business property. - Long Term Lease
A long term lease is a commercial lease that is over 5 years in length. These are a lot more complicated that short term leases and last for up to 10 years will rent reviews every 5 years. Most long term leases will be FRI leases so as a tenant you will practically have possession over the property.
What Happens After 5 Years of the Lease?
After you’ve been in a commercial lease for 5 years, you will be entitled to a duration of 25 years on that lease with rent reviews every 5 years. In these cases, the landlord maintains ownership but essentially gives up the possession of the property and you as the business tenant become responsible for the maintenance and repairs.
Do I Need To Pay Stamp Duty on a Commercial Lease in Ireland?
If you take out a commercial lease, you will need to pay Stamp Duty on the property in the same way as residential properties. You will need to pay the Stamp Duty even if you have a short term and it is on the business tenant to make sure this Stamp Duty is paid.
How Much Is the Stamp Duty for Commerical Leases?
The amount that you pay in Stamp Duty will depend on the length of the commercial lease and the average annual rent you’ll be paying. According to Revenue, here are the current Stamp Duty rates:
| Lease Length | Percentage Stamp Duty |
|---|---|
| Less than 35 years or Indefinite | 1% |
| More 35 years | 6% |
| More than 100 years | 12% |
Source: Revenue
Last Updated: 07/10/2022
Commercial Lease Stamp Duty Example Say you take out a commercial lease for 10 years and the rent for the first five years is €20,000 a year.
After 5 years, you rent increases to €25,000 for the next 5 years meaning your total rent payable will be €45,000. This means that your average annual rent works out like this:
€45,000 total rent ÷ 10 years = €4,500
This means that you’ll pay 1% Stamp Duty on €4,500 which is €45.
Is a Solicitor Needed for Commercial Lease?
Hiring a solicitor for your commercial lease is not a legal requirement and if you feel comfortable with being able to negotiate the terms of the agreement yourself, you are free to do so. However, if you’re not experienced with commercial property law it’s highly recommended that you hire a solicitor to go over the finer details of the commercial lease agreement. You don’t want to be caught by a clause you missed because you didn’t have a legal team to help you out!
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