How Does a Commercial Lease Work?
A commercial lease is a contract between a landlord and a business tenant that allows the tenant to set up their business at the property. Commercial leases are quite complex and not as straightforward as residential leases.
What Is in a Commercial Lease?
- Property Type and Description — Details of the property including address, floor plan, fixtures, fittings and facilities. Will include whether the property is freehold or leasehold.
- Business Activity Permissible — The kind of commercial activity you can use the property for. Some landlords may disallow certain types of businesses.
- Business Tenancy Term — Whether the contract is short term or long term, and whether it is automatically renewable.
- Rent Amount — How and how much you need to pay. The rent amount is often negotiated with no standard price. You might have extra costs if you sign a Full Repairing and Insuring (FRI) lease.
- Deposit — Like a residential lease, the deposit is paid up front to ensure the rules of the agreement are respected.
- Ending the Lease — How much notice you need to give and whether there is a break clause allowing you to end it early.
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Do Commercial Leases Have To Be Registered?
All commercial properties need to be registered on the Property Services Regulatory Authority (PSRA). As the tenant, the legal obligation to register the property is on you. You will need to provide:
- 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 PSRA?
The quickest way is online on the PSRA website, where you will find information related to commercial leases dating back to 2010. Make sure to register the lease to avoid trouble.
What Is the Normal Term for a Commercial Lease?
Commercial leases generally have two types:
- Short Term Lease — Usually under 5 years in length (traditionally 3.5 or 4.5 years). Much shorter documents and more straightforward. The landlord will still maintain possession of the property.
- Long Term Lease — Over 5 years, lasting up to 10 years with rent reviews every 5 years. Most will be FRI leases. As a tenant you will practically have possession over the property.
What Happens After 5 Years of the Lease?
After 5 years in a commercial lease, you will be entitled to a duration of 25 years on that lease with rent reviews every 5 years. The landlord maintains ownership but essentially gives up possession, and you as the business tenant become responsible for maintenance and repairs.
Do I Need To Pay Stamp Duty on a Commercial Lease in Ireland?
Yes. You will need to pay Stamp Duty even on a short-term commercial lease. It is on the business tenant to ensure it is paid.
How Much Is the Stamp Duty for Commercial Leases?
| Lease Length | Percentage Stamp Duty |
|---|---|
| Less than 35 years or Indefinite | 1% |
| More than 35 years | 6% |
| More than 100 years | 12% |
Source: Revenue. Last updated: 07/10/2022.
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Moving house? Our experts at Selectra can set up your energy, broadband, and utilities in one free call — saving you time and money.
Is a Solicitor Needed for a Commercial Lease?
Hiring a solicitor for your commercial lease is not a legal requirement. If you feel comfortable negotiating the terms yourself, you are free to do so. However, if you are not experienced with commercial property law, it is highly recommended to hire a solicitor to go over the finer details. You do not want to be caught by a clause you missed!