Wednesday 18 September 2019

If you rent business premises be sure to know your rights

Paul McNeive the right moves

A crop of queries from tenants about issues relating to business premises, has convinced me that there is a "fall-out" from the collapse of the market, where deals were done in desperation, and with little regard for paperwork. Leases are expiring, and it's clear to me that many small business owners have little understanding of their rights, when they are suddenly confronted with demands for more rent, or to vacate a premises.

This issue mostly persists in the retail sector, and it is magnified there by the higher proportion of tenants who are immigrants, and simply don't know their rights.

One would have thought that someone running a successful business would realise that they should take professional advice about their property, but that doesn't seem to happen naturally.

Last week, I heard that the owner of a shop in a Dublin city centre shopping centre was closing her outlet down. She has built a successful business, and her recent addition of an online platform is increasingly profitable.

There is a high rate of vacancy in the centre, and one unit, two doors away, has been vacant for over five years. The landlord has demanded a review of the rent, to a level that the shop cannot support, so she is going to close and concentrate on her online platform.

She has no awareness of her rights under the rent review clauses in her lease, and that she can negotiate, or have a third-party fix a rent which may be sustainable. The landlord, who has probably added on plenty of room for negotiation in his demand, may well lose a good tenant through a lack of communication.

Recently I met the owner of a restaurant in Dublin. He was the manager of this business for several years, then took it over from the owner, and kept it going through the recession. The property, in which he occupies one floor, was up for sale, and he had a Notice to Quit from the landlord's agents. He had no lease, as neither did the original owner, and he was frantically looking for alternative premises. He was about to close down and lay off his staff.

This restaurateur had no idea that he was entitled to a new long-term lease because the business had been in occupation of the premises for more than five years. Once he made the selling agent aware that he knew this, they withdrew the Notice to Quit.

The most important piece of knowledge for any tenant is the entitlement to claim a new 25-year lease, if your lease expires, and if you have been occupying the premises for more than five years. The new lease can be on whatever terms are agreed between the landlord and tenant, for example, as regards rent, rent reviews or repairing obligations.

A very strong negotiating card for the tenant, and one seldom used, is the option to apply to the District Court. The Court will grant tenants a new lease, on the same terms as the old one, except that the judge will also decide the new rent. There is an element of risk in that, for both sides, because judges are not property experts, and you might get a surprising result.

Another big advantage for the tenant is that you can claim any length of lease you like. In theory, you could go back to the Court, every year, for a new one year lease. This gives the tenant maximum flexibility, and reduces the value of the landlord's investment, so it's well worth using as a negotiating point.

Tenants taking on an existing lease should watch out for cases where the previous tenant "renounced" their rights to claim a long lease, even after the lease started. You will be bound by this, even if not aware of it.

It always pays to take professional advice from an estate agent and solicitor.

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