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More flexible terms expected in business leases

Almost half (48%) of Ireland’s real-estate sector expects commercial-lease terms to become more flexible for both tenants and landlords, a new survey by Mason Hayes & Curran has found.
The business-law firm surveyed more than 250 real-estate professionals at its recent webinar on landlord-and-tenant legislation.

Nuances

The nuances of commercial-lease-renewal rights, and the legal and strategic considerations involved, were discussed at the webinar.
Best practices and emerging trends in rent reviews were also examined.
While the majority (84%) surveyed believe the current process for rent reviews is fair to both parties, almost half (47%) said that better access to market data would improve the process.
For more than six out of ten (61%) of those surveyed, securing market-aligned rates was the top priority when entering rent-review negotiations.
Michael Doran (partner and co-head of real estate, Mason Hayes & Curran) commented: "Since Ireland legislated to end ‘upwards-only’ rent reviews in commercial leases in 2009, the rent-review process has become more complex.
“All parties must now agree an ‘open-market rent’ that could be higher, lower or remain the same as the original amount. There are several factors that can affect rental value, from the strength of the market at the date of review to the assumed lease term. With nearly half of our respondents pointing to the need for better market data, this reflects the move towards a more informed and data-driven negotiation process.”
The survey also sheds light on the challenges surrounding renewal rights. A substantial 45% of respondents identified negotiation leverage as the most challenging aspect of the process, with clarity and fairness of terms following closely at 35%.

Provision

Real-estate partner Marcus Kennedy explained: “Under landlord-and-tenant law, a critical provision exists for tenants operating a business from a premises for an uninterrupted period of five years.
“The tenant is entitled to renewal rights, or in simple terms, a new lease. This is commonly referred to as business equity. The renewal-rights process protects this equity and fosters stability and continuity, ensuring businesses can plan with confidence.
“While navigating the complexities of renewal negotiations can present challenges, our findings underscore the importance of transparent negotiations and clear, fair terms to both landlords and tenants.”