If you are a landlord facing the expiration of a commercial lease, it is essential to understand the statutory rights provided to tenants under the Landlord and Tenant (Amendment) Act 1980, especially in the case of disputes surrounding rent or lease renewal terms. Here, we explore the key points of the Act and what happens when a commercial lease comes to an end.
Under Section 13 of the Landlord and Tenant (Amendment) Act 1980, tenants who have been in place for a minimum of five years are entitled to what is called “business equity.” This provision allows tenants to renew their lease, provided they have been actively carrying out any “trade, profession or business whether or not it is carried on for gain or reward and any activity for providing cultural, chargeable, educational social or sporting services…”
Once a tenant qualifies for business equity, they are entitled to a new 20-year lease, though the specific terms of the renewal must still be agreed upon by both the landlord and tenant. However, if both parties cannot agree on terms including rent, the tenant can apply to the Court to resolve the dispute. The Court will then determine the market rent based on expert evidence and set the terms of the new lease accordingly.
If you are a landlord with a tenant whose lease is approaching expiration, it is highly recommended to review the current lease terms and seek advice to navigate the renewal process effectively and avoid any potential disputes.
There are also other types of “equity” that tenants can accrue other than business equity i.e. by reason of being in possession for a period of 20 years. This is known as long possession equity. Tenants are also entitled to claim what is called improvements equity if they can establish that they have carried out improvements to the property and are entitled to compensation for same where the value of those improvements is at least 50% of the letting value of the premises at the time the tenant gives notice of its intention to claim the relief i.e. the compensation.
If the tenant and the landlord cannot agree on the terms of the terms of the new tenancy, then the tenant is entitled to apply to Court, and the Court will fix the rent for the new tenancy and will do so in accordance with market rent. In normal circumstances, it will be necessary for the Court to hear evidence in relation to the appropriate market rent from specialist commercial letting advisers.
If a tenant has previously entered into a Deed of Renunciation thus giving up his rights to a new tenancy, then this will have the effect of waiving the entitlement provided that this Deed of Renunciation was put in place prior to the previous lease being signed and legal advice was taken by the tenant at the time of signing the Deed of Renunciation.
Zarinah Tan in our office helpfully prepared this article and if you have any further queries in relation to any commercial lease matter, please do not hesitate to contact either Brendan Dillon or Pauline Horkan on 01 296 0666.
