Mason Hayes & Curran survey stresses need for flexibility in commercial leases

Mason Hayes & Curran survey stresses need for flexibility in commercial leases

Michael Doran

Nearly half of Irish real estate experts expect commercial lease terms to become more flexible for both tenants and landlords, a new survey by Mason Hayes & Curran suggests.

The business law firm surveyed more than 250 real estate professionals at a recent webinar on landlord and tenant legislation.

The event discussed the nuances of commercial lease renewal rights and explored the legal and strategic considerations involved. It also examined best practices and emerging trends in rent reviews, providing practical guidance to optimise outcomes for both landlords and tenants of business premises.

While the majority surveyed (84 per cent) said they believe the current process for rent reviews is fair to both parties, almost half (47 per cent) said that better access to market data would improve the process.

For 61 per cent 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 at Mason Hayes & Curran, said: “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 a number of 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 shed light on the challenges surrounding renewal rights. A substantial 45 pre cent of respondents identified negotiation leverage as the most challenging aspect of the process, with clarity and fairness of terms following closely at 35 per cent.

Real estate partner Marcus Kennedy said: “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 for the future 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.”

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