Commercial Leases:
Hot Topics
29 April 2014
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Commercial Leases:
Hot Topics
Chair
Kevin Hoy,
Head of Real Estate
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Time to Split - Exercise of
Break Options
Nicola Byrne,
Senior Associate
e: nbyrne@mhc.ie
3
Law
•
No statutory framework
•
No Irish reported case law
•
No standard form lease break option provisions
•
No industry accepted or endorsed code of practice
•
Governed solely by law of contract
•
UK case law of persuasive authority
Example of a Break Option Clause
“The tenant shall be entitled to terminate this Lease on 30 April
2015 (“the break date”) strictly subject to compliance with the
following terms and conditions:
(a) service by the tenant of at least twelve months’ prior written
notice on the landlord;
(b) discharge by the tenant of the rent and all other outgoings
payable under the lease up to the break date; and
(c) compliance by the tenant of all of the tenant’s covenants and
conditions under the lease up to the break date.”
Service of Notice
• Identity
• Authority
• Timing
• Service
Discharge of Payments, Rent and Outgoings
•
Break payment
•
Rent and outgoings
•
Apportionment and overpayment
•
Cleared funds
Compliance with Covenants and Conditions
•
Subsisting breaches
•
Materiality
•
Repair and decoration
•
Alterations
•
Vacant possession
Estoppel
•
Landlord action or inaction can affect its legal position
•
Landlord strategic response to tenant engagement
•
Landlord estopped from denying tenant compliance by virtue of
encouraging, or acquiescing in, tenant’s non-compliance
Takeaways
• Take timely legal advice
• Identify the full nature and extent of tenant’s obligations
• Engage strategically with tenant
Keeping the Peace: Re-Entry of
Commercial Premises
Eimear Collins,
Partner
e: ecollins@mhc.ie
13
Overview
•
Effective, Speedy, Economical
•
Way for a landlord to get back vacant possession of a
leased premises
•
Without the necessity of obtaining any court order for
possession
Overview
•
Can be stressful, intensive time
•
Landlord should take legal advice in advance of re-entry
to minimise risk and exposure
Current attitude of landlords
• Substantial increase in use of re-entry as a method of
terminating lease
• Willingness to consider re-entry even in complex
scenarios
• Alternative of issuing proceedings not commercial or
timely
Framework
• Common Law – very limited right to re-enter
• - confined to conditions in leases only
• - “on condition that”, “provided that”
• Terms of lease – Does it give an express right to re-enter?
• Section 14 1881 Conveyancing Act
• Landlord and Tenant (Ground Rents) Acts
• Caselaw
• - Main Irish case - Sweeney Ltd –v- Powerscourt
Shopping Centre Limited [1984]
What is re-entry?
• It is where a landlord physically re-enters a demised
premises for the purposes of terminating the lease
• Service of a notice in itself is not sufficient
• Must actually get into the premises – no other act is
sufficient
When can a landlord re-enter?
• Expressly provided for in lease
• Common law – limited right to re-enter
Legal effect of termination by re-entry
LANDLORD
Tenancy ends once
landlord peaceably
re-enters the
premises.
TENANT
SUB TENANT
(OF TENANT)
Tenant’s interest
Subtenant’s interest
ceases once
ceases.
premises is reentered by landlord.
GUARANTOR
(OF TENANT)
MORTGAGEE
(OF TENANT)
Guarantor’s liability Mortgagee’s interest
re: future rent and
ceases as the asset
covenants in lease
no longer exists.
ceases unless
express provision of
lease states
otherwise.
So when is it an effective tool?
•
Tenant in breach
•
Lease/common law permits re-entry
•
Landlord satisfied to release tenant/guarantor
•
Landlord wants vacant possession
•
Business being run from demised premises is conducive
to re-entry
Section 14 Notices
•
In writing
•
Addressed and served on tenant
•
Specify breach
•
Specify remedy
•
Call on tenant to remedy breach
•
Give reasonable time
How to minimise risk
• Obtain legal advice
• Consider issues/barriers to re-entry in respect of the
specific premises
• Keep element of surprise
• Keep it peaceable
How to minimise risk
• Solicitor send letter to former tenant post re-entry
• Give tenant back its goods
• Keep it simple post re-entry
Actions tenant can seek to bring against
landlord
•
Relief from Forfeiture – Can be obtained even if landlord
has done everything correctly
•
Damages
•
- re-entry not procedurally correct
•
- goods which perished
Limitations/drawbacks/risks
• Not a universal panacea
• Commercial leases only
• May still have to sue tenant/guarantors
• Relief from forfeiture
• Title
Tenants Suing Landlords
Eamon Marray BL
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Q&A
Nicola Byrne,
Senior Associate
Eimear Collins,
Partner
Kevin Hoy,
Head of Real Estate
e: nbyrne@mhc.ie
e: ecollins@mhc.ie
e: khoy@mhc.ie
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