Long Term Commercial Leases
- May 26, 2022
- Jonathan Earl
- Comments Off on Long Term Commercial Leases
Long term leasing and its legal ramifications has been given high-profile news coverage recently due to the planned relocation of the National Maternity Hospital (NMH) from Holles Street in Dublin to the St Vincent’s campus.
Commercial Leases are usually either classified as short term (less than 5 years) or long term (more than 5 years). The reason for the distinction between short and long term leases is that a tenant who is in actual occupation of a business premises for over 5 years may be entitled to claim a 25 year Full Repairing Insuring Lease with five yearly rent reviews. The right of renewal is governed by the terms of the lease and the relevant legislation as set out in the Conveyancing Acts. It is not uncommon for leases to be granted for hundreds of years and terms are usually influenced by the historic title to the property and its nature and whether it is registered in the Registry of Deeds or in the Land Registry.
In the case of the NMH, the State wanted to buy the land but instead were offered a Lease for 299 years to the Health Service Executive. The Government says this is effective ownership. The Opposition say it is not, adding that the State won’t own the building either.
Legal representative for the HSE John O’Donoghue claims, “It is not the case that the State won’t have an ownership in the land. On this issue of freehold versus leasehold there are two different types of ownership interest in Ireland. There is freehold, where you own the property into infinity, and there is leasehold, which is where you own a property for specific period.” Essentially, he is saying a leasehold interest is a form of ownership for however long two parties agree it should be so.
Mr O’Donoghue, who is also a property lawyer, said the legal documents surrounding the deal “create a propriety interest in the land for the HSE for 299 years and the building constructed on that will be constructed by the HSE through its own interests. That lease contains a right for the State to build a hospital on that land, to maintain that hospital, to grant an operating licence to the operator of that hospital.”
Owning land on a leasehold basis means that there may be restrictions imposed on the lessee in relation to certain activities and/or uses. This may pose unforeseen difficulties into the future and the lessee should be fully satisfied that they will not be adversely affected by any covenants during their tenure.
It is also often the case that the lessee can “buyout” the freehold interest under certain circumstances. The State released details of the lease which states that should they attempt to acquire the freehold – the yearly rent of €10.00 may be increased substantially to €850,000.00 per annum. Always read the fine print !
NB – This is a guide for information purposes only and does not constitute legal advice. If you have an issue requiring legal advice, please contact any of the team at Nolan Farrell & Goff LLP, whose numbers can be found on our website www.nfg.ie, or email email@example.com.