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Significant Reform of Law in Relation to Business Tenancies. Section 47 of The Civil Law (Miscellaneous Provisions) Act 2008
September 2008

Since Monday 21 July there has been significant legislative change for business tenants in Ireland.

Under Section 47 of The Civil Law (Miscellaneous Provisions) Act 2008, Section 17(1) (a) of the Landlord and Tenant (Amendment) Act 1980, (as amended by section 4 of the Landlord and Tenant Amendment Act 1994) has been amended.

The New Provision

Landlords and Tenants can now contract out of the statutory provisions under The Landlord and Tenant (Amendment) Act 1980. This legislation automatically gave business tenants the right to a new tenancy for 20 years, where they had been continuously in occupation of the premises for a period of 5 years or more.

In the past, in an attempt to overcome this provision, four year and nine month tenancies were developed for business leases so that automatic renewal rights would not accrue to the tenant.

Until this recent reform was introduced, the only situation where one could contract out of the 1980 Act was under the 1994 Act, which allowed for an office tenant to contract out of its right to a new tenancy after obtaining independent legal advice prior to the commencement of the tenancy.

The new Act allows all business tenants, regardless of user, to waive the right to renewal of the lease for 20 years after the end of a five year period. It is important to note that the Tenant must receive independent legal advice prior to entering into such an agreement waiving the right to renew.

Leases Already in Existence

For Leases already in existence it appears that landlords and tenants are free to enter into such agreements going forward. However, as noted, prior independent legal advice is a prerequisite to validating any such waiver. This does not appear to be independent legal advice prior to the commencement of the tenancy in the first place but independent legal advice prior to waiving the right to the renewal of the lease. This differs from the previous waiver entitlement, as independent legal advice was necessary prior to the commencement of the tenancy under Section 4 of the 1994 Act in order to avail of the exception available to offices.

Advantages

Advantages of the reform include the fact that parties can now agree a term of 5 years or more without the concern of the landlord that the tenant will acquire renewal rights which would interfere with the landlord getting vacant possession when they require it. Moreover, it appears that the waiver is not necessarily to be effected prior to the commencement of the term. In this respect it will offer flexibility to both new and existing tenancies.

Landlords and Tenants can now agree commercial terms which will reflect their requirements which, in the current climate, will be better for start up and small businesses which may otherwise be slow to enter into long leases with guarantees.