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Commercial Leases: Hot Topics 29 April 2014

Commercial Leases: Hot Topics 29 April 2014. Commercial Leases: Hot Topics Chair Kevin Hoy, Head of Real Estate. Time to Split - Exercise of Break Options Nicola Byrne, Senior Associate e : nbyrne@mhc.ie. Law. No statutory framework No Irish reported case law

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Commercial Leases: Hot Topics 29 April 2014

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  1. Commercial Leases: Hot Topics 29 April 2014

  2. Commercial Leases: Hot Topics Chair Kevin Hoy, Head of Real Estate

  3. Time to Split - Exercise of Break Options Nicola Byrne, Senior Associate e: nbyrne@mhc.ie

  4. 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

  5. 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.”

  6. Service of Notice • Identity • Authority • Timing • Service

  7. Discharge of Payments, Rent and Outgoings • Break payment • Rent and outgoings • Apportionment and overpayment • Cleared funds

  8. Compliance with Covenants and Conditions • Subsisting breaches • Materiality • Repair and decoration • Alterations • Vacant possession

  9. 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

  10. Takeaways • Take timely legal advice • Identify the full nature and extent of tenant’s obligations • Engage strategically with tenant

  11. Keeping the Peace: Re-Entry of Commercial Premises Eimear Collins, Partner e: ecollins@mhc.ie

  12. 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

  13. Overview • Can be stressful, intensive time • Landlord should take legal advice in advance of re-entry to minimise risk and exposure

  14. 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

  15. 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]

  16. 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

  17. When can a landlord re-enter? • Expressly provided for in lease • Common law – limited right to re-enter

  18. Legal effect of termination by re-entry

  19. 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

  20. Section 14 Notices • In writing • Addressed and served on tenant • Specify breach • Specify remedy • Call on tenant to remedy breach • Give reasonable time

  21. 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

  22. How to minimise risk • Solicitor send letter to former tenant post re-entry • Give tenant back its goods • Keep it simple post re-entry

  23. 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

  24. Limitations/drawbacks/risks • Not a universal panacea • Commercial leases only • May still have to sue tenant/guarantors • Relief from forfeiture • Title

  25. Tenants Suing Landlords Eamon MarrayBL

  26. Q & A Nicola Byrne, Senior Associate e: nbyrne@mhc.ie Eimear Collins, Partner e: ecollins@mhc.ie Kevin Hoy, Head of Real Estate e: khoy@mhc.ie

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