- 12 July 2024
- Posted by: Brendan Sharkey
- Categories: Commercial Property, Landlord and Tenant, Landlord and Tenant Law, News, Property, Residential Property
Foreign Companies Leasing Office Space in Ireland
Foreign Companies Leasing Office Space in Ireland
by Brendan Sharkey, Reddy Charlton LLP
Law stated as of 01 May 2024 • Ireland
A Practice Note discussing the issues to consider when a foreign organisation leases office space in a
multi-tenant building in Ireland. This Note provides guidance for foreign counsel on the leasing process
in Ireland, including the workflow of the transaction, laws affecting the parties, and key documents,
issues, and customs in leasing transactions.
Workflow of a Leasing Transaction
Office Location Considerations
Principal Types of Leases and Structures
Restrictions on Leasing by Foreign Tenants
Physical and Financial Due Diligence
Important Questions to Ask Your Irish Leasing Attorney/Lawyer
A company that is considering opening an office in a foreign jurisdiction must be informed about the local laws and customs
related to office leasing. This Note provides a high-level overview of the office space leasing process in Ireland, including
discussion of:
- The professionals that should be engaged when opening a foreign
- Common leasing
- The principal stages in a typical leasing transaction (including physical and legal due diligence).
- Restrictions on a foreign entity leasing or occupying property in
- Keylease terms for
- Lease registration
- Taxes applicable to office space
This Note is useful for counsel advising a foreign organisation in its home jurisdiction on the key legal and practical points
to consider when leasing an office in Ireland. This Note is not, however, intended to be a replacement for legal advice from
a lawyer that is qualified in Irish commercial property landlord and tenant law. For a high-level overview of the commercial
real estate market in Ireland, see Country Q&A, Commercial Real Estate in Ireland: Overview.
This Note assumes the tenant is leasing space in a completed multi-tenant office building. It does not address build-to-suit
or single-tenant transactions. This Note also does not address the following topics:
- Current market conditions for office
- Construction law, except as it relates to due diligence of the premises (for more information, see Country Q&A,
Construction and Projects in Ireland: Overview).
- Environmental law, except as it relates to due diligence of the premises (for more information, see Country Q&A,
Environmental Law and Practice in Ireland: Overview).
- Establishing a business presence (for more information, see Practice Note, Establishing a Branch Office or
Presence in Ireland and Country Q&A, Establishing a Business in Ireland).
- Corporate registration and filing requirements (for more information, see Country Q&A, Doing Business in Ireland:
- Financing a leasehold interest (for general information, see Country Q&A, Lending and Taking Security in Ireland:
- Employment law (for more information, see Country Q&As, Doing Business in Ireland: Overview: Questions 12 to 17
and Employment and Employee Benefits in Ireland: Overview).
- Tax law, except as it relates to commercial leases (for more information, see Country Q&A, Doing Business in
Ireland: Overview: Questions 18 to 27).
Workflow of a Leasing Transaction
In Ireland, there are several steps involved in identifying appropriate office space and completing an office lease. These
steps include the following, which can overlap depending on the particular transaction:
- Assemble the leasing team (see Leasing Team).
- Define the lease and space criteria (see Office Location Considerations).
- Enter into heads of agreement (see Preliminary Agreements).
- Conduct due diligence of the premises, the property, and the landlord (see Due Diligence).
- Negotiate the lease and other related agreements (see Primary Documents and Box, Tenant Lease Negotiations).
- Execute the lease and, if applicable, register the lease and file the stamp duty return (see Executing the Lease).
Leasing Team
The critical first step when deciding to open an office in a foreign jurisdiction is to identify the key internal and external
advisers. These advisers provide valuable input when defining the criteria for the premises and the lease.
Internal Team
There are potentially many experts within the tenant’s organisation who should be consulted when establishing premises
criteria. The tenant should consider including internal representatives from departments such as:
- Human resources
- Information Technology (IT).
- Operations and Security
- Finance and Accounting
- Legal
It is critical at the outset for the tenant to have a broad understanding of the office space required and a proposed office
layout, as this is relevant from a planning and building control perspective (see Architects, Surveyors, Engineers, and Design
Professionals).
In addition, the tenant should identify any specific operational, IT, and security requirements at the outset so that it can
assess the target premises for suitability at a very early stage.
Key External Advisers
When leasing office space in Ireland, a team of external advisers should be assembled, including:
- Property agents (see Property Agent).
- Solicitors (see Solicitors).
- Architects, surveyors, engineers, and design professionals (see Architects, Surveyors, Engineers, and Design
- General Contractors (see General Contractors).
- Tax advisers (see Tax Advisers).
Property Agent
Property agents are typically involved in the sourcing and leasing of commercial properties in Ireland. Their value in lease
transactions of this nature cannot be understated, as they perform the following important functions:
- Assisting in sourcing a property to fit the needs of a prospective
- Negotiating the rent
- Negotiating the main commercial terms of the agreement, including:
- term duration;
- breakdates; and
- rent reviews
(see Primary Documents.)
When commercial office space is put on the open market for rent, the landlord will engage property agents to oversee that
process. If a foreign company deals directly with the property agent responsible for marketing and letting that property, that
property agent will be acting on behalf of the landlord. A foreign entity should engage a separate independent property agent
to represent their interests in the lease negotiation, if the foreign entity is not familiar with either:
- The Irish property
- Common rental conditions and rents
Solicitors
Solicitors review and identify any issues with:
- The lease
- Any supplemental agreements or
- The title to the landlord’s
- The planning and building control documents furnished in relation to the target premises
- Search results and replies to enquiries
Though the property agents normally negotiate the heads of agreement (that is, the document containing the principal terms
of the leasing arrangement) (see Preliminary Agreements). Solicitors should be involved from an early stage and review
the heads of agreement prior to accepting those terms. This allows some legal issues to be addressed at this stage, which
will avoid delays further on in the process.
Architects, Surveyors, Engineers, and Design Professionals
In Ireland, the planning and building control system operates largely on a self-certification basis. The Irish statutory authorities
responsible for issuing planning permissions and other statutory consents do not offer certifications that a building is in
compliance with those consents.
The developer engages independent professionals to confirm a building meets these legal requirements. It is therefore
essential to engage an appropriately qualified architect, surveyor, or engineer who can advise on the following:
- Carrying out a structural survey of the target premises to ensure there are no obvious structural
- Assessing the target premises against the statutory consents in place to ensure the property is compliant, including:
- planning permissions;
- fire safety certificates; and
- disability access
- Designing the proposed fit out of the target
- Assessing what statutory consents may be required as a result of the fit-out
- Making the necessary application for the proposed fit out
- Assessing the adequacy of heating, ventilation, and air conditioning
- Overseeing and certifying any required fit-out works carried out by the tenant
If the tenant is taking a lease of or in a newly constructed building, the tenant’s solicitor should check whether there are
any collateral warranties available from the members of the landlord’s professional team (such as architects, designers, and
engineers). For background information, see Country Q&A, Construction and Projects in Ireland: Overview.
General Contractors
Building contractors are normally engaged to carry out the tenant’s proposed fit out works. This is normally done in
accordance with the specification designed by the tenant’s architect, engineer, or surveyor (see Architects, Surveyors,
Engineers, and Design Professionals). Various office fit out specialists can be engaged to carry out the fit out.
Tax Advisers
Normally, a foreign company taking office space in Ireland would have already engaged tax advisers in Ireland. These tax
advisers primarily advise on how the Irish tax regime would apply to the company in all aspects of its business.
From a commercial leasing perspective, the company’s tax advisers primarily look at the valued added tax (VAT) treatment
of the lease. Standard commercial leases can contain quite detailed and at time onerous VAT provisions. It is normal that
the tax adviser would take responsibility for advising on these provisions.
Office Location Considerations
Although financial requirements are of primary importance when opening an office, establishing an office in the right location
for the organisation can be a significant driver in delivering a positive culture and success in the business. A suitably
experienced and qualified property agent can assist the tenant in formulating and prioritizing the tenant’s lease criteria. Some
factors the tenant should consider include:
- The number of employees in the office and how they will work in the The human resources department
should consult on the plans to staff the office and plans to allow hybrid or other flexible working arrangements. This
will dictate the size and layout of the space that the tenant requires and allow the tenant to prepare cost projections
that are based on the rentable square footage/meterage of the premises.
- Business The tenant’s specific needs for its business, such as:
- a particular office layout;
- security;
- specialized technology or other equipment;
- delivery and visitor access; and
- parking
- Commuting and transportation Where the employees are likely to live and how accessible the office is
from those locations.
- Tax Whether there are local tax or other incentives to lease space in a particular area of a city or region.
- Safety and Whether the building is in a safe and secure location.
- Amenities and What amenities the tenant expects to have in the building and services it expects the
landlord to provide.
- The landlord’s financial condition and Whether the landlord is viewed favourably in the market and
has sufficient financial backing to satisfy its lease obligations.
- Character of surrounding What services, restaurants, and stores are accessible in the surrounding area for
employees.
Principal Types of Leases and Structures
The principal types of lease structures for part of a multi-let office building in Ireland are leases, assignments, and subleases.
Lease
A lease is an agreement between the building owner and tenant. This is the most common structure. The lease terms are
open to negotiation by the landlord and the tenant. However, many terms of a commercial lease are industry standard to
which amendments will not generally be accepted. In a multi-let office scenario, these standard terms include the obligations
to pay:
- The agreed
- A service charge, which is a contribution towards the upkeep and maintenance of the
- An insurance charge, which is a contribution to the overall insurance cost of the
Assignment
In an assignment of a lease, the prospective tenant takes over an existing lease and steps into the shoes of the departing
tenant. Usually, the terms of the lease are not open to negotiation as they are already fixed though occasionally a landlord
might agree to some terms being varied but this is rare.
Leases usually prohibit assignments of part but most leases permit assignments of the full lease. The lease will contain
conditions entitling the landlord to veto the proposed assignee, as the landlord would want to ensure any incoming tenant
can meet the lease obligations.
Sublease
Existing tenants commonly sublet their offices by way of a sub lease to an incoming entity known as a sub-tenant. The
landlord must consent to the arrangement. The consent is normally documented in a licence to sublet between the landlord,
tenant, and sub-tenant, with the tenant agreeing to pay the costs of the landlord, which may include lawyers, agents, and
surveyors fees.
Sub-lettings of part are rare, but it will depend on the type of building as to whether they are permitted. Generally, landlords
are reluctant to permit further sub-division of existing space as it can lead to problems, including estate management issues.
Sometimes, landlords may compromise by allowing the subletting of a “permitted part.” For example, if a tenant leases
several floors in an office block, the landlord may agree to the tenant sub-letting a floor or a couple of floors together.
Due Diligence
Legal Due Diligence
The legal due diligence that must be conducted when taking a lease in Ireland predominantly falls under the following
categories:
- Title review (see Title Review).
- Searches(see Searches).
- Planning and building control (see Planning and Building Control).
- Service charge and other matters (see Service Charge and Other Matters).
- Security of occupation (see Security of Occupation).
All aspects of legal due diligence need to be carried out before the lease is signed.
Title Review
Generally, office buildings are freehold ownership. However, the tenant’s solicitor will need to check if title to the property
is registered with the Land Registry, then the tenant’s solicitor can obtain folios and filed plans of the target property
electronically from the Land Registry (for background information, see Country Q&A, Commercial Real Estate in Ireland:
The landlord’s title must be investigated to verify:
- The landlord owns the
- There are no restrictive covenants on title which could adversely impact the proposed use of the
- What security or funding might be secured against the office
Occasionally, the building can be leasehold title. If so, a prospective tenant must investigate the binding nature of covenants
in the lease that could:
- Affect the user of the
- Restrict the alienability and sub-division of the
- Impacton the repair and alterations that can be carried out to the
- Affectany services that the landlord undertakes to provide and the cost of those
- Whethera deed of renunciation of renewal rights was entered into when the lease was completed (see Security of
Searches
The tenant’s lawyer should carry out searches against the owner or landlord and the property. The searches that are typically
carried out in connection with a lease of office premises include:
- Judgement,insolvency, and bankruptcy searches against the landlord where the landlord is a
- Companies’office search against the landlord where the landlord is a
- Title
- Planningoffice
If there are environmental concerns in respect of a property, it is usual to engage environmental specialists to carry out
environmental surveys and searches. This is because liability for environmental contamination on real estate is not limited
to the polluter, although the polluter is likely to be pursued in the first instance by the relevant authority.
Planning and Building Control
When leasing office space, a prospective tenant must:
- Establishthat the appropriate planning permission is in place for the intended use of the
- Ascertainwhether appropriate fire safety certificates and disability access certificates are in
If an incoming tenant intends to fit out the premises to a different configuration, it should check whether its proposed fit out
will contravene the fire safety certificate and any disability access certificate. If the incoming tenant’s proposed fit out will
contravene the existing certificates, then fresh certificates may need to be obtained from the relevant authorities or the fit-
out may need to be amended if the relevant authorities are unable to approve it.
Service Charge and Other Matters
A prospective tenant should ascertain what outgoings are likely to affect the property prior to signing the lease, assignment
deed, or sublease.
The service charge structure must be investigated. Building maintenance costs are generally levied on occupants in an
office building via a service charge structure. It is very important that a prospective tenant ensures whether there are any
intended large-scale refurbishments to the building anticipated in the short term as a tenant could become liable to discharge
part of that cost.
Another principal outgoing that tenant of commercial properties in Ireland are likely to incur are commercial rates. A
prospective tenant needs to ensure whether are any arrears owing and also check whether there may be any reliefs or
exemptions available to it.
Security of Occupation
The Landlord and Tenant (Amendment) Act 1980 (LTAA 1980), as amended, grants a business premises tenant that
continuously occupies the premises for at least five years a statutory right to a new tenancy, known as a business equity. The
tenant can renounce the renewal right with a deed of renunciation that the landlord and the tenant execute with the lease.
Usually, market conditions and the parties’ bargaining power determine whether the tenant executes a deed of renunciation.
The LTAA 1980 requires a tenant obtain independent legal advice when executing a deed of renunciation for it to be valid.
Restrictions on Leasing by Foreign Tenants
There are no restrictions on foreign tenants leasing properties in Ireland.
Recent economic sanctions imposed in respect of the war in Ukraine may have a bearing. For more information, see Russia
Sanctions and Related Considerations Toolkit.
Physical and Financial Due Diligence
Physical Due Diligence
It is imperative to engage a building surveyor to carry out a structural survey of the property. Depending on the machinery,
for example, ventilation and air conditioning systems, specialist engineers may be required to check the condition of the
equipment.
The lease will contain a repairing obligation. Unless issues are disclosed before the lease is signed, the tenant risks
inadvertently taking on the responsibility for repairing the equipment if it is in disrepair.
Financial Due Diligence
Security over the assets of an Irish company must be registered with the Irish Companies Registration Office and registration
of security over real estate assets must also be completed in the Registry of Deeds or Land Registry to perfect the security
and secure priority of the security interest (see Country Q&A, Commercial Real Estate in Ireland: Overview: Question 24).
The tenant should check whether there is any bank or other party funding secured over the target property. If so, the landlord
may need to procure funder’s consent to the grant of the lease.
An accountant can be engaged to determine the landlord’s credit worthiness, though this is rare.
Legal Documents
Preliminary Agreements
After a foreign company selects a target property, the primary terms of the proposed lease are usually agreed directly with
the landlord’s property agent in the form of a set of non-binding heads of agreement. These capture the principal terms of
the deal, including:
- The extent of property
- The rent payable, the frequency and basis of any rent reviews, and any rent-free periods
- The service charge payable, including the type and level of services provided
- The term of lease
- Whether the lease contains any break clause and the terms of the right to break
- Whether any renewal rights that the tenant may acquire under statute are to be renounced (see Security of
- Any specific works that the landlord agrees to carry out
- These negotiations typically happen on a ‘subject to contract’ basis, which means that either the landlord or tenant
can walk away from the proposal at any point until a lease is signed and completed. A tenant can negotiate an
exclusivity period with the landlord.
Primary Documents
The parties become legally bound to the lease at the point it is signed by the landlord and the tenant and exchanged.
Where an agreement for lease is required, the parties become legally bound to the lease when the conditions set out in
the agreement for lease are satisfied.
When a foreign company leases office space in Ireland, the primary documents include
- An agreement for lease, which may be required when certain events must occur before the lease can come into
effect. For example, the landlord may need to procure proper planning for the intended use.
- A lease
- A license for works that records the consent of the landlord to a proposed fit-out by the tenant
- Side letters, which deal with any personal concessions that apply only to the tenant and not any successors on title
to the tenant.
- In the case of an assignment of a lease, a deed of assignment, which documents the transfer of an existing lease
from an outgoing tenant to an incoming tenant.
- Rent deposit deed detailing the circumstances in which a landlord is permitted to draw against a sum of money
deposited by the tenant to the landlord as security for payment of the rent and performance of the tenant’s
covenants in the lease.
Executing the Lease
Preparing for Lease Execution
Before executing a lease, the tenant should have carried out satisfactory due diligence (see Due Diligence). The landlord’s
solicitors will provide the tenant’s solicitors with the final version of the lease in an agreed form to be executed by the tenant.
The landlord’s solicitors will also provide the final form of any other applicable documents, for example, side letters or an
agreement for lease (see Primary Documents).
Lease Execution
Lease execution in Ireland is governed by the Land and Conveyancing Law Reform Act 2009 (LCLRA 2009). Generally, a
lease must be executed with a handwritten signature that is witnessed by one person (section 64(2)(b)(i), LCLRA 2009). The
Electronic Commerce Act 2000 (ECA 2000), which governs electronic signatures, does not authorize electronic signatures
for leases (section 10(1)(b), ECA 2000).
A foreign company must execute the lease in accordance with the formalities governing the execution of that lease in the
country where that corporate entity is incorporated (section 64(2)(b)(iv), LCLRA 2009). Normally, a foreign entity provides a
letter of opinion from lawyers practising in the jurisdiction where that foreign entity is incorporated confirming that the lease
has been executed in accordance with such formalities. If the foreign jurisdiction allows a lease to be executed electronically,
the lease can normally be signed electronically and registered in Ireland (see Lease Registration).
After Lease Execution
After execution, a lease may require registration witti ttie appropriate auttiorities (see Lease Registration).
Taxes Payable on Leases
Stamp duty paid under the Stamp Duties Consolidation Act 1999 (SDCA 1999) is payable on the passing rent. The tenant pays the stamp duty to the Revenue Commissioners. Stamp duty is calculated on the lease’s average annual rent. The
applicable rate is
- 1% for leases of 35 years or less
- 6% for leases between 36 and 100 years
- 12% for leases over 100 years
(Schedule 1, SDCA 1999.)
Stamp duty is payable within 28 days of the date of the lease. Where an agreement for lease is used, the agreement for
lease is subject to the stamp duty, which is then transferred to the lease when it comes into effect.
VAT may be payable on the rents passing under the lease. In practice, the landlord normally indicates at an early stage if
it is opting to charge VAT on the rents. VAT treatment is usually determined before the lease is signed so the tenant knows
whether it is required to pay VAT. Normally, the accountants or financial advisors of the landlord and tenant agree on the
VAT treatment.
VAT is payable to the landlord upon the production of a VAT invoice. The invoice is produced at the same time interval as
rent payments. The Value-Added Tax Consolidation Act 2010 sets the applicable VAT rate.
Lease Registration
After a lease is completed, there are the following registration requirements:
- If the lease term is 21 years or more, the lease must be registered in the Land Registry (Registration of Title Act
1964).
- Inthe case of all commercial leases, the lease particulars must be registered with the Property Services Regulatory
When registering the lease with the Land Registry and the lease particulars with the Property Services Regulatory Authority,
the forms for so doing are in a prescribed form and are available from each respective authority.
Tenant Lease Negotiations
A tenant’s ability to effectively negotiate the lease depends on several factors, including:
- The state of the rental market
- The tenants creditworthiness
- The size of the premises in relation to the building size
Below is a brief overview of some of the key lease provisions for an office tenant (the actual lease will include
additional provisions and terms may differ depending on the specifics of the transaction):
- Rent,service charge, and These amounts represent most of the tenant’s ongoing financial
obligations under the lease. The rent is typically calculated on a per square foot basis. Service charge is
usually based on a specific charge per square foot with the actual amount fluctuating each year depending
on the services required for that year.
- Permitted The permitted use clause affects the tenant’s flexibility in how it uses the premises.
- Assignmentand Assignment and subletting provisions restrict or limit the tenant’s right to
assign the lease or sublet the premises and are typically heavily negotiated. These rights affect the tenant’s
ability to transfer its lease interest, and affects an exit strategy if the tenant no longer needs all or part of the
premises.
- A tenant can negotiate for a variety of options that provide flexibility if business circumstances
change. Possible tenant options include:
- expansion;
- renewal;
- purchase;and
- termination
- Repairs and The scope of each party’s responsibility to repair and maintain portions of
the property and the building, and to pay the related costs, is another important component of the tenant’s
financial obligations under the lease. The tenant will be asked to bear responsibility for repairing everything
within its demise. These clauses are subject to much negotiation. Normally schedules of condition are
prepared to limit the tenant’s obligation to that set out in the schedule of condition.
- Security Many landlords require the tenant to deliver a security deposit (either in cash or a letter of
credit) or a guarantee from a creditworthy parent or principal.
Important Questions to Ask Your Irish Leasing Attorney/Lawyer
- Are there transfer or other taxes payable on the creation or assignment of a lease?
- Are there any legal restrictions limiting the maximum term of the lease (including renewals)?
- Are there any laws requiring landlords to allow a tenant to renew its lease?
- Are there any restrictions on rent that may be charged under the lease?
- Are there any laws permitting tenants to terminate their lease before the stated expiration date?
- Are there any laws allowing the tenant to assign or sublease without the landlord’s consent?
- Are there any laws allowing the landlord to restrict assignments or subleases by tenants?
- What is the common form of eviction proceeding and what is the customary length of time for that
proceeding?
- Are there any legal restrictions on a tenant mortgaging or pledging its leasehold interest as security for a
financing?
- Are there any requirements for landlords to hold security deposits in separate accounts and, if these
requirements exist, can there be one separate account for all tenant security deposits or must each security
deposit be held in its own separate account?
- Are there any required statutory or other legal disclosures to be made to all tenants?
- Are there are any taxes on rent or other taxes that landlords:
-
- must collect from tenants; or
-
- typically collected from tenants?
- Are there any limitations on the ability of landlords or tenants to exercise self-help?
- Must remedies such as acceleration of rent be expressly stated or are they implied?
Foreign Companies Leasing Office Space in Ireland, Practical Law Practice Note..
- Are there any expedited remedies for a tenant default and wliat lease provisions (such as waiver of jury trial)
would be required for a landlord to seek expedited remedies?
- Are there any formal requirements for the execution of a lease?
- Must a memorandum of lease, or other document, be registered for the lease to be enforceable by the
parties or against third parties?
For further information on this topic, please contact Brendan Sharkey at bsharkey@reddycharlton.ie
