Short Term Letting Agreements

The Dublin Solicitors Bar Association has launched A new version of the Short Term Letting Agreement for business premises.

This is very timely as we are seeing an increase in short term lettings.

The use of such a letting agreement is usually for a short term letting, being for a term of less than five years.

When considering using the letting agreement, a balance must be maintained between keeping the letting agreement simple, yet making sure that both the landlord and tenant are protected.

So, why would you use this letting agreement as opposed to a long term lease?

1. SimplicityThe document is a shorter document compared to a 40 page FRI Lease; it is user friendly and is an industry standard document so solicitors will be familiar with the key clauses which should lead to less time negotiating potential areas of disagreement.
2. Flexibility for landlord2.1 The landlord can have the letting agreement designed to be a “temporary convenience’ letting so that the tenant acquires no statutory rights under the Landlord and Tenant Act such as a right to a new tenancy.

   2.2 This can be achieved in two ways – a tenant can renounce their entitlement to a new tenancy by way of a Deed of Renunciation or the lease can be prepared for a term of less than five years (4 years, 9 months).

   2.3 If you are a landlord, it would be prudent that the Deed of Renunciation is executed at the same time as the letting agreement so as to avoid the letting agreement rolling over to a period in excess of five years and the tenant inadvertently accruing landlord and tenant rights.

3. Flexibility for tenantThe tenant may not have the financing support to sign a long term lease – usually for a term in excess of 10 years subject to five year rent reviews and onerous covenants. Therefore, a short term letting agreement may be more appropriate for the tenant.
4. What are the key differences between the short term lease and long terms lease?4.1 The length of the term of a letting usually increases the onerous obligations such as the covenant to repair.

   4.2 In a short term letting agreement, it is usual for the tenant to undertake responsibility for the repair of the interior only of the premises and for the landlord to retain responsibility for the exterior and structure. Whereas, leases for a longer term, the tenant will be obliged to repair both the interior and exterior of the demised premises including the structure.

Finally, some key points to bear in mind if you choose to use this lease?

• This letting agreement cannot simply be rolled out without careful consideration. It is not a one-size-fits-all agreement.
• The rationale for using the letting agreement as opposed to a long term lease must be assessed.
• The landlord and tenant must be aware of the potential areas of dispute such as repairs, insurance and which party is responsible for the payment of any service charge.
• It is extremely important that the treatment of VAT is addressed by both the landlord and tenant prior to signing the letting agreement.
• Finally, it is worth noting that there is an obligation on tenants to register such leases on the Commercial Lease Database with the Property Services Regulatory Authority within 30 days of signing the lease. Failure to comply may results in fines up to €5,000 and/or imprisonment for the tenant. This is being actively pursued by the PSRA.

For further information on this topic, please contact Brendan Sharkey at bsharkey@reddycharlton.ie