Drafting an Agreement on Lease of Business Premises

A business premises lease agreement and any amendments thereto should be set out in writing. If the agreement has been concluded orally, it is deemed to be valid until further notice, rather than for a fixed-term. Also, if the parties have not otherwise agreed in the agreement, the agreement is deemed to remain in force until further notice.

The rent and adjustment of the rent can usually be relatively freely agreed upon. The rent can also be tied wholly or partially to the tenant company’s turnover. The rent is usually paid in money.

Unless otherwise agreed, the rent payment period is one month. The rent must be paid on the second day of each month, unless otherwise agreed. If the due date is a Sunday, a Saturday or a bank holiday, it is deferred to the next business day.

The parties to a lease agreement can agree that reasonable security will be put up against any loss incurred as a result of either party’s failure to fulfil his, her or its obligations. The exact amount of the deposit is not limited, but it must be reasonable. If the security is not provided within the agreed time, the party in favour of whom it was agreed that security should be provided shall have the right to rescind the agreement. It is usually agreed on that the tenant shall provide a security to secure fulfillment of the tenant’s obligation. Financial deposit, a pledge and bank guarantees may be used as an alternative to payment of deposit.

The tenant may also be required to make an advance payment of the rent, to be credited against future payments of rent. Advance may be required upon conclusion of the lease agreement and, for special reasons, upon amendment of the agreement or change of tenant. When agreeing on advance payment of rent, the parties should also agree, whether the advance will reduce the first or last payment or payments of rent. The amount of advance payment must also be reasonable.

The landlord may obtain protection against potential damages by requiring the tenant to obtain insurance cover.