In principle, a commercial lease has a minimum duration of 9 years. For some companies or certain locations, this is too long. For them, the pop-up decree may be a solution. This decree allows companies to enter into a commercial lease for a period of up to one year.
The duration of a commercial lease is often a tricky point in the negotiations between landlord and tenant. It is important to note that the parties' freedom to negotiate on this point is severely restricted by law.
After all, the Commercial Tenancy Act provides for a minimum duration of nine years. As an exception, the pop-up decree does allow companies to enter into commercial rental agreements for a term of up to one year.
The Commercial Tenancy Act and the pop-up Decree are only applicable to rental agreements concerning immovable property used by companies that are in direct contact with their customers. Thus, this legislation is applicable when a grocery or clothing shop is operated in the rented premises, but not when a warehouse or factory is housed there.
In principle, a minimum duration of 9 years applies
The legally imposed minimum duration of 9 years should provide the tenant with temporary protection of its accumulated trade fund and clientele.
The tenant also has the right to request a renewal of the commercial lease up to three times, each time for nine years. The landlord can only refuse this renewal under certain conditions or by paying an eviction fee to the tenant. Both the request for renewal and the possible refusal must take place within the imperative deadlines stipulated by law.
The Commercial Tenancy Act is mandatory in this respect so that, in principle, parties cannot agree on a shorter duration. The parties can, however, agree on a longer term than 9 years. In that case, they should remember to have the commercial lease transferred to the mortgage office.
Exception for lease of up to 1 year
A duration of 9 years is too long for some companies or certain locations. The legislator has therefore provided for the possibility of concluding commercial rental agreements for a duration of less than or equal to one year.
In this case, the tenant has no right to request a lease renewal. A renewal of the agreement is only possible if the landlord agrees.
However, as soon as the total duration due to (successive) extensions exceeds one year, the lease immediately falls within the scope of the Commercial Tenancy Act. It is then deemed to have been entered into for a period of 9 years from the start of the initial lease.
ExampleParties conclude a tenancy agreement for 8 months from 01.05.2022 to 31.12.2022. At the end of the lease, parties agree to renew it under the same conditions. In that case, the total duration will exceed one year. The rental agreement shall therefore be deemed to have been entered into for a period of 9 years commencing on 01.05.2022 and ending on 01.05.2031.
The parties therefore have to choose between a lease with a maximum duration of 1 year or a lease with a minimum duration of 9 years. At the time of concluding the commercial lease, a duration of 1 to 9 years cannot be agreed. During the commercial lease, the parties can of course always decide in mutual consultation to terminate it, which must be done by notarial deed or by a declaration made before a court of law.
Van Steenbrugge Advocaten will be pleased to answer your questions on commercial leases.