Business leases

The purpose of the lease

As a commercial lessee you ought to ensure that the phrasing of the clause regulating your business’ use of the premises is as wide as possible. You must not let the lease be an obstruction to the future needs of your company, such as an extended use of the premises. A change in needs, which may force you to accept increased rental payments to stay in the premises or maybe force you to locate other premises.

Adjustment of rent

Be aware of any clauses allowing for an automatic adjustment of rent on an annual basis. The rent on which your budget is based may increase.

If you believe that rental payments are too high compared to similar leases, you have the option of requiring that the rent is adjusted downwards to conform with the market rent. Be aware that the lessor may also make use of this right to adjust the rent upwards. However, the lease must have been of at least four years’ duration before an adjustment to conform with market rent may be made.

Maintenance, extra expenses and photo documentation

Normally, the lessee is responsible for the interior maintenance of the premises; however, be aware of whether the lessee is liable for making extra payments towards the operation of the property over and above the rent, e.g. for keeping outside areas clean or for repairs carried out to the heating system.

On taking possession, you are advised to take photos of the premises, so as to be able to document the state of the premises.

The length of the lease

As a commercial lessee, you should not bind yourself to leased premises for any period longer than one year at a time - especially if your business is a start-up. If you let yourself be bound by a lease, which is non-terminable for several years, you are basically also liable for paying the rent for this period, which may be an insurmountable obligation for a start-up.

On the other hand, as a commercial lessee, you should consider whether the lease should be non-terminable on the part of the lessor.

Termination

As a commercial lessee, you are free to terminate the lease. However, you cannot terminate the lease if it is agreed to be non-terminable. The notice of termination is three months to the first day of a month, unless otherwise agreed. It is therefore of utmost importance that you are aware of the termination clause of the lease before entering into it.

Vacating the premises

Basically, on vacating the premises, the lessee shall provide the lessor the access required to show the premises to potential new lessees; however, the lessee determines the appropriate time. This also applies if the lessor plans to sell the property or the leased premises.

The commercial lessee is basically to surrender the leased premises in the state and condition in which they were taken over at the commencement of the lease, allowing for reasonable wear and tear. However, this only applies if nothing else has been agreed. Be aware of the terms of the lease with respect to the state and condition of the leased premises on surrender.

You should e.g. also ensure that you are not under a duty to reinstate the premises, if improvements have been made in the course of the term of the lease. If you have entered into a commercial lease specifying a duty of reinstatement, you should enter into a new lease with the lessor before making any improvements, so as to avoid the risk of having to undertake a costly reinstatement on surrendering the premises.

Dispute resolution

If you disagree with the lessor on circumstances arising from the Danish Business Lease Act or the terms of the lease, Advodan may assist in negotiating with the lessor and litigate on your behalf, should this be required.