Commercial leases in Jersey – an overview
It is important to take advice from a lawyer as to the points you should consider when negotiating with the Landlord regarding leasing office space.
You should be aiming to agree what is called the ‘head of terms’. This document is not binding, but it allows the lawyers to ensure that the lease reflects what you have agreed: the lawyers acting for the Landlord can draft the lease and the tenants lawyers can use this document to ensure that they have followed the agreed terms.
Issues you should consider when negotiating the lease
Term of lease
Under Jersey law, a commercial lease with a term of nine years or less may be dealt with without the formality of attending the Royal Court. These can be completed on any day by the parties executing the lease document itself.
Leases for a term in excess of nine years must be passed before the Royal Court of Jersey on a Friday afternoon.
Security of tenure
In Jersey, there is no equivalent to the Landlord and Tenant Act 1954 relating to a prima facie right to remain in commercial premises after the expiry of a lease.
However, under Jersey law, if a tenant remains in occupation after expiry of the term, and rent continues to be accepted, a new tenancy may be deemed to arise on identical terms, save as to guarantors.
Planning Consent – Use
You must always make sure that you are allowed to use the property as an office. The Jersey Planning department strictly regulate the use of all buildings in Jersey. It is not uncommon to discover tenants occupying property and leasing office space without appropriate use consent.
You need to consider service charges. This is a cost usually found in a commercial lease and allows the landlord to recoup additional costs from you. In general terms, Jersey leases will contain such a clause. As such, consideration should be given to limiting your exposure to these costs.
You should be careful to consider what responsibilities you have in relation to repairs and decoration. Never underestimate how much it may cost to maintain and keep your office space in good repair. It is always good practice to request a schedule of condition at the outset, so you can use this as a benchmark.
You will need to consider what works are required to furnish the office. All leases will have considerations as to what you can and cannot do regarding works at the premises. Generally tenants will need permission to carry out works and this not only from the Landlord but also from Jersey planning and building control. This will include partitioning.
While stating the obvious, you need to ensure that you have permission to carry out the works you plan (at least in principle) before you enter into the lease.
Rent Free Periods
If your office requires a fitting out, this can be time-consuming and may prevent you from using the space, notwithstanding having taken on the lease. As such, you should be considering asking the landlord for a rent free period. You should encourage your potential landlord to work with you to make the business a success, so you can both benefit in the long term.
Right to assign
You should always ensure a right to assign the lease. That way, you know that you won’t have to find a way of keeping up with rental payments until the end of the lease for a property you would rather be without.
There is no presumption under Jersey law that a tenant may assign a lease without the consent of the Landlord (unless the lease expressly provides otherwise). Jersey has no equivalent statutory overrides section 19 of the Landlord and Tenant Act 1927 which implies into any qualified covenant against assignment the obligation of the landlord not to unreasonably.
Breach and termination
Jersey has no concept of forfeiture of leases. There is no equivalent of the Law of Property Act 1925 section 146 procedures. The Landlord is likely to have the right to cancel the lease on specified grounds if the Tenant is in breach, subject to obtaining an appropriate court order. There is no provision for “relief” from cancellation. If both parties wish to terminate the lease, they can enter into a contract of cancellation on agreed terms.
Goods and Services Tax (‘GST’) may be payable on Commercial Leases. This is currently 5% on rental. There are exceptions to this. International Service Entities such as banks, trust companies and other financial institutions, who have been granted an exemption, will not incur GST.
Non-resident landlords are taxed at a rate of 20% on rental income derived from Jersey property.
Stamp duty on leases is payable if the term of the lease exceeds nine years.
There is no capital gains tax in Jersey.