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Drafting office lease agreements

One of the main questions for a beginning businessperson is the choice of office premise for entrepreneurial activity. Most often, due to the lack of financial ability to purchase their own premises, entrepreneurs rent offices.

Before renting (or leasing) property, you should thoroughly study the basic requirements for a lease agreement – a document that sets out the basic rights and obligations of the parties – the lessor and the lessee.

Many underestimate the role and significance of a lease agreement, unreasonably believing that this is just a formality

At first, you might think that for the lease agreement it would be sufficient to just indicate the essential conditions provided by law. However, based on the experience, VigoLex lawyers identify a large number of aspects that will allow avoiding conflict situations between the parties in the future, namely:

  • Lessor’s authority

It is not enough to verify the legality of the documents of title. It is also important to check the leased property for prohibitions and encumbrances, since the existing rights of third parties to the property may become the basis for deeming the contract invalid.

  • Sublease

Firstly, the sublease right should be directly stipulated in the primary lease agreement, and secondly, it should be remembered that the sublessee’s rights are terminated from the moment of the main contract cancellation. Therefore, it is important to designate a settlement of the consequences of such a termination for all parties.

  • Lease payments

The payment for the leased property use also includes the payment for the land use, on which the building is located. The terms of the land use should be explicitly stated in the agreement. Another important point is how the payment is made: in national currency or using a cash equivalent in foreign currency. Fluctuations in exchange rates have a commercial risk, therefore, it is worth considering the contract currency twice.

  • Objective of using the leased property

The owner of a residential house or apartment cannot lease such premises for commercial or industrial use, therefore, you should carefully read the classification of the premises.

  • Utilities and other additional payments

This section should be approached quite scrupulously and each item of costs and responsibility for payment should be described in detail.

  • Renovations of the premises

Often before moving in, the lessee has to carry out certain renovation works. In such case, it is very important to provide in the contract with step-by-step instructions for agreeing on the procedure for performing and paying for such works.

  • Termination of the office lease agreement

The grounds for termination may be different and it is important to describe the possible options for terminating the agreement in detail and clearly. Here it is worth paying attention to the possibility of unilateral termination with prior notification of another party, without obligatory compensation of the forfeit associated with such termination. In addition, it is important to define the terms of the agreement renewal.

Important

The lease agreement must contain a clause of absence of responsibility for agreement violations due to circumstance of insuperable force (force majeure). It was this point that acquired particular importance after the outbreak of the COVID-19 coronavirus pandemic in Ukraine and the rest of the world.

However, this is not the whole list of nuances that are important to consider when preparing an office lease agreement. Each case may be particular in its own way, but VigoLex lawyers approach any issue in a comprehensive manner, predicting and preventing all possible risks for the client.

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