LACK DUE TO RENOVATIONS

You rent a property that needs renovating and there is a tenant who agrees to cover the cost, but asks for a grace period…

In lease agreements for commercial premises or industrial buildings, it is common for the tenant to carry out some work to adapt the premises to their needs. However, if the works are of a certain magnitude, it is usually agreed that at the end of the contract they will remain for the benefit of the premises.

It is also common to agree that, for a few months, the tenant will not pay rent (precisely because they will be paying for renovations that will ultimately benefit the premises). In these cases:

• There is a direct relationship between the landlord’s waiver of a certain number of monthly payments and the tenant’s obligation to carry out the agreed-upon work.
• Therefore, in the event of non-compliance, the owner may choose between receiving payment of the unpaid rent or demanding that the works be carried out in accordance with the agreed terms, without prejudice, in either case, to the compensation to which they are entitled for any damages that can be proven.

To this end, the lease agreement must specify, at a minimum, the duration of the works, the necessary permits, the renovation budget, the building specifications, and the plans for the final result.

At the end of the contract, the tenant may not request additional compensation for the cost of the work carried out, as this remains the property’s benefit.

In any case, you should bear in mind that:

• If the tenant does not carry out the work within the grace period, the landlord may choose between demanding that the work be carried out as agreed or demanding full payment of the unpaid rent. If, after receiving notification, the tenant still fails to comply, the landlord may terminate the contract (and continue to claim payment of rent).
• The owner shall have the same options if the works carried out exceed or differ from those authorized, without prejudice to their right to demand, at the end of the contract, that they remain for the benefit of the property, without the tenant being able to claim any compensation.

Our professionals will advise you on drafting the lease agreement and clauses relating to the execution of works and rent deferral.