REALWorld Law

Commercial leases

Length of leases

What is the usual length of each type of commercial lease?

Angola

Angola

Commercial leases may be granted for a fixed period of time or for an undetermined period of time.

The length of a commercial lease is decided by agreement between the parties, with a maximum limit of 30 years. In the event that the parties do not set forth a term, the contract shall be deemed to be in force for a two-year term, automatically renewable. Any lease of more than six years is subject to registration under the Land Registry Office.

Australia

Australia

There is no minimum or maximum term for a commercial lease. The duration of the lease term can be for any number of years or up to a fixed date.

Generally, a commercial office lease for a larger tenant will be for eight to ten years with one or two option terms (exercisable by the tenant) of three to five years each. In most Australian jurisdictions leases for a period which exceed three years must be registered on a public register with the relevant government authorities for the lease to be legally effective. The main benefit of registering the lease on a public register is to provide third parties with notice of the tenant's leasehold interest in the property.

However, retail leases (relating mainly to leasing of shop space in shopping centres) are governed by specific legislation and, in most jurisdictions, retail leases have a minimum term (inclusive of options for renewal included in the lease) of five years, unless the tenant agrees to waive that right.

Belgium

Belgium

General leases (offices, warehouses, industrial buildings)

Few legal provisions affect the term of general leases (as opposed to commercial leases which are used in a retail context). There is no legal minimum or maximum duration. The term can be fixed (as is most often the case) or indefinite. In the case of the former, break options allowing termination of the lease after a certain period are permitted. The most common arrangement for an office lease is what is known as a ‘3-6-9 lease’, ie a nine year lease with an option for both parties to end the lease after the third and sixth years. Normally parties will agree on the notice period to be given if the lease is to be terminated.

General lease agreements with an initial duration of more than nine years must be concluded in front of a Belgian notary, since they require registration in the mortgage registers of the locality where the leased premises is situated.

Commercial leases (retail and workshops)

Commercial leases are always agreed for a fixed term of not less than nine years. Commercial leases entered into for less than nine years are treated as having a minimum duration of nine years. This also applies where parties have not specified the term of the lease. This provision also applies to subleases, but they may not be entered into for a period exceeding the duration of the principal lease.

In a commercial lease the parties may specify a term of more than nine years but in this case the lease contract must be concluded in front of a Belgian notary, since it must be registered in the mortgage registers of the locality where the leased premises is situated.

Commercial leases (pop-up retail and workshops)

Both in the Flemish Region, the Walloon Region and the Brussels Capital Region, commercial lease agreements can also be concluded for a term not exceeding the period of one year.

Bosnia-Herzegovina

Bosnia-Herzegovina

Leases can be granted for a limited or an unlimited term. The usual length of leases in Bosnia and Herzegovina is one year.

Canada

Canada

There is no minimum or maximum term for a commercial lease. The duration of the lease term can be for any number of years or up to a fixed date.

Generally, a commercial office or retail lease for a larger tenant will be for five to ten years with one or more option terms (exercisable by the tenant) usually of one to five years each. Ground leases tend to be for longer terms such as 20 to 99 years, and in many cases the rent is prepaid for the entire term.

In most Canadian jurisdictions, leases for a period greater than three years may be registered on a public register maintained by the relevant government authorities subject to certain statutory requirements. The main benefit of registering the lease on a public register is to provide third parties with notice of the tenant's leasehold interest in the property. In some Canadian jurisdictions, registration of long-term leases (for example, for a term greater than 30 years in British Columbia) will attract land transfer tax in the same manner as a transfer of freehold title.

China

China

The usual length of a lease depends on the nature of the lease, but cannot be more than 20 years. Residential leases are usually for a length of 12 months with an option to renew for a second year. Commercial leases generally last between three and five years.

Croatia

Croatia

There is no minimum or maximum term. Very long leases are normally granted for land (building rights) in return for a one-off payment rather than a market rent. For market rent leases, terms are much shorter (between three and 15 years is common).

Czech Republic

Czech Republic

The usual length of a lease depends on the nature of the lease.

Retail, warehouse and office leases generally last between five and 15 years with a break option halfway through the term.

There is no typical length for leases of manufacturing facilities. These vary depending on the nature of the business.

Denmark

Denmark

Generally a contract is not limited in time; however the parties can agree to impose a time limit.

France

France

The minimum obligatory term for a commercial lease is nine years. The tenant has the right to terminate the lease at the end of each triennial period by giving notice (by bailiff or by registered letter with acknowledgement of receipt). The parties are free to negotiate a notice period longer than six months.

Short-term leases can be granted for a maximum term of three years (several short-term leases can be granted consecutively provided that in aggregate their duration does not exceed three years), but in this case the legislation relating to commercial leases does not apply.

In certain cases, the tenant may waive its right to terminate the lease at the end of the relevant three-year periods. The parties are free to provide for whatever termination options/mechanisms that they wish (eg the parties may agree that there will be a financial penalty for exercising a right to terminate the lease at the end of a three-year period, to be paid by the tenant to the landlord). The cases in which the tenant may waive its triennial termination right are the following:

  • leases relating to premises for office use
  • leases relating to premises suited only to the carrying on of a specific business activity due to their particular layout
  • leases relating to storage premises
  • leases with an initial duration of more than 9 years.

There is no maximum obligatory term for a commercial lease and the parties may agree to a lease of more than nine years. However, any lease of more than twelve years must be entered into before a notary and should be recorded with the locally competent mortgage office (Service de la Publicité Foncière). This involves the payment of a fee amounting to approximately 0.715% of the total rent and service charges due for the entire period of the lease (within the limit of 20 years).

Germany

Germany

There is no minimum or maximum period for general leases of commercial and/or residential premises and they may be entered into for periods of more than 30 years. However, long-term arrangements like this may be terminated by either party after 30 years.

Hereditary building rights (Erbbaurechten) that entitle the holder to use the leased property for up to 99 years and to erect buildings on the land can be created for longer periods of time, typically 99 years.

Hong Kong, SAR

Hong Kong, SAR

There is no minimum or maximum term for a commercial lease. Very long leases (for example 10 years) are possible, but are uncommon. For office leases, terms are usually much shorter, with two to three years being usual with or without an option to renew for another two to three years. For retail leases, terms are comparatively longer with three to five years being usual with or without an option to renew for another three to five years. The current market trend is towards shorter leases.

Hungary

Hungary

Leases in Hungary can be entered into for a definite or an indefinite period of time. There are no statutory time limitations to the term of a lease.

The usual term length for Class A office and retail premises is between 5 and 10 years, sometimes with an option for the tenant to unilaterally extend the term by three to five years. For industrial buildings the usual term is somewhere between three and five years.

Ireland

Ireland

The term of a lease can vary and depends on the requirements of the tenant and the landlord. A short-term letting agreement to a commercial tenant is usually for less than five years. A longer-term full repairing and insuring (FRI) lease to a commercial tenant is usually for a term of up to 20 years though terms of between 10 and 15 years are becoming more common.

Italy

Italy

The Tenancy Law provides for a minimum term of six years for commercial leases (except where the activity to be carried out in the premises is temporary) and nine years for hotel leases. For residential leases the minimum term fixed by law is four years, except when the lease is agreed in order to satisfy temporary needs or in relation to tourism activities. Parties are free to agree upon longer lease terms, while, if the lease term agreed upon by the parties into the relevant lease is less than the statutory minimum term, the relevant contractual provision is regarded as void and is automatically replaced by the statutory provision.

When the initial period of the lease expires, the contract is automatically renewed on the same terms and conditions for another term unless either party gives to the other written notice not to renew the lease at least 12 months (or 18 months in the case of hotels) before the end of the initial term.

When the initial period of the lease expires, the tenant is free to decide not to renew the lease while the landlord can only deny the lease tacit renewal in very limited circumstances, as set forth under the Tenancy Law (including in case the landlord has the intention to use the premises itself, to demolish and rebuild, or to refurbish the building in order to comply with certain regulations). Tenants can therefore usually rely on the renewal of the lease after the initial term. At the end of the subsequent lease terms, there are no restrictions to the landlord's right to deny the lease automatic renewal by giving to the tenant the prior notice mentioned above.

Pursuant to the Italian Civil Code, the lease term cannot be longer than 30 years.

In relation to business branch leases, the parties are free to negotiate the term of the lease. In general business branch leases do not provide for an automatic renewal at the end of the term stated in the contract.

Japan

Japan

The lease term of a commercial lease depends on the nature and type of the lease.

The terms for office or retail leases typically range from two to five years. In most ordinary leases, we often see an automatic renewal clause for an additional term of the same or shorter length.

Netherlands

Netherlands

Commercial leases

Leases of commercial real estate can be entered into for a fixed period or for an indefinite period. The parties leasing industrial space or office space are free to decide the lease period. However, an initial five- to ten- or fifteen-year lease period is common. Obviously, a lease period can be much longer depending on the type of lease and the lessee´s investments in the property. Leases often include automatic renewal periods as well as break options for the lessee only.

Retail leases

By virtue of certain mandatory provisions, retail leases are entered into for an initial duration of at least five years. On the expiry of the initial term, the lease will automatically be continued up to a total period of ten years (provided termination by the lessee). Leases entered into for less than two years (and which actually last less than two years) are not subject to the same provisions regarding the duration of a retail lease.

Nigeria

Nigeria

Commercial lease terms are subject to the agreement of the parties. Usually, there are no limits to the length of the term that parties can agree and fix for a commercial lease if the grant does not exceed the term which the lessor holds under the head lease. A lessor can therefore, lease the entirety of the term held under its proprietary title deed or for a lesser period of one year or even months, subject to the conditions and covenants agreed by the parties and provisions of the head lease.

In state allocation or direct grants of proprietary real property interests by government, it is the discretion of the state as grantor to give any term of years, typically not exceeding 99 years.

Norway

Norway

This varies greatly, depending on availability, type of premises, type of lease, rent levels and who the contracting parties are etc. Leases are often granted for five years (with a right for the tenant to renew for a further five years) or for ten years. The lease can be for a fixed term or an indefinite period of time. If no expiry date is stipulated, then the lease is valid indefinitely and cancellation must be in accordance with the relevant provisions of the Tenancy Act.

Poland

Poland

The term of a tenancy (dzierżawa) can be definite or indefinite. A tenancy is regarded as having an indefinite term where the parties agree on a period of over 30 years and the initial term of the lease has come to an end. The tenancy continues indefinitely with either party having the right to terminate within a relatively short statutory time of up to one year.

The term of a lease can be indefinite or definite with a maximum term of 10 years, or in the case of a lease concluded between 'entrepreneurs' (which, under Polish law, are defined as natural or legal persons, or non-corporate organisational units, conducting economic activity on their own behalf), 30 years. A lease (najem) is regarded as having an indefinite term where the parties agree on a period of over 10 years (or 30 years for a lease between entrepreneurs) and the initial term of the lease has come to an end. The lease continues indefinitely with either party having the right to terminate within a relatively short statutory time of up to three months.

Portugal

Portugal

The length of a non-residential lease is decided by agreement between the parties, with a maximum limit of 30 years (subject to a right to terminate on notice) and a minimum of 1 year. Should the term be omitted, the contract shall be deemed to be in force for a definite term of five years, renewable for the same period and the notice period for termination by the tenant shall be deemed to be one year. However, and regardless of the term agreed by the parties, the landlord cannot oppose to the renewal of the lease at the end of the agreed term during the first five years.

NRAU foresees a general rule for non-residential leases stating that parties may freely stipulate the length, termination and opposition to the renewal regimes, without prejudice of a set of imperative legal provisions having we already made reference above to two of them, regarding the length and the impossibility to cease non-residential leases during the first five years.

In light of the recent legislative amendments, landlords may no longer freely terminate the contract at any time, except in Indefinite Term Leases and only in two situations and under the harsh and severe circumstances imposed by the Civil Code, requiring the landlord to pay an indemnity to the tenant and to the employees of the company/establishment for the damages and losses proven to be a consequence of the lease termination.

On the other hand, in the absence of stipulation regarding the termination regime, the tenant may trigger the termination mechanism under the same conditions and notice periods provided by the Civil Code for residential leases (except if parties did not stipulate the length of the contract, case in which will be applicable the notice period of 1 year, as we mentioned above).

However, nothing prevents the parties to exclude the possibility for the landlord to terminate an Indefinite Term Contract, if it is their will to do so. The same thing applies for the right of the tenant to terminate Indefinite or Definite Term Leases: it can be excluded if parties decide so, under their contractual freedom

Romania

Romania

Lease agreements are usually entered into for a period of between three and ten years, depending on the type of property (usually longer in case of industrial leases). However, lease agreements may be entered into for shorter or for indefinite periods of time. If no expiry date is provided for and the parties did not want to conclude the agreement for an undetermined period of time, the duration can be determined either by common practice or by the Civil Code. The maximum duration of a lease agreement is 49 years. If the parties to the lease agreement establish a longer duration, it will be automatically reduced.

Slovak Republic

Slovak Republic

Generally, the parties are free to contract as they wish. The Leases of Agricultural Land, Agricultural Holding and Forests Act in some particular cases lays down minimum or maximum terms. The maximum length of short-term apartment leases under the Act on Short-term Apartment Leasing is six years. Leases of land for five years or more must be registered with the cadastral registry.

Spain

Spain

There is no minimum length laid down for commercial or residential leases. In residential leases entered into after 6 March 2019 the landlord must allow extensions to the term of the lease up to a minimum of five years if the initial term is less than five years and the landlord is an individual, and extensions up to a minimum of seven years if the initial term is less than seven years and the landlord is a legal entity, while in commercial leases the parties may freely agree on the duration.

Sweden

Sweden

Commercial leases are normally valid for a specified period of time. There is no limit on their minimum term, however terms of more than 50 years are not legally binding. Furthermore, terms of more than 25 years regarding a premises located within a zoning planned area are not legally binding. Leases can also be valid for an indefinite period until terminated by one of the parties.

Hotel leases are often longer than other leases, and also often grant the lessee more comprehensive rights and responsibilities (particularly concerning maintenance and the interior) than other leases.

Thailand

Thailand

The duration of the term depends on commercial considerations. The Civil and Commercial Code only requires registrations of a lease if the lease term is more than three years. It should be noted that the maximum term for a lease is 30 years, with an option to renew for another term of 30 years.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

A one-year renewable term is the norm for residential properties, although leases of three to five years are increasingly being offered for commercial (retail and office) properties and longer for industrial properties.

In the Abu Dhabi Global Market free zone (ADGM), real property may be leased for up to 99 years renewable, such that the term does not exceed 198 years. For leasehold property not within the ADGM, there is no maximum duration for a lease set out in the applicable law. However, it is not common to see long leases (defined by statute as being lease with terms of over 25 years) being granted as:

  • Absolute ownership is preferred in the region, and
  • Non-UAE nationals and entities may only be granted leases with a term of 25 years or more within one of the designated investment areas
United Arab Emirates - Dubai

United Arab Emirates - Dubai

It is common to see a commercial lease for a term of between one and five years.

UK - England and Wales UK - England and Wales

UK - England and Wales

There is no minimum or maximum term for a commercial lease. Very long leases (for example 999 years) are relatively common, normally granted for a one-off payment rather than at a market rent. For market rent leases, terms are usually much shorter, with anything from 5, 10 or 15 years being common. The current market trend is towards shorter leases.

If the tenant has “security of tenure”, this means that the lease will not end following the expiry of its contractual term. The tenant will be entitled to a new tenancy unless the landlord has reasonable grounds for opposing it, in which case compensation may be payable.

Leases of more than seven years must be registered at HM Land Registry.

UK - Scotland

UK - Scotland

There is no standard length. However, current market trends are for leases of between 5 and 15 years, although it is also common to find leases with shorter terms and/or with tenant's break options.

With effect from June 2000 no lease can be granted for a period of more than 175 years (20 years for a residential lease).

On 28 November 2015 certain categories of long lease (in which the annual rent was not more than £100) were converted automatically into tenants' ownership by virtue of the Long Leases (Scotland) Act 2012. Leases which qualified for conversion into tenants' ownership were leases that (1) were originally granted for over 175 years; (2) in the case of residential leases, had over 100 years left to run from 28 November 2015; and (3) in the case of non-residential leases, had over 175 years left to run from 28 November 2015. In calculating the period for which a lease was granted, break options are disregarded, but landlords' obligations to renew are included. Mineral leases are specifically excluded from the provisions of this legislation. The legislation contains provisions under which landlords could, in the two-year period after 28 November 2015, claim (limited) compensation for loss of ownership.

Ukraine

Ukraine

A land lease agreement can be entered into for a term of not more than 50 years. The lease term for a lease of agricultural land for commercial agricultural purposes, a farm business or a private agricultural household cannot be less than seven years. If such lands are meliorated with use of hydraulic structures (ie reclamation infrastructure), the lease term for them cannot be less than 10 years. There is no limit on the term of other real estate lease agreements (with the exception of leases of apartments with the right to buy-out, the length of which does not exceed 30 years).

United States

United States

The duration of commercial leases vary on a case by case basis and can be any length of time, but typically range from three to ten years. Longer term leases tend only to be encountered in the context of ‘ground leases’ and ‘net leases’. In ‘net leases’ the tenant is responsible for the cost of operating, insuring and paying taxes on the real property. A ‘ground lease’ is a sub-specie of net lease where the tenant is given rights to develop a parcel of land leased to it.

Zimbabwe

Zimbabwe

Commercial leases in Zimbabwe do not have a prescribed period, and the length of the lease is subject to contractual agreement between the parties. The market trend in real estate currently sways towards shorter-termed leases, ranging from anything between one to ten years. The current economic challenges in Zimbabwe have forced landlords to grant shorter commercial leases. For long-term leases, that are more than 10 years, the Deeds Registries Act provides for the lease to be registered.