Renewing commercial lease agreements

Renewing a commercial lease in Belgium involves specific procedures and deadlines for both tenant and landlord. This article provides an in-depth understanding of the process and the associated rights and obligations.

Approach

Who can apply for a renewal?

Only the tenant has the right to request a renewal of the commercial lease. The owner can only determine this request or find the lack thereof. If the tenant does not make an application, the lease will automatically end after nine years. If an owner wishes to terminate the lease, the owner may give notice, but this must be subject to specific conditions and/or the tenant must be compensated for damages incurred due to the termination.

Deadline for requesting a renewal

The tenant must request the renewal of the contract between 18 and 15 months before the expiration date of the contract. This request must be made by registered letter or by bailiff’s writ. If the tenant does not respect this deadline, the lease will end after nine years. If the owner does not respond to the request and the tenant retains the disposal of the property, the term of the lease becomes indefinite. In this case, the landlord may terminate the lease at any time with 18 months’ notice.

The content of the renewal application

The lease renewal application must include the following information:

• The desired terms of the tenant’s renewal of the lease. This may include a change in rent or charges, for example, or the terms may remain unchanged.
• A reminder of the landlord’s rights and obligations following the renewal application.
• The explicit statement that “the landlord will be deemed to agree to the lease renewal under the proposed terms if he does not, in the same manner and within three months, notify the commercial tenant either of his reasoned refusal of renewal or of other terms or of the offer of a third party.”

Rights and obligations of the lessor in a renewal application

Not only is the tenant bound by strict deadlines; the landlord must also respond within a set period. The landlord must respond to the tenant’s request through the same communication channel within a maximum of three months. After this deadline, the contract is automatically renewed. The landlord has the option to refuse the renewal, accept it outright, or accept it under the proposal of different terms.

Refusing the renewal

The landlord can refuse the request for rent renewal only under certain conditions. In that case, the landlord must pay the tenant an eviction fee, the amount of which varies depending on the situation and can be the equivalent of three years’ rent.

The owner may refuse renewal under the following circumstances:

• The owner or a family member wishes to carry on a commercial or craft activity in the property themselves.
• A third party offers a higher rent than the current tenant, and the tenant refuses an identical offer.
• The landlord wants to do work on the property that will cost more than three years’ rent.
• The owner wants to change the zoning of the property.
• The tenant failed to fulfill certain obligations.

Table: compensation for refusal of lease renewal

Acceptance of the renewal under modified conditions

Sometimes an owner agrees to renew the lease, but wishes to negotiate the terms proposed by the tenant, usually regarding the rent.

There are two possible outcomes:

• Tenant Conditions Accepted: Tenant agrees to the amended terms and conditions and must confirm in writing no later than 30 days.
• Tenant terms not accepted: The tenant does not accept the new terms and must then take legal action. The justice of the peace will then decide on the terms of the lease.

In either case, the tenant must respond in writing within a maximum of 30 days of the landlord’s response, otherwise the tenant risks losing the right to renew.

What is an eviction indemnity?

An eviction fee is compensation that the owner must pay to the tenant when the owner breaks the commercial lease. The exact amount of this compensation depends on the specific situation. If the damages suffered by the tenant due to the termination of the lease exceed the statutory amount of the eviction compensation, the tenant can apply to the justice of the peace to try to increase the amount.

After three renewals of the lease agreement

After the three possible renewals, which is 36 years from the start of the lease, there is no longer any legal protection giving the tenant the right to remain in the property. The tenant must then enter into a new lease. Both parties can agree on a shorter lease at this stage.

Managing commercial lease agreements with real estate management software

As a commercial property owner, keeping track of important contract dates is not always easy. While with commercial leases it is the tenant who must take action for renewal or termination within certain timeframes, it is beneficial for the landlord to have an overview of approaching dates. Property management software, such as Offimac, offers an efficient solution here.

Offimac keeps you informed of all the expiration dates of your contracts based on the information entered. The tool even allows you to use suggested texts to send notices to the tenant, where all you have to do is choose the desired communication channel

In addition to these reminder functions for important dates, Offimac automates a wide range of property management tasks, including:

• Payment reminders for outstanding rents
• Calculation and transmission of rent indexations
• Settlement of service charges.
• Prepare service charge invoices for tenants who request them.

Offimac centralizes all information about your real estate portfolio, giving a clear picture of its status. This saves you hours of work, avoids overlooking unpaid rent or missed indexations, and eliminates the need to manually search for information.

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Source reference:

1] Law Concerning Commercial Leases of April 30, 1951. Articles 13, 14 and 15: The Legal Procedure and Deadlines for Renewal. [2] Academic Legal Journal (Belgium). Analysis of Form Requirements and Consequences of a Late Application for Renewal. [3] Royal Federation of Belgian Notaries (notaris.be). The Role of the Notary in the Closing and Renewal of Commercial Leases. [4] Specialized law firm in Real Estate Law. Case Law on Valid and Invalid Motives for the Landlord to Refuse Renewal. [5] Flemish Agency for Innovation & Entrepreneurship (VLAIO). Practical Guide: Business Continuity and Trade Lease Protection. [6] Federal Public Service Economy (FPS Economy). Information on Tenant’s Rights and Rent Review at Renewal. [7] Real Estate Sector Report (Belgium). Market Analysis of the Impact of Lease Maturity on the Commercial Value of the Property. [8] Deloitte or PwC (Belgium). Tax and Accounting Aspects of Long-Term Lease Obligations after Renewal. [9] Common Rental Law (Federal Legislation). Distinction between Commercial Lease Renewal Procedure and Other Lease Regimes. [10] Chamber of Commerce/Business Association. Advice on Negotiating New Lease Terms at Renewal. [11] Legal Journal (Business Law). The Effects of Renewal on Clauses such as Assignment and Sublease.

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