What is a professional / commercial lease?
A commercial lease means the lease of a thing, especially real property, agreed upon for the purpose of conducting in it a commercial or professional activity protected by Presidential Decree 34/1995, and more specifically a law office, medical practice, accountancy office, the operation of educational institutions in general, pharmacies, etc.
Today, commercial leases are regulated by the provisions of Presidential Decree 34/1995, as amended by Laws 2749/1999, 4242/2014, 4257/2014, 4264/2014, 4335/2015 and 4373/2016. Following the new legislative regime, professional leases are now distinguished into “old” leases (concluded before 28.2.2014) and “new” leases (concluded after 28.2.2014).
What are the rights and obligations of the lessor?
(a) The lessor is obliged to deliver the leased premises to the tenant fit for the agreed use and to maintain it in such condition for the entire duration of the lease.
(b) The lessor bears the burdens of the leased property (necessary expenses and costs arising from natural wear and tear).
(c) The lessor has the right to set a specific amount as a security deposit. The deposit is returned to the tenant upon expiry of the lease.
(d) The lessor is granted the right to verify on a quarterly basis the proper use of the leased premises in accordance with the terms of the lease, in person, through a representative, or through a skilled person or expert witness.
What are the rights and obligations of the tenant?
(a) The tenant is obliged to pay the rent in the manner and at the time specified in the lease agreement.
(b) The tenant must use the leased premises exclusively for the use and purpose agreed upon. Use as professional premises precludes use as a primary residence.
(c) The tenant is obliged not to cause damage attributable to his fault that cannot be regarded as natural wear and tear. In the case of damage caused by his own fault, he bears the cost; for any necessary expenses he has incurred, he is entitled to reimbursement by the lessor.
(d) Ordinary common-area expenses and any other monetary obligations relating to the leased premises which by agreement fall on the tenant are paid by the tenant. Late payment of these has the same consequences as late payment of rent.
Note: The amount of rent is freely determined. Any agreement as to the amount of rent and any subsequent increase or decrease is legally valid and binding on both parties. The stamp duty on a professional lease remains 3.6%!
What is the minimum duration of a new professional lease concluded after 28-2-2014?
MINIMUM DURATION 3 YEARS (even if a shorter period has been agreed).
a) A fixed-term lease expires automatically once that period has elapsed, while an open-ended lease requires valid termination.
b) A tacit renewal for an indefinite period is deemed to occur where, after expiry of the agreed term, the tenant continues to pay rent and the lessor does not object.
c) If a term longer than three years is agreed, the longer term applies. If, however, a term shorter than three years is agreed, or no specific duration is agreed (open-ended lease), then the minimum three-year duration applies and binds both parties.
d) The tenant cannot terminate the lease on grounds of repentance under Article 43 of Presidential Decree 34/1995, since this provision no longer applies to new leases.
What is the minimum duration of an old professional lease concluded before 28-2-2014?
A minimum duration of at least 12 years continues to apply, but without the previously provided automatic 4-year extension upon the lapse, without action, of the 9-month period following expiry of the 12-year term. The abolition does not apply to leases for which the 9-month period had already elapsed before 28/2/2014, and which were therefore automatically extended by 4 years.
How is a new professional lease concluded after 28-2-2014 terminated and dissolved?
a) A professional lease expires automatically upon the elapse of the agreed term or upon the lapse of three years.
b) Termination must be in writing and must be served on the lessor or tenant.
c) The legal effects of termination take effect three (3) months after notification to the lessor or tenant. That is, each contracting party has the right to terminate at any time (after expiry of the contractual term of the lease), without any compensation, with the obligation of the lessor and correspondingly of the tenant to a three (3) month extension (and payment of the corresponding rent) following notification.
However, for early termination, it is accepted that a serious cause is required, primarily breach of a principal contractual obligation.
Note: For new leases, the following grounds for termination have been abolished: a) Termination by the lessor for own use or reconstruction, and the related compensation provisions; b) Termination by the lessor for own residence and the related compensation provisions; c) Termination by the lessor for the purpose of creating a primary residence; d) Termination by the lessor for the demolition of a dilapidated building; e) Termination by the lessor on grounds of the tenant’s bankruptcy; f) Termination by the tenant before the contractual expiry, with payment of the corresponding compensation of one month’s rent after three months; g) The special compensation for goodwill of 24 months’ rent in case of expiry of the 12-year duration of the lease.
How is an old professional lease concluded before 28-2-2014 terminated and dissolved?
– For fixed-term leases that have not yet expired, there is an obligation to give notice 3 months before the tenant’s departure, after the lapse of 1 year from the start of the lease, with payment of 1 additional month’s rent as compensation.
– For open-ended leases, the notice obligation is 15 days before vacating the leased premises.
The new provisions introduced new rules concerning the shortening of time-limits and the reduction of compensation in cases of termination by the lessor. Specifically:
- The lessor may terminate the lease for own use by the owner, his children or his spouse only after expiry of the contractual term of the lease, and in any event before 18 months have elapsed.
- The lessor owes the tenant, as compensation, 8 months’ rent calculated at the rent payable at the time of termination. The tenant may, by application to the court, seek an increase of the compensation to 15 months’ rent.
- The lessor may terminate the lease for reconstruction of the leased premises by him or by the owner of the premises: a) After expiry of the contractual term, unless that term exceeds 6 years, in which case termination may be effected after the lapse of 6 years in any event;
- After the lapse of 18 months from the commencement of the lease, where the contractual term is shorter than 18 months or the lease has been concluded for, or is of, indefinite duration;
- After the lapse of 9 months from the commencement of the lease for law offices, accountancy offices, medical practices etc., if the contractual term of the lease is shorter than nine (9) months or the lease is of indefinite duration.
- The lessor owes the tenant, as compensation, 6 months’ rent calculated at the rent payable at the time of termination. The tenant may, by application to the court, seek an increase of the compensation to 9 months’ rent.
- The compensation for the operation of a similar business in the leased premises following termination for own use or reconstruction (goodwill / intangible commercial value) equals 15 months’ rent if the business is operated 1 year after the surrender of the premises for the above reasons. The court may increase the amount up to 20 months’ rent.
Note: Indicative grounds for termination and dissolution, whether of an old or a new lease, include the following: A) late payment of rent; B) misuse of the leased premises; C) breach of any term, provided it is expressly stipulated in the contract; D) defects in the leased premises; E) death of the tenant (termination by the tenant’s heirs).
In case of dissolution of the lease for any reason, the lessor has an obligation to declare such dissolution by the end of the month following its dissolution on the information system of the Independent Authority for Public Revenue (AADE), failing which the lease is deemed to remain in force.
What are the grounds and methods of eviction in professional leases?
GROUNDS FOR EVICTION:
1st ground: non-payment of rent (default) and unlawful retention of the leased premises;
2nd ground: expiry of the lease.
METHODS OF EVICTION:
1st method: Issuance of an order for surrender of the leased premises and payment of rent.
Specific conditions for the issuance of an order for surrender of leased premises:
a) Late payment of rent (default);
b) An active leasehold relationship;
c) Prior service of a written extra-judicial notice on the tenant at least fifteen working days before the application for issuance of the order is filed, by which the tenant is called upon to pay the outstanding rent and/or any debts in respect of common-area expenses. If the tenant pays within 15 days, the order cannot be issued, unless the tenant again falls into arrears. It should be noted that financial difficulty does not constitute a valid reason for non-payment of rent.
d) In practice, eviction may be carried out twenty calendar days after service of the order, with the assistance of a bailiff.
2nd method: Filing of a lawsuit for surrender of the leased premises and payment of outstanding rent.
a) Where the conditions for issuance of an order for surrender are not met and the tenant continues to remain on the premises without paying rent, the lessor may file a lawsuit for surrender of the leased premises and payment of rent.
b) Upon expiry of the lease for any reason (lapse of a fixed term or valid termination), the lessor has the right to bring the relevant lawsuit on grounds of expiry of the leasehold relationship, where the tenant continues to remain on the premises.
Note: a) by the above order, payment of common-area expenses and electricity bills etc. may also be sought, provided that their settlement is documented in writing. b) The order for surrender of the leased premises is, in practice, much faster and more effective than the corresponding lawsuit, which is rather time-consuming, since the issuance of a judgment requires several months of waiting.
- See also article Tenant Eviction
- See also article Payment Order
- See also article Divorce
- See also article Certificate of Inheritance
- See also article Renunciation of a Minor’s Inheritance
- See also article Joint Custody of a Child
FREQUENTLY ASKED QUESTIONS ON PROFESSIONAL — COMMERCIAL LEASES
1. How do I evict a commercial tenant who is not paying?
The fastest route is the order for surrender of the leased premises and payment of rent. Before filing the application with the Single-Member Court of First Instance, a written extra-judicial notice is served on the tenant, granting him a deadline of at least fifteen working days to settle. If he does not pay, the order is issued and eviction is carried out twenty calendar days after its service, with the assistance of a bailiff. Where the conditions for the order are not met, a lawsuit for surrender of the leased premises is filed, although this is more time-consuming. The tenant’s financial difficulty does not constitute a justification for non-payment of rent.
2. How long does the eviction procedure last in a commercial lease?
Under the procedure for an order for surrender of the leased premises, from service of the extra-judicial notice to actual eviction of the tenant, the time generally ranges from two to four months, depending on the court’s caseload and the bailiff’s actions. If the tenant files an opposition against the order, enforcement may be temporarily suspended and the time-frame is extended. By contrast, a lawsuit for surrender of the leased premises generally takes one to two years until the issuance of a final judgment, and is therefore chosen only where the order route is not available.
3. What is the minimum duration of new commercial leases?
For leases concluded after 28-2-2014, the minimum duration is set at three years and binds both parties, even if a shorter period has been agreed in the lease. If a longer duration is agreed, the longer term applies. After expiry of the three-year period, the lease may be freely terminated by either party, in writing, with the effects taking place three months after service. Before expiry of the contractual term, termination requires a serious cause, primarily breach of a principal contractual obligation, such as non-payment of rent or misuse of the leased premises.
4. What documents do I need to obtain an order for surrender of leased premises?
The original lease agreement is required, registered on the information system of the Independent Authority for Public Revenue (AADE), as well as evidence of the debt — that is, a statement of outstanding rent, common-area or electricity bills if their payment is also being sought, and the extra-judicial notice with the bailiff’s report of service. Any document evidencing the delivery of the leased premises and their use by the tenant is useful, as is any correspondence (emails, extra-judicial notices) documenting persistent non-payment. At our office, after evaluating the file, we determine the optimal strategy.
5. Can I claim damages for harm caused to the leased premises?
The tenant is liable for any damage caused by his own fault that exceeds normal wear and tear from use. At the end of the lease, the lessor may withhold the security deposit to cover such damage and, if it does not suffice, may file a lawsuit for damages. It is particularly useful to draw up a delivery–receipt protocol with photographs, so that the initial condition of the property can be proven. Furthermore, the lessor is entitled to verify, on a quarterly basis, in person or through a skilled person, that the leased premises are being used in accordance with the contract, which strengthens his evidentiary position.
6. What is the role of the lawyer in a commercial lease?
Our office handles the review and drafting of the lease with clauses that protect the owner (security deposit, penalty clauses, express termination terms), the declaration to AADE, the drafting and service of the extra-judicial notice, the filing of the application for an order for surrender of leased premises and payment, the monitoring of enforcement through the bailiff, as well as the rebuttal of any opposition by the tenant. In cases of expiry of the lease without voluntary departure, a lawsuit for surrender is filed. In parallel, we represent the owner in negotiations for an amicable settlement, which often proves faster and more economical than the judicial route.