Key Issues to Consider in a Lease Agreement in Qatar
|Registration and Fees||
Under the Lease Law, all commercial, industrial and residential leases must be registered with the Municipality. It is the obligation of the landlord to register the lease agreement. The fee for registering a lease agreement is 1% of the annual rent of the leased premises, and it is payable by the landlord.
|Before Signing a Lease Agreement||
Many commercial leases are not based on a standard form agreement; each commercial lease is customised to the landlord's needs and may require considerable negotiation. As a result, we are advising you before entering into a commercial lease agreement to ask for a copy of the lease early in the process, carefully examine the terms with a view to discussing contentious provisions before practically committing to the premises.
It is useful to consider the term of the lease. A long term lease may not be always indicated especially given the uncertainty of rents long term in a market where considerable space is expected to come onto the market over the next few years. A short-term lease may be of benefit, if linked to more than one right of renewal. This will provide considerably more flexibility in the light of uncertain future needs. When establishing a business and you are requesting a loan from a bank, it is advisable that the lease term of the premises is at least equal to the duration of the loan.
It is important to negotiate the rent increase, and the security deposit and conditions for its return. In practice, rent is usually fixed for the initial lease term (2-3 years), and rent increase applies for each renewal term.
Usually security deposit amounts to two months’ basic rent refundable within 30 days from the expiry of the lease term.
|Fit Outs and Improvements||
If the premises needs fit outs or improvements, you may want to negotiate with the landlord to provide them at no cost to you. If you are willing to sign a long-term lease, the landlord may be more willing to pay for improvements to the property.
Most of the commercial leases for property do not entitle the tenant to sublease or assign the premises. However, before signing the lease, you may want to ask for the right to sublease or assign the premises, so that if you need to move out, you will be able to have another tenant take the premises and pay the rent, without having to break the lease and incur costs.
It is important to ensure that the lease exactly determines the rented space, including common areas, and how the landlord measures the space. For avoidance of doubt, it is advisable to incorporate a copy of the premises’ plans as an annexure to the lease agreement.
It is very important that the lease determines how it may be terminated, including notice requirements, and whether there are penalties for early termination. In practice, commercial leases will set out that, upon early termination by the lessee, the lessor shall be entitled to the rent for the balance of the lease term. The lessee should ensure that the lease agreement incorporates a break out clause entitling it to terminate the lease prior to the expiry of the lease term, while paying a minimum penalty.