STANDARD COMMERCIAL LEASE TERMS EMEA SEPTEMBER 2013

STANDARD COMMERCIAL LEASE TERMS EMEA SEPTEMBER 2013

PROPOSAL FOR STANDARD COMMERCIAL LEASE TERMS EMEA PLEASE SELECT THE COUNTRY TO VIEW 1. AUSTRIA 2. BAHRAIN 3. BELGIUM 4. BULGARIA 5. CHANNEL ISLANDS 6. CYPRUS 7. CZECH REPUBLIC 8. DENMARK 9. ESTONIA 10. FINLAND 11. FRANCE 12. GERMANY 13. GREECE 14. HUNGARY 15. IRELAND 16. ITALY 17. KOSOVO 18. LATVIA 19. LITHUANIA 20. LUXEMBOURG 21. MACEDONIA 22. THE NETHERLANDS 23. NORWAY 24. OMAN 25. POLAND 26. PORTUGAL 27. ROMANIA 28. RUSSIA 29. SERBIA 30. SLOVAKIA 31. SLOVENIA 32. SPAIN 33. SWEDEN 34. SWITZERLAND 35. TURKEY 36. UKRAINE 37. UNITED ARAB EMIRATES 38. UNITED KINGDOM EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

PROPOSAL FOR STANDARD COMMERCIAL LEASE TERMS AUSTRIA GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE LETTING COSTS The tenant is required to sign a binding agreement. Lease agreements must be registered for tax purposes and are subject to registration duties. All leases are legally binding and are registered at the tax authority. However, it is possible to register the lease in the ground book, but this is usually done only if the tenant makes a substantial investment in the premises and this is rarely seen. Tenant: Legal costs of approx 1.0% of the annual rent, state tax of 1% (of the annual rent for the duration of the contract, but capped at a maximum of 3 years if the lease is indefinite) and agency costs of the equivalent of a maximum of 3 months rent. Landlord: None. LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Negotiable. Office: usually 5-10 years Industrial: usually 3-5 years Retail: usually 5-10 years Euro per square meter per month. None usually subject to negotiation, mostly the tenant agrees not to terminate the contract for a stipulated period (often 3-5 years) but has the right to do so after this period is over (mostly at the end of every quarter with 6 months notice. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS Monthly (or quarterly) in advance. A security deposit of 3 months rent is usually required. Rent reviews are not a common practice, only sometimes used in indefinite lease contracts on basis of a specialist s arbitration. Frequency is negotiable, but usually 5-10 years. Indexed to a government-issued monthly index. Sometimes a 3-5% step before an increase comes into effect. No automatic right to renew. However, many old office leases still exist where the tenant has a perpetual right to renew. Key money is not normally charged. Turnover rents are increasingly being used in shopping centre leases. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Generally allowed, but subject to the landlord s consent. None on expiration of the lease apart from the responsibility of the tenant to reinstate the premises, with the exception of wear and tear. It is typically agreed that the tenant has to undo all alterations if the landlord demands. Negotiable see break options. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

PROPOSAL FOR STANDARD COMMERCIAL LEASE TERMS AUSTRIA S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN Tenant: Internal repairs. Landlord: Structural repairs. Buildings have to be insured for fire, liability and water pipe damage and this is paid by the landlord and charged back to the tenant via service charges. In most contracts the tenant is bound to insure the premises with business liability insurance. Service charges are monthly and are reviewed and adjusted yearly. The law regulates which costs may be included into the service charge. TAXATION LOCAL TAXES Paid by the landlord (charged back to tenant via service charge). VAT ON RENT 20% MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Net Internal Area. Includes toilets and corridors but excludes stairs, walls and vertical circulations. There are two points to adhere: 1) Building permit states the maximum people allowed in an object (varies from property to property) 2) Minimum size of an office: 8 sq.m for the first employee, 5 sq.m for each additional. LEGISLATION LEGISLATION RELATION TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP MRG (Mietrechtsgesetz), 2001 None. Generally there are no restrictions on permits to sell land to foreigners (if EU). If not, the local body must approve the permit sale of commercial buildings. This is normally a formality and with all the correct paperwork, a permit will be issued after 8-12 weeks. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

PROPOSAL FOR STANDARD COMMERCIAL LEASE TERMS BAHRAIN GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS Lease agreements are usually printed on special legal paper and vary from one page documents up to full international standard leases. Leases must be registered with the local Municipality. The contract is legally binding and enforceable in the courts of Bahrain or other appropriate legal authority in Bahrain. These are reasonably common but are rarely enforced. Letting fees are typically paid by the landlord and are usually 8.33% of the annual headline rent. LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Retail: 1-5 years. Office/Industrial: 1-5 years. Bahraini Dinar per sq.m per month. Tenant break options are typically negotiable but usually only after the first year. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS Quarterly in advance. Most landlords do not request a deposit but a deposit of 1-3 months is not uncommon. No rent review process is place. At the time of lease renewal a 10% increase is permissible as per law. This needs to be agreed by the tenant and market rate will be taken into account. No indexation process is place. In certain areas there is no automatic right to renew but the law is not entirely clear on this. If the landlord does not issue any termination letter at the time of lease expiry the tenant reserves the right to roll over for another one year with similar terms and conditions. Premiums and key money are not very common in Bahrain. Due to the poor state of the market and high level of availability incoming tenants are rarely willing to pay key money. It may occur in exceptional cases with regard to retail units in certain high demand areas. Turnover rents are not common in Bahrain. Some of the malls may have a base rent and then charge a percentage of turnover after a certain threshold has been met. ANNUAL OCCUPANCY COSTS EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

PROPOSAL FOR STANDARD COMMERCIAL LEASE TERMS BAHRAIN DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION The tenant is usually prohibited from subletting without the landlord s consent. There is currently no process in place whereby tenants can assign their lease. None following disposal of the lease. Leases usually state that the tenant must reinstate the premises in the original state, including removal of fittings and fixtures. Only if the lease contains a break clause or in common consent between parties. S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN Tenant: Internal repairs. Landlord: Structural repairs. Tenant obligation. Service charges are usually fixed at either 10% or 15% of the rent. In some commercial properties Actual Cost Recovery has been implemented. Water and electricity are usually paid by the tenant. TAXATION LOCAL TAXES VAT ON RENT Tenants have to pay Municipality Tax which is currently 10% of the rent. Water and electricity are also usually paid by the tenant. None. MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE There is no universal measurement practice in Bahrain. The most common practice is to include the usable area (including columns) and the WC s and pantry. Some landlords will try to include lift lobbies and other common areas. N/A LEGISLATION LEGISLATION RELATION TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP Bahrain Civil code 2001. Article 505 to 546 covers commercial leasing in Bahrain. None. Foreign ownership of commercial property is only allowed in certain areas. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS BELGIUM GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS Any lease agreement must be registered at the Ministry of Finance, Bureau de L Enregistrement and is subject to registration duty. The contract is legally binding and enforceable by the tribunals of Brussels or other appropriate legal authority throughout Belgium. On signing the lease the tenant waives some rights for recourse from the landlord, with exception of cases of malevolence. Tenant: If an agent is employed, the cost is 15% of the annual rent, plus VAT. The tenant is responsible for the registration of the lease. Landlord: Agents fees at 15% of the annual rent plus VAT. LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Retail: Minimum of 9 years, maximum of 99 years. Both parties are free to negotiate longer leases. Office/Industrial: Negotiable, but normally 9 years. Euro per sq.m per year. Tenants may terminate the lease every 3 years with 6 months prior notice. If explicitly provided for in the lease agreement, the landlord may also terminate the lease every 3 years with a year's prior notice if he intends to use the premises himself or in certain exceptional circumstances. In the latter case, compensation by the landlord will be due. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION Quarterly in advance. A bank guarantee of between 3 to 6 months is given by the tenant. Annually. All sectors are indexed annually in line with the Health Index (an adjusted consumer price index). Normally the landlord will recalculate the rent annually; in case of deflation the tenant has to send a notice of rent decrease to the landlord, if the contract allows it; most contracts do not allow rent decreases. SECURITY OF TENURE Retail: The tenant normally has the right to renew for a further three terms of 9 years but must adhere to a strict procedure. Exceptions to the tenants right to renew are where the property is required for the owner s occupation, where the owner wishes to redevelop, or where there is a better offer from a third party which the tenant is not prepared to match. PREMIUM/KEY MONEY Office/Industrial: None. Premiums and key money/business goodwill are common practise for retail property in Belgium. The premium is calculated according to the difference between the actual rent and the market value and depends on the length of the lease. Given the security of tenure for retail contracts in Belgium, most rents in high streets imply key money because there is virtually no vacancy in top streets. Only exceptional key money is paid one-off at the signature of a new lease; the standard key money is calculated in the rent. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS BELGIUM RENTAL PAYMENTS (CONT.) TURNOVER RENTS ANNUAL OCCUPANCY COSTS There are a few examples of retail centres in Belgium where these are common. The average percentage payable on turnover is 7-10% for clothing and footwear and 2-3% for supermarkets. The précompte immobilier is payable annually and calculated on the basis of the revenue cadastral, the rateable value attributed to the property in the cadastral register. It applies to the whole of Belgium, but the tax differs from one region, province and municipality to another. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION The tenant is usually prohibited from assigning or subletting without the landlord s consent. However for retail, the tenant has the right to sell or sublet the lease with the business goodwill, provided the nature of the business remains the same. None following disposal of the lease. However, the tenant is liable in the event of incoming tenant failure in the case of assignment. The tenant must reinstate the premises in the original state, including removal of fittings and fixtures. Only by break clause which is possible every 3 years by the tenant, or in common consent between parties. S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN Tenant: Internal repairs. Landlord: Structural repairs. Tenant obligation. Service charges are not normally included in the rent. Unless stated otherwise, these charges are paid by the tenant. Largely dependant of kind of property and sector. Normally service charge will cover lifts, security, HVAC, internal repair and decoration (but no structural repairs). TAXATION LOCAL TAXES VAT ON RENT The précompte immobilier is payable annually and calculated on the basis of the Revenue Cadastral, the rateable value attributed to the property in the cadastral register. It applies to the whole of Belgium but the tax differs from one region, province and municipality to another. (There is also an annual tax, which is levied on office properties in the Brussels region. Whilst it is charged by the authorities directly to the landlord, most leases allow for the recuperation of the amount from the tenant). None. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS BELGIUM MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Retail: Gross Internal Area: middle of the wall to middle of the wall. Offices: Gross External Area: window to window, middle of the wall to middle of the wall, including service core and excluding plant rooms. Industrial: Gross Internal Area The only official figure in Belgium is for federal ministry government officials: they are entitled to 13.5 sq.m per person. LEGISLATION LEGISLATION RELATION TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP The legal structure of property in Belgium is based on the Civil Code, and there are a number of main types of title to property: Retail: bail commercial, April 1951; Office/Industrial: Articles 1714 to 1762 of the Civil Code. None. No restrictions on foreign ownership of commercial property. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 3

STANDARD COMMERCIAL LEASE TERMS BULGARIA GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS Whilst becoming increasing standardised, leases do still vary depending on the landlord. Lease contracts are enforceable where they have been correctly agreed and notarised if required. The transfer of property does not automatically break a rental agreement that the previous landlord negotiated if the lease contract was signed in front of a notary. In such cases the new landlord is entitled to break the lease not earlier than 1 year after the acquisition. If the rental agreement is notarised and duly registered at the Registry Agency by the tenant they are protected against unilateral break for the entire lease term. Both tenants and landlords pay in the range 8.33% - 12.5% of the average annual rent for the duration of the whole lease term. In addition both the tenant and the landlord pay in equal (usually ½) the notary fees if they agree to notarise the contract The registry agency tax, which amounts to 0.1 per cent of deal size (sum of all rental payments for the term of the contract), is usually payable by the tenant. LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Retail: Terms of a minimum of 5 years, especially in prime modern retail centres. Anchor tenants are usually required to sign a 10-year contract. Unbreakable leases longer than 10 years are relatively rare. Hypermarkets and other anchors would typically lease for periods longer than 10 years but with break options after year 10, 7 or 6. For smaller schemes lease terms are typically shorter - between 3-5 years. 5 years is the most typical term for offices and industrial space. 10-year contracts for both are not uncommon either. Industrial and logistics: Built-to-suit contracts in the industrial and logistics sector are typically 5+5 or 10 years. Smaller industrial and logistics schemes are characterized by shorter leases usually up to 3 years with 3- or 6-month termination notice. Rents are quoted in /sq.m/month as the Bulgarian LEV is pegged to the Euro. Presently landlords are closing leases with break options after the third year with 6 months notification in 5-year contracts and after the fifth or sixth year with 6 months notification in 10-year leases. No tenant substitution is required. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS BULGARIA RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS Monthly in advance. 1-3 months is usually required in the form of a cash payment or bank guarantee letter. For anchor tenants a guarantee from the parent company is accepted but not preferable. There is no standard review mechanism and this may be negotiated in the lease. Rents are indexed to EU HCPI or the euro zone HCPI index. Indexation to Bulgarian CPI is rare, e.g. in smaller or secondary logistic projects. Service and marketing charges, especially in shopping centres, are usually indexed with the Bulgarian CPI. All leases are signed for a definite period of time. On expiration of the term of the lease the lessee has the right to negotiate a further lease for a definite period of time, otherwise they are usually required to vacate the premises; or, according to the Law on Obligations and Contracts, the contract is automatically transferred to permanent agreement, terminable with one month notice. Key money is only applicable for high street units in Bulgaria and it is extremely rare. Yes, between 3-8%, depending on the tenant. For café and fast-food tenants this can be as high as 12% for example. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Subletting is not allowed without prior consent of the landlord, apart from certain where the subtenant is subsidiary of the prime tenant. Pharmacies can sublet due to amendments in Bulgarian law. Hypermarkets are also allowed to sublease smaller units that complement their product or service offer. The tenant is responsible for the repair of any damage except for capital expenditures and normal wear and tear. There is no liability following disposal of the premises upon lease expiry. Only by break clause or mutual consent. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS BULGARIA S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN Landlord: Main Structure (may be charged to the tenant through the service charge). Repairs and support of the building is made by Landlord and paid by service charge. Improvements are made on Landlord cost. Tenant: minor outlays and superficial repairs. In a multi-let building, the landlord may provide such services but charge back via the service charge. The tenant is usually also responsible for reinstating the premises to their previous state, with the exception of wear and tear at the end of lease. For retail the premise are given back in good conditions with fit outs as floor, ceiling, installations. The landlords are responsible for insuring the main structure whilst the tenant pays internal insurance. Third-party liability insurance and property insurance for the occupied premises are covered by the tenant. The typical service charge, payable by the tenant is: Offices: 1.75 3.50/sq.m. Industrial: 0.3 1.00/sq.m. Retail: 5.00 6.00/sq.m. No. The tenant pays for these separately. TAXATION LOCAL TAXES VAT ON RENT 20%. Garbage fee paid by the tenants and is proportional to the leased area, usually included in the service charge. Besides, businesses can opt to pay volume-based fee for separate waste collection to registered waste collection companies. Real estate tax obligation of the owner/landlord though usually paid by tenants. MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Based on Gross External Area. There is an ordinance from 1999 which does not stipulate specific areas per employee due to the large variety of specific jobs and premises. Each premise has to be evaluated on a case by case basis. LEGISLATION LEGISLATION RELATING TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP Bulgarian Law on obligations and contracts governs any disputes, including the commercial law. None at the moment. There are no restrictions on foreign ownership of commercial property except land. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 3

STANDARD COMMERCIAL LEASE TERMS CHANNEL ISLANDS GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS Leases must be in writing and the lease document forms the standard documentation required. A formal deed is required for all leases over 9 years these must be passed in the Royal Court and are recorded as Public documents. Leases of less than 9-years do not have to be passed through court and do not have to be recorded as Public documents. A mandatory standard form of lease does not exist and there is no market standard. There is currently no initiative to simplify leases. Leases are legally binding on both landlord and tenant. The authorised use will depend on the terms of the lease which will also state the degree to which this may be varied by the tenant. Fees are subject to negotiation however fees for lease acquisition and tenant representation are generally in the order of 10% of annual rent. Legal fees are circa 1%. All fees are subject to GST @ 5%. LEASE TERMS LEASE Retail: Traditionally, for the best stock, leases have been for a term of 15-21 years and could be higher. Leases are now more typically 9 years-15 years for the best stock and 6-9 years for the best secondary stock. Lower secondary/tertiary stock will likely be negotiated at terms of 6 years or less. RENT PAYMENT BREAK OPTIONS Offices: 9-15 years or longer for prime space (likely subject to break clauses at years 9/13 for 15-year leases). Leases of 6-9 years with breaks 3-yearly for more secondary/tertiary stock. Industrial: 9- years or longer for prime space (likely subject to break clauses at intervals of 5-years for longer leases). Leases of 6-9 years with breaks 3-yearly for more secondary/tertiary stock. Rents are quoted in Sterling on a per sq.ft per annum basis. Rare in the past but now increasingly negotiable. In the absence of a clear agreement in the lease, the tenant has no legal right to break so long as the landlord fulfils his obligations. Breaks can be negotiated at any point in the lease. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT Rents are typically payable quarterly in advance, though monthly payment can sometimes be negotiated. A security deposit is not normally required for a tenant with a strong covenant or where a parent company guarantee (or less frequently a bank guarantee) is provided. For weaker covenants, a deposit will likely be required, by negotiation with 3-6 months rent equivalent commonplace/perhaps tempered by personal or director guarantee. RENT REVIEWS Usually 3 yearly to open market rental value (upward only) for prime stock occasionally alternating cost of living increases. For secondary stock, cost of living increases are most common. Comparable rents are analysed as net effective rent rather than headline rent if incentives have been granted. INDEXATION SECURITY OF TENURE Indexation is not common practice for prime stock but is being seen increasingly on an alternating basis and more consistently for secondary stock. No. The Landlord & Tenant Act 1954 Part II (as amended) does not apply to the Channel Islands. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS CHANNEL ISLANDS RENTAL PAYMENTS CONT. PREMIUM/KEY MONEY TURNOVER RENTS ANNUAL OCCUPANCY COSTS Premium payments are not common. Have been negotiated in specialist sectors such as hotels. Normally equates to the sum of net rent and service charges that include insurance and rates. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Leases typically allow tenants to assign/sublease the whole of the premises with the landlord s consent. Sub-letting typically allowed in part subject to landlords consent. Upkeep throughout the lease and at the end of the lease, the tenant is responsible for reinstating the premises and to give the premises back at the end of the lease in the same condition as they were in at its grant. Only by break clause or non-performance. S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN For prime and the best secondary stock, the tenant is usually responsible for all maintenance and repairs. For usual secondary and tertiary stock, IRI terms are more common. The landlord usually insures the main structure and external fabric but will recover the premium from the tenant. Insurance for common parts is also paid by the landlord and charged back. The tenant is responsible for occupiers business insurance directly. A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance and insurance, servicing of elevators, water, heating, air conditioning, management fees and property taxes. It excludes internal maintenance and insurance of rented accommodation, utility charges and GST. Yes. TAXATION LOCAL TAXES VAT ON RENT The Parochial Authority charges the rates, the local property tax, which is payable on all property by both the occupier and owner (Foncier). The Parochial Authority sets rateable value and rates typically represent 2%-3% of rental value. No allowance is given for empty properties. Currently 5%. With the exception that GST is not payable by registered (International Service Entity) ISEs or if landlord company s turnover is less than 300,000 pa. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS CHANNEL ISLANDS MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Retail floor space is measured on a Net Internal Area basis, excluding structural and internal walls, common parts, toilets and other restricted areas. Industrial is on a Gross Internal Basis. Office is Net Internal Basis. There is no minimum legal requirement. LEGISLATION LEGISLATION RELATING TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP The Landlord and Tenant Acts do not apply. None. There are no legal restrictions on ownership of real estate. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 3

STANDARD COMMERCIAL LEASE TERMS CYPRUS GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE LETTING COSTS Lease agreement. High. One month s rent. LEASE TERMS LEASE RENT PAYMENT Retail: Usually 2-5 years. Office: Usually 1-3 years. Monthly in advance. BREAK OPTIONS Mostly the tenant has the right to terminate the contract after a period of 3-5 years. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS Monthly. One or two months rent. Annual indexation. Some leases are annually indexed to a government-issued monthly index. Where the tenant is statutory protected, the landlord has the right to increase the rent biannually up to a capped percentage which is specified by the government. Tenants of certain properties qualify for statutory protection whilst those of other properties do not. Each tenancy should be examined on an individual basis. Only for retail. Unlikely in the current market environment. Only in malls. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Usually not allowed. Full up to the end of the lease. Usually not allowed, unless long lease with a tenant s right to terminate. S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN Tenant. Tenant. Tenant. Only for common areas. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS CYPRUS TAXATION LOCAL TAXES VAT ON RENT Tenant. VAT payable on licenses, not leases. MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT FOR MINIMUM WORKSPACE PER EMPLOYEE Gross External Area, usually excluding common areas, e.g. stairwell, lift lobby, etc. No. LEGISLATION LEGISLATION RELATING TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP Contract Law. None. Non-EU controlled companies and individuals can acquire commercial real estate only after receiving approval from the council of ministers and only for their own use (not for investment). No restrictions for EU controlled companies and individuals. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS CZECH REPUBLIC GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS Leases must be in written form but there is no standard contract. A recognizable western style lease is in place, which includes the legal points required by the Czech laws (commercial code, civil code and the law on leases of non-residential premises) for the contract to be valid and legally binding, but with clauses common to western leases added. The lease document is the only written document required to establish a lease. Among typical appendices to the contract are: confirmation from the cadastral office that the landlord owns the property or has the right to act as owner, a statement of company registration, plans of the premises. The lease agreement is usually printed out in two copies, one for each party. The standard lease agreements will likely be amended to reflect the new civil code, which will enter legal force on 1 st of January, 2014. It s too early to say how will the market standards be influenced, but the new civil code has the aim of simplifying the valid law and increasing its predictability. Even leases signed prior to 1 st January, 2014 will be governed by the new law. Leases are legally enforceable but not widely tested in the courts. The new civil code in principle limits the range of reasons for invalidity of lease contract and should lead to better predictability of court decisions. The lease is a contract to use the real estate rather than an ownership right and hence does not need to be registered with the land registry. However, the new civil code in principle allows for facultative registration of leases, however it is unlikely that this will become the market standard, due to administration involved. Every lease agreement has to include a definition of the purpose of the lease (e.g. retail, office, storage), which has to be in line with the use permit and is restrictive, i.e. the tenant may not use the premises for other purposes. The contract is absolutely invalid without the definition of the purpose of the lease and the purpose can only be changed (if the use permit allows for that) by a written amendment. In case the premises are used for business activities the lease agreement has to state what activities the tenant will carry out in the premises (e.g. selling clothes). The change of the business activities is possible without amending the contract but must be approved in advance in writing by the landlord. The landlord pays agency fees at 7% to 17% of the annual rent. The tenant, if represented, pays agency fees at 5% to 8% of the annual rent and savings bonuses in case of offices and 10% to 15% of the annual rent in case of retail. LEASE TERMS LEASE RENT PAYMENT Typical lease terms for office and retail is 3 or 5 years. Industrial/logistics/retail warehouse leases have a term of 3, 5 or 10 years. Rents are denominated in EUR or CZK, and payable in EUR or CZK. Rents are expressed on a per-sq.m, per-month basis or per-month basis. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS CZECH REPUBLIC LEASE TERMS CONT. BREAK OPTIONS Conditions to terminate are negotiable but must be clearly stated in the lease; if nothing is stated the reasons permitted by law for both the landlord and the tenant apply. Fixed term leases can only be terminated under conditions specifically stated in the lease agreement and these conditions typically represent a serious breach of one of the parties. Whilst break clauses (without a breach) do exist, they are almost exclusively conditioned by significant penalty. The new civil code stipulates clearer rules for termination of a lease contract than previously (e.g. premature termination of an agreement by one party has to be contested within one month). It also explicitly sets rules for long-term leases of over 50 years, which are according to the law considered to be signed for an indefinite period. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS ANNUAL OCCUPANCY COSTS Rents are generally paid monthly or quarterly in advance. A security deposit equivalent to three months rent (can be also six for industrial or prime shopping centres), service charge and VAT applicable on the amount is usually required or the equivalent parent company guarantee. Tenants can generally use a bank guarantee instead and top retail tenants are sometimes allowed to issue a mother company guarantee in lieu of the deposit. Market rent reviews almost non-existent as leases are typically signed for 5 years or less and inflation indexation is almost universal. Most rents are indexed annually to the relevant inflation index either the euro zone or EU 27 HICP for euro-denominated leases or Czech Statistical Office CPI for CZK leases. Security of tenure is not automatic but may be included in the lease by negotiation. Common on the Prague s high street and sometimes seen in leading shopping centres in Prague, otherwise almost non-existent. Law does not specifically recognize key money, but there are various ways how to structure such payment in accordance with the Czech law. Frequently turnover rents of between 3-10% (depending on use) are employed in new retail developments. Turnover rents are almost always subject to a base rent. Real Estate Tax is payable by the owner, but the amount payable is very small, albeit increasing in the last years. Despite this, the cost is often recovered from the tenant in the service charge. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS CZECH REPUBLIC DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Sub-leasing is negotiable but is almost always subject landlord approval (this has to be specifically agreed in the contract). Assignments are recognized by Czech law but are rare in practice; a written agreement by all parties (landlord, old tenant, new tenant) is typically used. Usually, the tenant is responsible for reinstating the premises subject to normal wear and tear. In some retail projects landlords require the tenant to cover the lost rental income in case the landlord terminates the agreement because of a breach on the tenant s part. Only by break clause. Lease agreements for indefinite period of time can be generally terminated with a 3-month withdrawal period, unless stated otherwise in the lease agreement. The new civil code stipulates clearer rules for termination of a lease contract than previously (e.g. premature termination of an agreement by one party has to be contested within one month). It also explicitly sets rules for long-term leases of over 50 years, which are according to the law considered to be signed for an indefinite period. S, REPAIRS & INSURANCE REPAIRS INSURANCE Landlord: Main Structure (may be charged to the tenant through the service charge) and large scale repairs and maintenance. Tenant: The tenant is responsible for minor outlays and superficial repairs. In a multi-let building, the landlord will provide such services but charge back via the service charge. The landlord is responsible for insuring the main structure whilst the tenant pays internal insurance (sometimes also business insurance in retail). S, REPAIRS & INSURANCE (CONT.) UTILITIES INCLUDED IN A service charge is usually payable in all building types. The charge normally includes management fees, security, cleaning, internal maintenance of common parts, servicing of elevators, external maintenance, external insurance, water, electricity, heating, air conditioning and snow clearance. It excludes internal maintenance of rented accommodation, internal (equipment) insurance and VAT. By law the service charge cannot be included in the rent and must be quoted and paid separately. Utilities for common parts are always included in the service charge. In case of utilities consumed directly by the tenant one of three regimes is used: (i) the tenant contracts the utility provision directly, circumventing the landlord (common for phones), (ii) the utility is provided through the landlord, but measured individually and recharged 1:1 (e.g. electricity), (iii) the utility is provided through the landlord and not measured individually and recharged based on some key (e.g. heating, by tenant s share on GLA). TAXATION LOCAL TAXES Not applicable. VAT ON RENT 21%. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 3

STANDARD COMMERCIAL LEASE TERMS CZECH REPUBLIC MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Standards vary, with some landlords using GIF (retail), some BOMA, otherwise it tends to be Gross Leasable Area, including area below partitions and excluding unusable areas larger than 0.5 sq m (pillars, voids). Many office leases include an add-on factor to allow for a proportion of common areas. Industrial leases do not tend to follow a particular standard. Standards are in place and they depend on many factors but generally 10-16 sq m per employee are required. LEGISLATION LEGISLATION RELATING TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP COMMENT State law supersedes the lease contract. A western lease contract is generally applicable for the leasing of commercial premises with compliance of certain Czech rules. Civil code, commercial code and the law on leases of non-residential premises govern commercial property. Some residential rents are regulated by a government decree and the cities have the right to deregulate in their areas, which they usually do, the goal being to deregulate completely over time. Completely new civil code has been passed, will take effect on 1.1.2014 and can significantly alter the current practice. General trend is towards more contractual freedom and simpler requirements for contract validity and thus higher level fo predictability of the law among contracting parties. In terms of tax legislation, real estate tax will likely be gradually increased in the future. Generally natural persons without citizenship of an EU country or residence in an EU country cannot acquire real estate. Fully owned subsidiaries of foreign entities that operate in the Czech Republic, are subject to the same laws and taxes as Czech domestic companies and can acquire real estate. Property laws are gradually improving for ownership. Lease structures continue to evolve and a standard, freely negotiable form is now in place albeit not properly tested in courts. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 4

STANDARD COMMERCIAL LEASE TERMS DENMARK GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS Tenants are required to sign an individually drafted document based on the landlord s proposal. The practice is common among the major real estate owners and companies. Leases are legally binding according to the Danish Business Lease Act. None. Tenant: 15% of the first year s gross rent plus VAT. Landlord: 15% of the first year s gross rent plus VAT. LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Usually between 2 and 5 years, but may be longer, especially for purpose-built buildings. After this (typically) 2-5 year period, the lease is constantly rolling until notice is served by the tenant or landlord. However, the landlord s conditions are rather strict, and in reality the landlord s options of terminating the lease are very limited. Generally, these lease terms apply to all sectors. DKr per sq.m per year. Negotiable, but typically Danish leases have a non-termination period of 2-5 years after which the lease is constantly rolling until notice is served by the tenant or landlord. However, the landlord s conditions are rather strict, and in reality the landlord s options of terminating the lease are very limited. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS ANNUAL OCCUPANCY COSTS Rents are payable quarterly or monthly in advance. A cash security deposit of between 3 and 6 months rent is usually required. Reviews can occur every 4 years in accordance with the Danish Business Lease Act, and may be upwards or downwards, depending on assignment and depending on current market rent. Annual increases in rent are usually indexed to the consumer price index or a fixed percentage, although the details vary between leases. The tenant has security unless the landlord wishes to occupy, tear down or redevelop. These conditions are rather strict, and in reality the landlord s options of terminating the lease are very limited. Key money is only common in retail leases. Turnover rents are common in shopping centres. The sum of net rent, service charges and utilities. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Negotiable. Assignment is typically allowed in retail leases. The tenant is normally responsible for reinstating the premises with the exception of wear and tear, although this is negotiable. Only by break clause, which is rare. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS DENMARK S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN Tenant: Internal repairs Landlord: External repairs Tenant: own effects, maybe glass and sanitary appliances in the lease if the landlord doesn t have it in his insurance. Landlord: Building insurance. Payable - but either added to the rent or included in the rent. Electricity for the lease is paid directly by the tenant to the supplier. Electricity for staircases etc. (that is, common areas) may be included in Service Charges. Heating is paid in separately, typically on account. TAXATION LOCAL TAXES VAT ON RENT 25%. Usually included in the service charge. Alternatively, it can be included in the rent, in which case the landlord may add any increase in taxes to the rent paid, based on the Danish Business Lease Act. MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Gross External Floor Area. Some restrictions with regards to fire safety and working environment do apply, although these will vary according to different factors like size, sector, etc. General practice is for between 15-25 gross sq.m space per employee. LEGISLATION LEGISLATION RELATING TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP COMMENT The Danish Business Lease Act (tenancy law) became effective in January 2000, and changed the terms of the previous law significantly. For normal leases including offices, warehouses etc. there are now few actual restrictions besides normal contractual legislation, as a large number of the provisions of the law can be dispensed from by agreement between the parties. For protected leases (primarily shops/retail) the rules are more protective to the tenant. None. There are no restrictions on foreign ownership of commercial property for companies in the member EU states or the EEA. Companies that do not comply with the above and which have not been domiciled in Denmark for a period of 5 years can only acquire commercial property with the permission of the Danish Ministry of Justice. Clause ( ) 14 in the present Business Lease act, is a clause which more and more landlords try to include in the lease contracts. If the clause is agreed upon, the landlord can ask the tenant for negotiations on the terms (rent, deposit, indexation, tenure etc.). The landlord can do this for the first time 8 years after the lease has started, and after successful negations where the parties agree on new terms, the landlord can do it again 8 years after that. However, the landlord can not do it earlier than 4 years after a successful rent review. If the parties can t agree on the new terms, the landlord can terminate the lease. This clause can t be used in retail leases. The clause is considered one sided in favor of the landlord. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS ESTONIA GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES Leases must be in writing but may vary in form and content. The lease, if registered in the Land Register is legally binding on both parties. The authorised use will depend on the terms of the lease which will also state the degree to which this may be varied by the tenant. LETTING COSTS Fees for lease acquisition and tenant representation are generally as high as 12%- 15% of the annual rent plus VAT. LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Leases may be either for specified or unspecified terms, but typically seen at: Retail: 5-10 years for shopping centres. Offices: 3-5 years. Industrial: 3-10 years. Rents are quoted in EUR per sq.m per month. Lease agreement for an unspecified term may terminate a lease by giving at least three months notice. A lease agreement for a specified term expires at the end of term. Extraordinary termination is allowed for material breach of the contract. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS ANNUAL OCCUPANCY COSTS Rents are typically payable monthly in advance. A security deposit or bank guarantee (of up to three months rent) is normally required. Not a common practice. Rents are typically tied to the Euro but indexed to local inflation. Not automatic by law, but a common practice on the market. If, after expiry of a fix term lease contract, the tenant continues to use the leased premises, the lease is taken to have become a lease agreement entered into for an unspecified term. None. Not commonly used. The sum of rent, service charges and utilities. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION Permitted, subject to the landlord s consent. Upkeep throughout the lease and at the end of the lease, the tenant is responsible for reinstating the premises and repairing any damage etc.. Only if specified in lease contract. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1

STANDARD COMMERCIAL LEASE TERMS ESTONIA S, REPAIRS & INSURANCE REPAIRS INSURANCE UTILITIES INCLUDED IN The tenant is usually responsible for all internal maintenance and repairs. Payable by the landlord. Payable by the tenant and covers management and maintenance costs. Excludes utility charges and VAT. No. TAXATION LOCAL TAXES VAT ON RENT Land tax is payable. It varies between 0.1% and 2.5% of the taxable value of the real estate and is determined by the local municipality. Although the rent of real estate is considered to be a VAT exempt supply, owners of can opt to charge 21% VAT on rent provided the customer is a VAT registered taxable person. MEASURING CODE MEASUREMENT PRACTICE LEGAL REQUIREMENT / MARKET PRACTICE FOR MINIMUM WORKSPACE PER EMPLOYEE Retail Net Internal Basis. Industrial Gross External Basis. Office Net Internal Basis. None. LEGISLATION LEGISLATION RELATING TO LEASE CONTRACTS PROSOPECTIVE CHANGES TO LEGISLATION RESTRICTIONS ON FOREIGN OWNERSHIP None other than the Estonian Civil Law. No changes to legislation expected. There are generally no restrictions on owning commercial property. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 2

STANDARD COMMERCIAL LEASE TERMS FINLAND GENERAL DOCUMENTATION ENFORCEABILITY OF LEASE RESTRICTIVE USER CLAUSES LETTING COSTS A standard agreement is signed between the tenant and the landlord. All leases are legally binding when both parties meet the legal requirements. According to Finnish law, a sale does not break a rental agreement. All purchasers are bound to the existing rental agreement. Tenant: Agents fees at the level of 1-2 months rental amount, plus legal fees. Landlord: Agents fees at the level of 1-2 months rental amount, plus legal fees LEASE TERMS LEASE RENT PAYMENT BREAK OPTIONS Negotiable. Typically lease lengths for industrial & logistics are 7-12 years, for office 1-10 years and in S&L scenarios 7-15 years, stand alone retail building 5-10 years, shopping centre and high street retail 1-5 years. Retail, office and industrial may have Until Further Notice (UFN) agreements in poor locations or old buildings. Euro per sq.m per year or total rent for unit to avoid claims of compensation by the tenant if the actual rentable area deviates from the area specified in the lease agreement. None, if not agreed separately. RENTAL PAYMENTS FREQUENCY OF RENT PAYABLE RENT DEPOSIT RENT REVIEWS INDEXATION SECURITY OF TENURE PREMIUM/KEY MONEY TURNOVER RENTS ANNUAL OCCUPANCY COSTS Monthly in advance. A security deposit equivalent to 1-3 months rent is usually required except for exceptionally solid or large tenants. The rent is reviewed to market rent at the end of the lease term by negotiation between the landlord and tenant. Indexed annually or biannually to the cost of living (FIN elinkustannusindeksi). Very secure. See early termination below. Key money used only in the prime shopping centres and high streets in Helsinki. Turnover rents are increasingly common for retail and leisure property. See local tax. DISPOSAL OF LEASES ASSIGNMENT AND SUB- LETTING TENANT LIABILITY EARLY TERMINATION This is permitted and negotiable. Sub-letting requires permission from the landlord. The tenant is responsible for reinstating the premises with the exception of wear and tear. Only by break clause. Following the termination of a commercial lease by the landlord, the tenant is entitled to compensation, unless the landlord can provide other premises for lease or certain other circumstances (such as the tenant's misconduct) are at hand. Therefore, the tenant always has a so called indirect security of tenure. EUROPEAN RESEARCH GROUP CUSHMAN & WAKEFIELD 1