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30 October 2017 / article

The rules on short term and pop-up lease contracts

In the last few years, we have seen a large rise of pop-up stores. The contractual rules between tenant and owner of the premises were however not always clear. Flanders is the first Belgian region to create clarity. These are the rules.

In 2016 a new Decree on short-term retail leasing entered into force in Flanders.

The Decree applies to

  1. leases of (parts of) immovable premises
  2. which are leased for the operation of a retail or craftsmen activity
  3. with direct contact between the tenant and the public
  4. which are concluded for a term which is equal to or less than 1 year (i.e. a short-term lease).

Pop up stores: the rules

The main rules laid down in the Decree can be summarized as follows:

  • automatic termination of the agreement on its expiry date;
  • no renewal of the short-term lease agreement allowed. Extension under the same conditions is only possible if the parties agree so in writing and the total duration does not exceed 1 year. Failing this, the short-term lease agreement is deemed to be concluded for 9 years and falls within the scope of the Commercial Lease Act;
  • no assignment of the short-term lease and sublease allowed;
  • the agreement can be terminated by the tenant at any time, by giving 1 month’s notice by registered post or by bailiff’s writ;
  • the tenant has the right to carry out works that are useful for his business provided that (i) the cost of the works does not exceed the annual rent, (ii) the works do not affect the safety of the leased property, its esthetical value or its health aspects and (iii) the tenant informs the landlord before the start of the works, unless otherwise agreed in writing;
  • the parties can terminate the short-term lease agreement before its expiration date by mutual consent in writing.

Short term: precarious occupancy agreement

It should be noted that you can still choose a precarious occupancy agreement to lease someone’s commercial property for a short period of time.

The advantage of this agreement is that its duration is not limited to 1 year; it can even be concluded for an indefinite period of time. Moreover, no special legal regime applies so that the parties have much contractual freedom to negotiate and adapt their contract.

Precarious occupancy agreement: disadvantages

The disadvantage of a precarious occupancy agreement is, however, that it can be terminated by the grantor at any time. Moreover, precarious occupancy agreements can only be concluded by way of exception. This means that the parties must have good reasons to justify that they conclude a precarious occupancy agreement and not a short-term lease or a commercial lease agreement. Whether or not the parties can conclude a precarious occupancy agreement (and thus have good reasons to justify the conclusion of a precarious occupancy agreement) must be assessed in the light of all relevant circumstances.

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