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Commercial Lease Agreements

What is the typical length of a commercial lease in Georgia?

Commercial leases typically range from 3 to 5 years, often with options to renew. However, terms are fully negotiable depending on business needs.

Does the lease agreement include utilities?

Usually, utilities (electricity, water, internet) are paid separately by the tenant based on usage, unless a "gross lease" arrangement is agreed upon.

Can I register my company at the rented address?

Yes, but you need the landlord's consent and usually a digitally signed document or a visit to the Public Service Hall with the landlord to register the legal address.

What is a "break clause"?

A break clause allows the tenant (or landlord) to terminate the lease early, usually after a specific period (e.g., after 2 years), by giving prior notice without penalty.

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Commercial lease agreements represent one of the fundamental components of business operations in Georgia. Whether it is office space, a shop, a restaurant, or a unit in a shopping mall, a properly drafted lease agreement is a guarantee of business stability. Unlike residential leases, commercial leases are characterized by much more complex terms, higher financial risks, and longer durations. It is critical for business entities that the contract accurately reflects commercial goals, includes conditions for fit-out works, addresses VAT issues, and provides guarantees for business continuity. An improperly executed contract can lead to business interruptions or unforeseen financial losses.

What Does Commercial Lease Service Cover?

Specialists represented on the Legal.ge platform offer comprehensive legal services related to commercial real estate leasing, which includes:

  • Legal Formalization of Commercial Terms: Defining fixed and variable (turnover-based) rent components and specifying rent-free periods.
  • Permitted Use of the Property: Precise formulation of what activities the tenant is allowed to conduct in the premises to avoid subsequent restrictions by the landlord.
  • Fit-out Works and Permits: Outlining conditions for setting up the space, cost distribution, and obligations to obtain relevant permit documentation.
  • Subleasing Rights: Obtaining or restricting the right to transfer part of the premises to third parties.
  • Termination and Renewal Mechanisms: Formulating "Break options" (right to early termination) and rights of first refusal or lease renewal.
  • Tax Planning: Considering the impact of VAT and consulting on income/profit tax implications.

Common Real-World Scenarios

Problems arising in commercial leases are often related to the following situations:

  • Rent Increase: The landlord demands a rent increase due to rising market prices, but the contract does not specify an indexation mechanism, leading to a dispute.
  • Property Defects: After starting the business, it turns out the building has hidden defects (e.g., insufficient power capacity), hindering operations.
  • Force Majeure and Pandemic: The business is forced to stop operations (e.g., due to lockdown), but the contract does not provide for rent exemption or reduction during such times.
  • Compensation for Improvements: The tenant carried out expensive renovations, and upon termination, the landlord refuses to reimburse the costs.
  • Legal Address: The landlord refuses to consent to using the premises as the company's legal address, delaying registration.

Georgian Legal Framework

Commercial leases are regulated by the Civil Code of Georgia, which defines the general framework, and the Law on Entrepreneurs, which is important for corporate aspects. Special attention is paid to the Tax Code of Georgia, as commercial leases almost always involve VAT (Value Added Tax 18%) obligations if the landlord is a VAT payer. Furthermore, it is important to know that in the case of legal entities, the authority of the person signing the contract must be verified in the Registry of Entrepreneurs to ensure the transaction does not become voidable. Registration in the Public Registry is not mandatory for terms under 1 year, but for commercial stability, a long-term and registered contract is always preferable.

Step-by-Step Service Process

The process of executing a commercial lease with Legal.ge specialists proceeds as follows:

  1. Negotiation Stage (Heads of Terms): Agreeing on and documenting key commercial terms before drafting the full contract.
  2. Legal Due Diligence: Checking the legal status of the property (liens, mortgages, third-party rights).
  3. Contract Drafting: Preparing a detailed agreement that protects your commercial interests.
  4. Adjustment and Finalization: Communicating with the other party's lawyers and clarifying terms.
  5. Signing and Registration: Executing the contract and ensuring its registration in the Public Registry.

Why Choose Legal.ge?

Commercial leasing is a cornerstone of business success. Legal.ge offers access to lawyers with years of experience in commercial law and real estate. Specialists selected through our platform will help you conduct negotiations, formulate complex terms in your favor, and prevent future disputes. Find a reliable partner on Legal.ge and ensure a safe environment for your business.

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