7 things to consider when leasing commercial property in Tallinn

  1. Location

The most important issue to start with is to decide on the location of your new office. The City Centre of Tallinn is popular among legal and financial service providers. The area near airport Tallinn (Ülemiste City) ha attracted mainly IT, logistics and pharmaceutical companies. Contemporary office buildings can also be found in the vicinity of Järvevana, Tondi, Mustamäe. For more detailed suggestions you can always contact a local commercial real estate professional.

  1. Rent

The rental fees of commercial real estate in Estonia are indicated in advertisements per month and almost always without tax. Local value added tax at the rate of 20% will be added. Rent payments are usually made once a month.  Upon formation of a contract, a security deposit in the amount equal to 2-6 months rent is expected.

  1. Accessory expenses

In addition to the payment of monthly rent the commercial lessee is usually obliged to cover accessory expenses such as heating, electricity, water and sewerage, cleaning and maintenance etc.  It’s strongly suggested to establish the cost of these expenses during pre-contractual negotiations to avoid any unpleasant surprises later.

  1. Formal requirements

The Law of Obligations lays down the main principles of Estonian contract law. Therefore, the requirements arising from law are not expressly stated in the agreement. Though the form of the commercial lease contract is not prescribed by law, the contracts are commonly made in an unattested written form. The agreement can be signed in Estonia by the legal representative of the company either by hand or digitally. In order to obtain a legally valid digital signature one should apply to e-Residency. 

  1. Contract period

Commercial lease contracts are normally fixed-term or combined agreements, but open-ended contracts are also negotiable. In the new buildings the minimum duration of a contract is usually 3-5 years. A combined agreement means that for the first 3-5- years it is not possible to terminate the contract without penalties. After the original term expires the contract can be renewed allowing the lessee to terminate the agreement without penalties with the prior notice (3 – 12 months). The terms in the older buildings are more flexible and open-ended agreements or fixed -term agreements for up to 1 year can be negotiated.

  1. Serviced offices

If you need a temporary office space or prefer to rent an office where everything from the furniture to the high-speed WiFi is taken care of, then serviced offices are most suitable for you.  In Tallinn City Centre there are some office buildings where serviced offices are provided. Commonly they offer customisable space that grows with your company needs. You can negotiate flexible terms allowing you to rent work spaces only from an hour up to years.  

  1. Obligations of Parties

One contractual clause beneficial for the lessee to include in the contract, is commercial lessor’s obligation to eliminate defects or obstacles that interfere with the intended use of the premises. The commercial lessee is of course obliged to inform the lessor if such situations arise. It is best done in a reproducible written form by stipulating a reasonable term for the elimination of defects or obstacles. If the defect is not remedied in good time, the lessee is entitled to repair the defect himself and either demand compensation or reduce the rent unilaterally or terminate the contract before the date of expiry.

  1. Local language skills

Last but not least it is good to know that the English language skills of locals are at a fairly good level. If there are property managers who are not able to communicate in English, you can always turn to a commercial real estate agent for assistance. Also, if legal advice is needed, then there are plenty of law firms in Tallinn able to correspond in English. Though the commercial real estate lease agreements are drafted mainly in Estonian, some of the office building owners are providing also agreements in English.

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