A side letter is a separate written agreement, signed alongside or after a lease, that grants one party something the lease itself does not say. In Slovak industrial deals it usually carries the concessions: the rent-free months, the fit-out money, a capped service charge, a break right, an option on the neighbouring unit. It is binding between the parties who signed it. The hard question is whether it still binds the next owner of the building, and Slovak law does not answer that in the tenant’s favour by default.
What a side letter is and why it exists
The document is a collateral agreement. It sits beside the lease, refers to it, and modifies or supplements what the lease says between the two parties who signed both. It is not a draft, not a comfort note and not a summary of intentions. A properly executed one creates enforceable obligations exactly as the lease does, which is why it should be dated, signed by the same authorised people and kept with the lease rather than in a deal folder.
The reason it exists is disclosure. A lease is read by people who were never in the negotiation. Lenders read it before advancing against the asset. Valuers read it to derive a rent. Buyers read it in due diligence, and their advisers read it again. The headline rent inside that document drives the capital value, and every concession that reduces the effective rent reduces that value. So the market developed a habit: keep the headline number in the lease and put the concession somewhere else. Heads of terms serve a different purpose entirely, being the pre-contract summary that is usually expressed as not binding, and they are superseded once the lease is signed.
What Slovak landlords typically put in one
The contents are predictable once you know what the lease is protecting. Rent-free periods and stepped rents come first, because they are the cleanest way to reduce the real cost without touching the quoted figure. A fit-out contribution follows, sometimes paid as a capital sum, sometimes as a further rent-free stretch, occasionally as work carried out by the landlord at its own cost.
Then come the rights that a purchaser would rather not inherit. A personal break option granted to this tenant and to no assignee. A cap on the service charge for the first years of the term. A right of first refusal on the adjoining unit. An agreement not to enforce a relocation right. Permission for a specific use that sits outside the drafted permitted use. Sometimes an agreement that the deposit will be released early once a covenant test is met. Each of these is worth real money, and each is a candidate for the separate agreement rather than the lease itself.
The risk nobody prices: what happens when the building is sold
Slovak law is precise here, and the precision is the problem. Under section 680(2) of the Civil Code, where ownership of the leased thing changes, the acquirer enters into the legal position of the landlord, and the tenant may discharge its obligations to the previous owner only once the change has been notified or proved. The statute transfers the position of landlord under the lease. A separate contract concluded between the tenant and the person who used to own the building is not the lease.
That is the whole exposure in one sentence. The new owner inherits the rent, the term and the covenants, and can quite reasonably say that a personal arrangement made by its predecessor is a matter between the tenant and the predecessor. Registration does not help either, because what reaches the cadastre is the lease. DLA Piper’s Slovak guidance notes that leases of land for five years or more must be registered with the cadastral registry, and a collateral document is not part of that filing. A tenant who has traded a visible rent for an invisible discount then holds an enforceable claim against a seller who has taken the money and gone.
Section 680 has a third paragraph worth knowing in the same breath. Where ownership of immovable property changes, only the tenant may terminate the lease for that reason, and it may do so even if the term is fixed, provided notice is given in the nearest notice period. That is a genuine lever at the moment of a sale, and it expires quickly. A tenant discovering that its concessions have evaporated has a narrow window in which the statute gives it something to negotiate with.
How to make the concession survive
Six mechanics, in descending order of reliability. The first and best is not to use a separate document at all. If the incentive can live in the lease, put it there, because everything that follows is an attempt to reproduce what the lease already gives you. A stepped rent inside the lease is more durable than a rent-free period recorded elsewhere.
Where the document has to stay separate, the second step is express wording that it binds successors in title and assigns, and that the landlord will not transfer the property without procuring a written accession from the buyer. The third is to annex the document to the lease and cross-refer in both directions, so that it cannot be read as an isolated arrangement. The fourth is to match the formalities exactly: written form, same parties, same signatories, dated, with any variation also in writing. The fifth is a practical one, namely to keep the executed original with the lease and to disclose its existence to any incoming manager rather than relying on a folder nobody opens. The sixth is commercial rather than legal: where a concession is large and the covenant strength of the landlord is uncertain, take the value early instead of over time.
Why this matters more in 2026 than it used to
Because assets are trading and terms are being reset at the same time. Cushman and Wakefield put Slovak industrial prime rent at EUR 5.30 per square metre per month in the first quarter of 2026, with prime yield at 6.00 per cent for class A stock only and vacancy at 7.72 per cent. Renegotiations made up 54 per cent of total demand, and gross take-up of 128,800 square metres against net take-up of 56,700 tells you how much of the market is existing tenants restructuring rather than new occupiers arriving.
Two things follow. Tenants have negotiating room, so incentives are being granted, and the temptation to keep them out of the visible document is at its strongest when the landlord is preparing to sell. And a market with active investment turnover is precisely the market in which a collateral agreement gets tested. The arithmetic of what a concession is actually worth belongs in an effective rent calculation. Whether the discount will still exist in year four belongs in the drafting, and that is the part that gets skipped.
Frequently Asked Questions
Is a side letter legally binding?
Between the parties who signed it, yes, provided it meets the same formal requirements as the lease it accompanies. It should be in writing, dated, signed by people with authority to bind each party, and should state clearly which lease it relates to. Anything agreed by email or in a meeting note is a different and much weaker thing.
Does it survive a sale of the building?
Not automatically. Section 680(2) of the Slovak Civil Code puts the acquirer into the legal position of the landlord under the lease, which is not the same as making it a party to a separate agreement signed by the previous owner. Unless the document expressly binds successors and the seller is obliged to obtain the buyer’s written accession, a tenant may be left with a claim against the seller rather than a right against the new owner.
How is it different from heads of terms?
Heads of terms come before the lease and are normally expressed as not binding, apart from confidentiality and exclusivity. This document comes with or after the lease and is intended to bind. Concessions that were agreed at heads of terms and then left out of the lease do not survive on their own; they need to be recorded somewhere enforceable.
Should the incentive simply go into the lease instead?
From the tenant’s point of view, usually yes. The only reason to keep it separate is to protect a headline rent for valuation or lending purposes, and that reason belongs to the landlord. If the landlord insists, the price of agreement is durable successor wording, an obligation to procure an accession from any buyer, and an annexed copy attached to the lease.