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Commercial leasing can be a very complicated area and a minefield for those not experienced in the area.
At LegalVision we have experienced commercial lawyers who can help either a Lessor or Lessee navigate this minefield. Retail Leases are covered by various State and Territory legislation, however, commercial leases are a little more unregulated and therefore, it is especially important to consider the terms of the lease documents before entry into a commercial lease.
The number one rule is that lease documentation MUST be correct from the outset to avoid, or at the very least limit, any disputes during the term of the Lease.
Your leasing lawyer plays a vitally important role in ensuring that the lease documentation is in order.
Commercial Leases (Non Retail)
When negotiating a commercial lease it is important to consider the following:
- Agreement on the key terms of the lease, preferably evidenced by a “term sheet” or “Heads of Agreement” signed by both parties. Key terms are things like:
o the term of the Lease and whether there will be a lease option (or options) in addition to the original term;
o the method for exercising any options to the lease;
o the rental amount payable, the frequency of the rental payment (weekly or monthly);
o a method of rent review to provide for how the rental amount will increase on each review date under the lease. For example, will the lease increase each year on its anniversary by way of either a fixed-price increase, review to market or the Consumer Price Index (CPI)?;
o the commencement date of the lease;
o the termination date of the lease;
o any special conditions such as the lessee’s fit out or the lessor’s contribution to fit out; and
o the Outgoings payable by the Tenant.
- What is the security for the lease? For example, guarantees from the directors of the Tenant (if appropriate) and a bank guarantee or cash deposit to the value of at least three (3) months rent.
- Determine who is responsible for the fit out of the premises and who will own the fit out at the end of the lease. Matters such as the make good of the premises at the end of the lease and periodic decorating, such as re-painting during the course of the lease and/ or lease options should be agreed to avoid a costly and lengthy dispute at the end of the lease term.
- Determine the maintenance requirements for each party. For example, the Lessor may need to maintain common areas and lifts. The Lessee may need to maintain the premises day to day. Large items such as air conditioner repair and maintenance should also be agreed upon.
- Understand the procedures in place to assign the lease and what the Lessor will require to give consent to any such assignment. Take careful note of whether liability stays with the original Lessee upon any subsequent assignment.
- Determine which insurances the tenant is required to take out and obtaining evidence of such insurance.
Commercial leases are usually complicated documents prepared by the Lessor’s lawyer. It is common that the Tenant pays the Lease preparation fees in addition to their own legal fees with respect to a commercial lease, though not always the case.
Conclusion
To be certain that you have included everything you need in your lease agreement, speak with a commercial leasing lawyer to review your lease. Our team at LegalVision has extensive experience in assisting with the drafting and review of leases and work on a fixed fee basis. Get in touch on 1300 544 755!
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