There are a number of legal fees involved in the preparation of the lease itself, and which may arise during the period of your lease term, including registration and lodgement fees. It is more common now for the parties to the transaction to agree to pay for their own legal costs.  If you feel that your landlord is being unreasonable in trying to get you to pay for his or her legal fees, then you should first consult your landlord about the matter, before turning to a solicitor to find out the legalities of the situation. The last thing you want is to be tricked out of your money and to pay for someone else’s pricey legal fees!

In NSW, retail leasing is covered by the Retail Leases Act 1994. The Retail Leases Act provides for minimum standards, which must be followed in commercial leasing relationships. A landlord has a legal obligation to you and the rental agreement you both signed. For more information, speak with an experienced leasing lawyer.

Legal Fees

It is common for you (the tenant) to pay the landlord’s reasonable legal fees for preparing and negotiating the lease documentation, which may be up to a specified limit.  The amount, if any, is a matter for negotiation between you and your landlord, bearing in mind that you will also have to pay your own legal fees.

However, tenants can negotiate otherwise. The best way to protect you is to have your leasing lawyer make sure that a costs agreement is included in the lease document. Remember that once you have signed a commercial lease, there is no turning back. You should, wherever possible, try to negotiate that each party will pay for their own legal costs. If not, you should at least make sure that the clause outlines who is responsible for the costs, and if that person is you, that those costs are fair and reasonable (Hint: Ask your leasing lawyer). If possible, try to include a clause that places some sort of limit on the amount of the landlord’s legal costs for the preparation and negotiation of the lease, so that you don’t get any nasty surprises. It’s also a good idea to ask the landlord to provide evidence or proof, such as receipts and legal bills.

For leases regulated in Western Australia by the Commercial Tenancy (Retail Shops) Agreements Act 1985 (the Act), a landlord cannot claim from the tenant legal or other expenses relating to:

  • The preparation, negotiation or execution of the lease, renewal of lease or extension of lease;
  • Obtaining any mortgagee’s consent to the lease; and
  • The landlord’s compliance with the Act.

Commercial leases are required to specify how the landlord will recover operating expenses, or ‘outgoings’.  These are expenses separate and in addition to the rent.

Disputes

In some cases, the lease may contain a clause that obliges the tenant to pay all the landlord’s legal fees in the event of a dispute, or where the tenant has breached terms in the lease agreement. It is recommend that you try to avoid including this type of clause, as it could severely increase your legal costs in the event of any dispute and would be particularly unfair in cases where you are not the party at fault. If you have any concerns, you should consult a commercial lawyer. It is important to ensure that the issue of costs is dealt with from the beginning so as to avoid ambiguity and disputes down the track.

Conclusion

Where a landlord demands payment for her or his legal fees, consult the lease agreement to check your rights and responsibilities and consult your leasing lawyer. Where you are liable to pay the landlord’s legal fees, have your leasing lawyer determine whether they are fair and reasonable, that they do not exceed any limit contained in the lease agreement, and request evidence of such costs.

If you find yourself in a dispute with your landlord over legal costs or any of the clauses contained within the lease document, you should seek legal advice from an experienced commercial or leasing lawyer. Your lawyer will be able to review your lease and confirm your rights and obligations, and can either guide you in the process of negotiating with your landlord, or negotiate on your behalf.

Priscilla Ng

Next Steps

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