In Short
- Choose a longer lease for your childcare centre to avoid the high costs and disruption of relocating.
- Carefully review and negotiate the terms of your lease, including outgoings and fit-out periods, before signing.
- Understand your rights as a tenant, especially around transferring the lease if selling your business.
Tips for Businesses
Before leasing a childcare centre, ensure the lease meets your long-term business needs. Consider factors like location, outgoings, and the condition of the premises. Negotiate key terms, such as early access for fit-out work or a rent-free period, and fully understand your rights before committing to the lease.
A childcare centre lease is usually a long-term commercial property lease between a landlord and tenant. It is essential to familiarise yourself with the steps involved in finding and negotiating a lease for your childcare centre. This article will provide seven tips regarding your rights and obligations as a tenant and how to safeguard your interests.
1. Ensure Your Needs Are Met
Whether your goal is to expand and grow your business or establish regular turnover, you should choose a location that will allow for this over the entire duration of the lease.
2. Choose a Longer Lease
Traditionally, childcare centre leases have a longer life than regular leases, sometimes up to 10 or 15 years. It may be a good idea to choose a longer lease as frequent relocation may be expensive. This is not just because of the infrastructure required but also because most of your customer base will be dependent on your location.
Consider the process and costs when applying for relevant local council approvals.
Continue reading this article below the form3. Research and Inspect
Like you would do for any other commercial or residential lease, you should make the necessary inquiries and do your research.
Additionally, you should note the condition of the premises and any work that must be done to fit them out to your desired standard. Facilities such as car parking spaces may also be invaluable for parents to pick up or drop off their kids.
4. Be Aware of Any Outgoings
Outgoings are additional costs that the landowner passes onto the tenant. Your lease should document all outgoings. Usually, outgoings include:
- taxes and fees such as council rates, water rates and body corporate levies;
- maintenance and repair services;
- any security services which may be provided by the landlord;
- cleaning, garden maintenance, administrative fees relating to the premises; and
- reasonable expenses incurred as a result of promoting the childcare centre.
A lease that requires that you pay for outgoings may also require the landowner to keep you updated with estimated costs and the actual expenditure. You should be aware of the outgoings you are responsible for before signing.
Alternatively, the lease may not include outgoings and be considered a ‘gross lease’. In this case, you should inquire about the premises’ value. Furthermore, you should find a rough estimate of the total cost of outgoings so that you are aware of the potential costs.
5. Fully Understand What You Are Signing
It is vital that you read through the entire lease document so that you have a solid understanding of what you are signing.
The terms of a commercial lease are also open to negotiation. Fully understanding the terms of your lease will allow you to see if there are any terms you would like to negotiate before you enter into the lease. You should not sign a document which has not yet properly been reviewed first, or reviewed after you have signed it. Typically, the landlord will include terms in the lease that are a lot more favourable to them. At the worst, they may include unfair contract terms.
This guide will help you to understand your options when you purchase a business with leased premises.
6. Fitting Out a Child Care Centre
Depending on the premises’ condition, the centre may need some work before you can start operating. As mentioned before, you can negotiate the lease terms before signing. You should try to negotiate with the landlord for early access to carry out these works or negotiate a rent-free period to carry out your fit-out works.
Additionally, the landlord may require you to provide detailed plans and identify contractors you will be engaging to complete any fit out works for their approval. The landlord might also have a standard fit out guideline that your works must comply with.
However, considering the unique nature of a business that cares for children, you will also need to meet additional requirements that could be costly. Meeting fire safety standards and installing appropriate security measures are among the prerequisites for running a safe and profitable childcare business. You should also inspect the condition and age of all existing structures such as the:
- walls;
- roofing;
- guttering;
- gardens; and
- fences.
7. Know Your Rights as a Tenant
Like any other lease, you need to know your rights both before signing as well as during the lease.
Key Takeaways
It is important that you are clear on your rights and obligations as a tenant before signing into a childcare lease. A failure to understand or properly negotiate your rights as a tenant could be fatal to your childcare business. Take into account the unique nature of your childcare business, what you need to succeed, and whether the lease agreement provides you with that.
If you need help negotiating your childcare lease, our experienced leasing lawyers can assist. As part of our LegalVision membership, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today at 1300 544 755 or visit our membership page.
Frequently Asked Questions
Yes, the terms of a commercial lease are negotiable. Before signing, you should fully understand the lease and attempt to negotiate terms that better suit your needs, such as early access for fit-out works or a rent-free period to complete renovations.
You may need to carry out fit-out works before starting operations. These works must comply with the landlord’s guidelines and may require their approval. Additionally, you will need to meet childcare-specific requirements, like fire safety standards and security measures, which can be costly.
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