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5 things you need to know about Property and Leasing

  • Lease: A lease is a contract that sets out the rights and obligations of the owner of a property (Landlord or Lessor) and the person or entity who will occupy the property (Tenant or Lessee). All leases contain provisions for payment of rent, the length of the lease (term) and other clauses for maintenance and repair.
  • Heads of Agreement: Also known as a lease proposal or letter of offer. Before entering into a Lease, the parties may prepare a Heads of Agreement setting out the key commercial terms of the Lease (like the rent, the term, the commencement date, and more). This can be binding, requiring both Landlord and Tenant to enter into a lease. As a result, both Landlords and Tenants should obtain legal advice on any Heads of Agreement to ensure that any lease proposal complies with their understanding of the lease negotiations.
  • Retail vs commercial leases: There are two types of leases that businesses deal with: retail and commercial. Retail leases are regulated by State and Territory based legislation (Retail Leasing Legislation) and differ across Australia. LegalVision has experience working with legislation in all States and Territories. Retail leasing has an additional level of protection for Tenants, including disclosure requirements for the Landlord prior to the Tenant’s entry into a retail lease. A commercial lease does not have the same protections offered to retail leases and is largely unregulated, leaving Landlords and Tenants to negotiate their own terms.
  • Lease costs: A Tenant may be required to pay lease preparation fees to a Landlord under the Heads of Agreement or the Lease. While this is prohibited in most states under Retail Leasing Legislation, there is no such regulation for commercial leases, and it is simply a matter for negotiation.
  • Key lease terms: Key provisions to pay attention to in a Lease include the “make good” provisions (which requires the Tenant to remedy any damage or redecorate premises at the end of the term), the repair and maintenance obligations of both the Landlord and Tenant, the breach provisions (including any notice period that must be provided to a Tenant before the Landlord can take action), and the assignment and subletting terms.

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