Leasing property, especially commercial or retail leases can be quite complicated so it is important to seek the input of an experienced and knowledgeable conveyancer to ensure your rights and obligations. The responsibilities and rights of the landlord and tenant need to be clearly defined in a commercial lease. Elan Legal offers professional lease services covering everything from security deposits and fit-outs to maintenance issues.
Commercial and Retail Leases
A commercial or retail lease is a contract between a landlord and a tenant for the rental of commercial property such as an office or shop. Commercial and Retail leases are often complex documents that must balance the rights of the landlord and tenant and should provide for numerous eventualities during the term of the lease. These include such issues as the premises being damaged or a tenant defaulting on the lease.
Generally, the landlord provides the tenant with the lease, which contains terms relating to the rent, the term of the lease, permitted use of the premises, any bank guarantee or security deposit, maintenance requirements and termination provisions.
Before you sign a commercial lease, Elan Legal can provide advice on understanding the lease contract that defines the rights and responsibilities of each party prior to negotiating the commercial terms and entering into the lease.
In relation to retail leasing, we also advise on the preparation of disclosure statements and the landlord’s obligations under Retail Leases Act 1994 NSW.
The main issues to consider are:
- Term of lease and option to renew − Duration is important when negotiating a commercial lease. Negotiate flexibility into the term and options of the lease to suit your requirements. Usually there will be a clause that provides an opportunity for you to renew your lease between three and six months before the end of your lease.
- Rent and reviews − The rent and rent reviews are negotiated between the landlord and tenant. Under NSW legislation, there are no regulations to specify rents or the rate of increase. However, the law specifies that the timing and basis of those reviews must be set out in the lease for each rent review period. This should be clearly set out in your commercial lease contract.
- Outgoings − Rent for a commercial lease may be inclusive of outgoing costs such as water rates, land tax, management fees, strata or other levies and council tax. The lease document will identify the type of outgoings for which you will be liable.
- Bond − There are no legislative requirements for a bond under a commercial lease. It will usually be required to be in the form of a bank guarantee or cash deposit. The lease will need to specify when the bond will be returned to the tenant after the lease has ended and under what circumstances the landlord can withhold funds from the bond.
- Fixtures and fit-out − Under current NSW legislation, unless otherwise agreed, tenants generally pay the cost of installing shop fixtures and fittings. When the lease has ended, tenants usually remove the fit-out and return the shop to its original condition. This is referred to as a ‘make good’ provision. Your commercial lease agreement should contain an inventory of the landlord’s fixtures and fittings (if any) and your right to install and remove fixtures.
- Maintenance − The commercial lease should clearly outline what repairs and maintenance the tenant is responsible for and what is the obligation of the landlord. Often the tenant is responsible for general repairs and maintenance. The lease should clearly outline what the landlord is responsible for such as the roof, common areas like gardens and hallways and air-conditioning.
- Refurbishment − Make sure that the lease clearly sets out the nature, extent and timing of the refurbishment.
The above are just some of the main issues to consider before entering into a business lease. There are many more matters that are involved and need to be taken into account. It is wise to obtain legal advice from our team before making a commitment to a commercial lease. Contact us now to discuss your requirements.