Examine Lease
Lease period and options
Negotiating your lease period determines how long you will be able to stay in your premises.
Once a lease has expired without an option to extend, the landlord has no obligation to renew it which can severely impact the operations of a business.
The inclusion of options allows the tenant to extend their lease at a specified time, for a specific period of time.
Remember, landlords are not required to provide options, but you can always negotiate option/s into the lease.
Lease disclosure statements
Understanding responsibilities and obligations
The primary function of lease disclosure statements allows both landlord and tenant to note any conditions that may affect either parties decision to enter a lease.
You should examine the disclosure statements as they are considered part of the legally binding agreement you are entering. Please check:
- Length of lease and options
- Rent amount and review method
- Outgoings and other costs
- Trading hours
Rent and outgoings
Seek clarity when in doubt
One of the largest ongoing outgoings of the business will be rent.
As a tenant you are obliged to continue paying your outgoings regardless of the challenges your business faces.
Any changes in outgoings are to be clearly stated in the lease, including changes in rent and the method used to calculate the new amount (fixed increment or CPI increases).
Other outgoings can include management, operation, cleaning and land taxes. Seek clarity as to when these are expected to be paid.
Permitted Use
Check with Council
Generally, the lease outlines the type of business permitted to operate from the premises. We suggest understanding the local council permissions and restrictions relating to the business, so you can plan immediate and future expansions relating to the operations of the business.
Researching similar businesses to get a feel for how they have diversified and adapted to changes can provide some handy insights.
Protection under the Retail Leases Act
Safeguards
For a lease to be covered by the Retail Leases Act it must:
- Be less than 1,000 square meters in size
- Sell and supply goods and services
- Be a retail business
Retail leases offer additional safeguards for both landlords and tenants.
In contrast commercial leases have more freedom in the lease structure, terms and conditions. Commercial leases can appear to favour landlords and great care should be exercised by tenants during the negotiation phase.
Both retail and commercial leases can be registered with the NSW Land Registry Services.
Works, repairs, relocations and demolitions
Always check
Always ensure to check on the lease who is responsible for repairs and maintenance. We often suggest negotiating fair terms where the landlord is responsible for major building items while the tenant becomes responsible for inner surfaces like walls, ceilings and floors. Where the premises are old or not in a stable condition, we suggest obtaining a building inspection report prior to entering the lease.
Also, check for a relocation or demolition clause in the lease and understand your rights if enforced. Tenants can be forced to relocate to alternate premises in situations such as refurbishment, redevelopment or extension of premises.
