A commercial lease is a legal document that allows a tenant to occupy a commercial property such as a shop, an office, a industrial premises (warehouse) in return for paying rent to the property owner (commonly referred to as the landlord) and other costs (referred to as outgoings).
A lease covers a wide variety of issues and can be as long or as short as the parties want. The longest leases are usually shopping centre leases that can run to 80 or so pages. The essential issues that need to be covered in a commercial lease are:
Term of lease
Rent – Amount, method of payment and frequency
Rent reviews – fixed (ie 3%), CPI or Market
Options for further lease terms
Permitted use (ie bike shop, warehouse etc)
Outgoings payable by the Tenant, such as rates, land tax, insurance etc
Insurance obligations of each party
End of lease obligations such as make good, repairs, replacements, redecoration, etc
Bond or bank guarantee as security for non-payment of rent or other defaults such as damage to premises etc.
So how does the commercial leasing process flow from start to finish:
1. Agree the terms – A commercial real estate agent usually markets the property for lease on behalf of the Landlord. Once a suitable tenant is found the agent should ensure that the commercial terms are drawn up in a Heads of Agreement and signed off by both parties.
2. Lease preparation – The agent or Landlord then instructs their lawyer to prepare the lease.
3. Seek legal advice – A lawyer should prepare the lease documents to ensure that meets all legal requirements and accurately reflects the agreed terms contained in the Heads of Agreement. An experienced commercial property lawyer should be involved for the Landlord in preparing the lease and the Lawyer’s role in acting for the Tenant is to review and advise in relation to the content of the Lease. This will ensure that the lease is prepared, finalised and signed by the parties in the proper and legal manner.
4. Arrange the appropriate approvals - If the Landlord or the Tenant is required to carry out any works (Landlord – base building works and Tenant – fitout works) often approval is required from the local council. This must occur prior to the commencement of any works.
It is important to note that for shops the Retail Code (Tasmanian Legislation) will normally apply to the Lease. For more information on the application of the Code to a Commercial Lease in Tasmania, please visit https://www.cormistonlegal.com.au/news/2018/7/31/when-does-the-retail-code-apply-to-leases-in-tasmania
We are able to assist Landlords in drafting and negotiating leases or Tenants in reviewing and negotiating leases for office, retail, warehouse and industrial leases.
Importantly for Landlord’s and Property Managers we are able to provide guaranteed turn around time for lease preparation. Normally we can prepare and provide a draft lease within 48 hours of receiving the lease preparation instructions.
If you have any queries or require any assistance in relation to leasing, please contact us on 03 6332 9353 or use our contact us form - https://www.cormistonlegal.com.au/contact-us/