Whether you are leasing retail or commercial property you can rely on Tony Laumberg’s over 30 years’ leasing experience to provide you with a smooth, reasonably priced transaction backed up by high quality legal advice.
The steps involved in a commercial Lease are as follows:
- The parties must agree on the essential terms including: (a) the term of the Lease i.e. the commencement date and the termination date;
(b) whether there will be any options to renew the Lease for a further term or terms;
(c) the rent for the first year of the term;
(d) the method to provide for rental increases such as the Consumer Price Index or a fixed percentage;
(e) the outgoings or percentage of outgoings payable by the lessee: and
(f) whether the lessee will provide a bank guarantee or a security deposit.
- The lessor’s solicitor will then prepare a Lease and send it to the lessee’s solicitor who will not only check that it contains all the agreed terms but will ensure that the lessee understands all his rights and obligations under the Lease. This may lead to some negotiation of the terms resulting in amendments to the Lease;
- Once the Lease is finalised and signed by the lessee it will be returned to to the lessor’s solicitor along with a cheque for the lessee’s solicitor’s costs, as the lessee normally pays such costs, and either a bank guarantee or a cheque for the security deposit;
- The lessor’s solicitor then arranges for the lessor to sign the Lease following which it is sent to the lessor’s mortgagee, if any, to consent to the Lease;
- The Lease is then lodged for registration at Land & Property so that it can be recorded on the title for the property; and
- After registration the Lease is returned to the lessor’s solicitor who forwards the original to the lessee’s solicitor and a copy to the lessee.
Today there is a distinction between Leases over retail premises which are governed by the Retail Leases Act 1994 (NSW) (‘the Act”) and Leases over commercial premises.
First it has to be determined if the Act applies to the Lease. It will if the lessee’s business, to be conducted from a retail shop, is listed in Schedule 1 to the Act or is carried on in a retail shopping centre.
If the Act applies then additional considerations include:
- The lessee must be provided with a Lessor’s Disclosure Statement, setting out important matters about the Lease, at least 7 days before the Lease is entered into;
- The minimum Lease term, including options, is 5 years unless a certificate is provided by the lessee’s solicitor saying that the lessee signed the Lease for a shorter term after the solicitor explained the lessee’s entitlement to a minimum 5 year term;
- The lessor is not allowed to recover Lease preparation expenses from the lessee (except registration fees) apart from certain amendments to the Lease; and
- Security deposits must be lodged with the NSW Retail Bond Scheme.