Here are some of the main considerations:
Are the premises suitable for your proposed use? – You have to check if your proposed business use for the premises is allowed by the current local Council zoning. Ask the landlord for a copy of the Development Approval for the premises if you are to continue the same business as the previous tenant. If not then you will have to lodge a Development Application with the Council to ensure Council approval.
Who Pays for Legal Costs? – Often, the landlord will require the incoming tenant to pay all legal costs in connection with the preparation of the lease (in addition to the legal costs payable to the tenant’s own lawyer). However, sometimes the landlord will agree to pay some of the costs. It is a matter for negotiation.
Rent-free periods – A rent-free period at the beginning of a lease may be available for up to three months, depending on how keen a landlord is to attract a tenant and especially where the tenant will need time to fit-out the premises.
Taxation Advice – It is critical as part of due diligence to obtain advice from an accountant as to any capital gains tax, income tax and GST implications before entering into the lease.
Length of the Lease – Normally, a commercial lease will be for a period of 3 to 5 years with further options to renew if desired. However, the term may be made shorter by negotiation if the tenant wishes to reduce the risk.
Security for the Lease – A commercial lease will normally require either a security bond or a bank guarantee from the tenant equal to up to three months’ rent plus any outgoings plus GST. Also, if you wish to lease the premises through a company, you will usually have to provide an unlimited director’s guarantee. It may be worth negotiating to limit the director’s guarantee to a certain amount or to remove it in return for a higher security deposit or bank guarantee.
As always, the assistance of a lawyer to help you with work through all these issues is recommended!