Whether you’re entering into a retail or commercial lease, tenants should carefully consider the terms they want included. Many lease conditions require negotiation with the landlord before signing.
Lease Term
Consider how long you want to operate your business on the premises. Leases are legally binding contracts, so you can’t simply leave when you want. A typical lease might be for 3 years with an option to extend for another 3 years on similar terms. All terms are negotiable before you sign.
Rent
Ensure the starting rent is fair. Rent usually reviews annually and can adjust based on a fixed percentage, changes in the Consumer Price Index, or a market rent review. When exercising an option to stay, a market rent review typically applies.
Bond
Landlords generally require a bond as security against tenant default, such as missed rent payments. This bond may be a security deposit or a bank guarantee, usually equivalent to up to three months’ rent plus outgoings and GST.
Personal Guarantees
If the tenant is a company, landlords often require personal guarantees from company directors. This means directors’ personal assets could be at risk if the company defaults on the lease.
Outgoings
Negotiate who pays outgoings like Council rates, water charges, land tax, and strata levies. If the tenant pays, discuss what proportion of these costs you will be responsible for.
Permitted Use
Make sure the lease specifies the correct permitted use of the property. You can’t use the space for anything else without the landlord’s consent. Also confirm that your intended use complies with local Council rules and whether you need Development Approval.
Other Important Terms
Ensure other key terms important to your business are included before signing. These might include rights to fit out the premises, install a kitchen or air-conditioning, or receive rent-free periods.
Need Help Negotiating Your Lease?
Negotiating retail or commercial lease terms can be complex and significantly impact your business. Contact A. S. Laumberg today for expert legal advice to secure terms that protect your interests and support your success.