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You have just found the right commercial property to lease for your business, and the Lessor has handed you a lengthy Commercial Lease to sign.  Now What??

We highly recommend that you engage a  commercial solicitor to review the terms within the Commercial Lease, before it is signed and executed, as more often than not, a Commercial Lease will contain clauses that are unfavorable to and/or unfair to a Lessee.  It is also important that you understand and have explained to you the terms of the Lease.

Commercial Leases are generally for a significant period of time and can often be one of the largest expenses you will commit to. It is, therefore, critical that as a Lessee you:

  1. Are well aware of your legal responsibilities and obligations under the Commercial Lease; and
  2. Negotiate terms that are fair and reasonable and which will not affect the operation of your business.

Below is a non-exhaustive list of key matters a Lessee should consider and/or review before entering into a Commercial Lease:

  1. Review and verify that the details within the Commercial Lease are accurate, including:
    • The address and the certificate of title reference of the commercial property;
    • The area within the property that will be leased, if you are not leasing the whole property.  Also it is important that you ensure that there is a plan that clearly marks the area that you will be leasing and includes everything you were told you would be leasing (inside and outside areas);
    • The amount of the bond, rent, rent free periods, outgoings and deposit which you have negotiated paying the Lessor;
    • The lease commencement and expiry dates; and
    • Whether any renewal periods apply.
  2. Check that you can obtain the required insurances for the values specified in the Commercial Lease.
  3. Confirm that the permitted use outlined in the Commercial Lease allows you to use the property to run your business.  If you intend to use the property for any other purpose, other than what is outlined in the Commercial Lease, you must negotiate this with the Lessor and ensure it is put into the Commercial Lease.   We also recommend that you check with your local council that you can operate the type of business you want to from the property you are proposing to lease before signing the Lease.  You do not have a legal right to terminate the lease, without penalty, if you enter into the lease agreement and find out at a later stage that the property cannot be used for the purposes you intend to use it for.
  4. If you intend to undertake a major fit-out to the property, you must ensure that the Commercial Lease permits you to do so, and you must check whether you will be required to return the property to its original state and/or if you are allowed to leave the fit-out behind.   If you are required to return the property to its original state, remember to factor this expense in at the expiration of the Commercial Lease Agreement and ensure you take photos before any works are started at the property so that you have a record of what it looked like when you took possession.
  5. If you are renting a property that has other offices within the building, consider if you require an exclusivity clause to be included in the Commercial Lease to safeguard you against the Lessor leasing any of its other offices to a business with supplies a similar service/products to your business.

The above are just a few, of many things that you need to consider before entering into a Commercial Lease and that you should get advice on before signing any documents.

Another matter to be aware of is that sometimes you will be given an Agreement to Lease (usually by a real estate agent) to sign before you enter into the formal Commercial Lease.  Care must be taken with Agreements to Lease as they often contain in them an agreement to the standard terms of the Lessors formal Commercial Lease.  This means you need to review these standard terms and ask for any amendments to the same that will need to be listed in the Agreement to Lease before signing it.

A Commercial Lease should be tailored and customised to the needs of your business.   At Clarke Hemmerling Lawyers, we are experienced in drafting, advising and negotiating Commercial Leases on behalf of our clients.

If you are about to enter into a Commercial Lease or an Agreement to Lease, please speak to one of our leasing specialists at Clarke Hemmerling Lawyers.

This blog was written by Natasha Hemmerling, Partner at Clarke Hemmerling Lawyers.

This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you.  Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.