Whether you are looking to move your small business to its first commercial property or if you need a larger premises to accommodate for an expanding company, whatever your needs, if you are looking to rent a commercial property you will be faced with signing a commercial lease at some point. Commercial leases vary in their complexity, size and terms, and involve a big financial and long-term commitment. Robert Wood and Associates is home to Melbourne’s trusted team of commercial lease lawyers. Although similar in many ways to a residential lease, there are also different considerations that both tenants and landlords should be aware of when negotiating terms. Let’s take a look at commercial leases and why it’s so important to seek professional legal advice before signing the contract.
What is a Commercial Lease?
A commercial lease is a legal document that sets out the rights and responsibilities of landlords and tenants in relation to each other. There are two kinds of commercial lease:
Retail – applicable wherever goods or services are being (or will be) sold to the public from the premises.
Non-Retail – applicable for any other business purpose (e.g. offices, warehouses).
Contained within a commercial lease will be all of the basic terms and conditions set out under standard leases, including:
- The names of each party
- The agreed rental amount
- When the rent is to be paid
- The duration of the lease
- Any additional terms or conditions
- What is expected of the tenant throughout the tenancy
- What the landlord will and will not do
Understanding Responsibilities Under a Commercial Lease
For Tenants
The two most important considerations for tenants are the rental amount and the term of the lease. Before signing the agreement it’s important to ensure these terms are in line with your understanding of them. Some other considerations for tenants include:
- Check that the proposed rental amount is competitive with similar properties in the area and that you are not overpaying for the premises
- Understand what the landlord will insure and what additional insurance you will need to take out
- Ensure the usage of the premises as defined within the lease allows for the type of business you intend to conduct, or is broad enough to incorporate what you want to do
- Check whether you will be liable for outgoings, and if so, what type of outgoings and in what percentage
- Often if tenant is a company, the landlord will require a personal guarantee by the director(s) of the company, guaranteeing the obligations of the lessee company to meet its obligations under the lease including the requirement to pay rent
- Sometimes leases require that the tenant pay the landlord’s legal costs in relation to the negotiation and preparation of the lease
For Landlords
Areas of responsibility that landlords must take care to understand when entering into a commercial lease include:
- Understand what kind of insurance is required over the property
- Make sure to know when rental payments are due, what to do if your tenants fail to pay, and ensure that your tenants are paying rates in accordance with the lease
- Make sure the lease provides for appropriate increases in rental throughout the term and at the commencement of each further term
- Ensure that the lease allows for an adequate bond, as this amount will have to repair the premises if there is any damage when the tenant leaves
- Make sure that your tenant’s use of the premises as allowed under the lease is not an illegal one
Why Is It Important to Have Commercial Lease Lawyers Look Over a Lease?
Although it is not required by law, legal representation can be greatly beneficial, for both landlords and tenants, when negotiating a commercial lease. A lawyer experienced in commercial lease agreements will be able to assist in achieving the most ideal lease terms as well as ensuring the best interests of both parties are protected.
If you are looking for new business premises or negotiating new terms for existing business property, it’s important to get the right legal team to guide you through the process. If you need a lease prepared or reviewed or are thinking of re-negotiating the terms, contact the expert commercial lease lawyers in Melbourne at Robert Wood and Associates on (03) 9762 3877 or get in touch with us online now.
