What Do You Need To Know Before Signing A Commercial Lease?

Law Blog

Do you intend to start a business? Many people in your situation will rent premises from a commercial landlord, and if you intend to follow this route, you certainly need to take a close look at the lease. What do you need to bear in mind to avoid any problems at the outset?

Detailed Rights and Responsibilities

Fundamentally, a commercial lease will detail the rights and responsibilities of both yourself as the tenant and the landlord.

Financial Consideration

It will cover the financial arrangement and tell you how much to pay and when it should be paid and should also detail how much the rent is likely to increase on an annual basis. You'll want to pay particular attention to this latter clause in the early days and see if you can negotiate something that would put less pressure on your business as it grows.

Maintenance and Repair

The lease will also detail who pays for any maintenance and repairs. In most instances, repair or maintenance to the property's structures will be the landlord's responsibility, but you may be responsible for certain smaller tasks. Again, pay close attention to the details here so that you do not run into any surprises in the future.

Fit and Refurbish

You may lease a "barebones" property without any internal improvements. In this case, you may want to fit out the premises to meet your needs. Still, the lease may well require you to return the property to its original state, although additional obligations may be placed on you to refurbish.

Add up All the Expenses

Remember, additional expenses may be associated with a commercial lease, over and above the rent. In many jurisdictions, you will be expected to pay land tax on a commercial lease, which can be significant. Beyond land tax, expect water rates, council rates and (often) owners' corporation fees. You need to determine if these charges are all reasonable and see if they are open to negotiation.

Consider Break Clauses

Look very carefully at the break clauses to see if you have a right to terminate the lease before its anticipated date. Likewise, see if the landlord has any rights in this area and decide whether you want to modify the agreement to be fairer. 

Perform a Title Search

Of course, before you enter into any lease arrangement like this, you should conduct a title search. This will tell you if the landlord can enter into such an agreement for the specific property.

Get Expert Advice

Don't hesitate to reach out to a lawyer for help with your negotiations. They will likely have prior experience in this area and can provide you with valuable advice before you sign.

Contact a professional for more information about commercial leases


19 December 2022

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