What is a commercial lease?
A commercial lease is a legal document that outlines how a tenant and landlord should relate to each other while the tenant is renting a property. A suitably qualified and experienced property lawyer should prepare a commercial lease. Find out more about commercial leases.
Commercial property lease clauses to pay attention to
Certain property lease clauses can cause issues if they are incorrectly worded, not included, or not properly understood. Below are some of the most common ones to look out for.
Property boundaries
Somewhere in the lease, it should spell out the property's boundaries so that there is no confusion about what areas are up for lease. The address on the lease may not include all the spaces on the premises in terms of what is being leased.
Handover date
A fit-out of the premises can occur on the handover date when the keys are given to the tenant. Whether you need to pay rent between the handover and commencement dates will depend on your negotiations.
Lease commencement date
The lease begins on this date and signifies when the rent becomes payable. You may not have rent due if a rent-free period has been negotiated.
Fit-out contribution
An owner or landlord may offer to contribute to costs associated with the fit-out of the property.
Rent amount
You will need to specify what the rental amount is, including and excluding GST. Be clear on whether the rent is due weekly or monthly.
Outgoings
The outgoings form the upkeep costs of the leased property and may include council rates, water, insurance, and other practicalities. Leases must declare what outgoings are included, how they are calculated and who will be responsible for them. Rent plus outgoings are called occupancy cost, and are a truer measure of the amount a tenant pays for various leased properties.
Lease terms
Is the lease for a short time or a long time? Shorter leases will suit younger businesses that require more flexibility and less financial risk. Longer-term leases will be appropriate for older, more established businesses that want to secure a long-term address.
Permitted use
The tenant’s plans for their business must fit within the permitted use of the lease. If the business is sold, the potential buyer must also work within it.
Rent reviews
Rent reviews are necessary for commercial leases to ensure the rent reflects current market rates. A rent review will take place every year on the lease date, using either CPI, fixed percentage increase or review to market.
Options to renew
An option to renew allows the existing tenant to stay in the property for another term. The landlord doesn’t have to renew the lease if this option is not included. The lease should state any due date by which the tenant must exercise the option and whether a rent review will occur when renewing the lease.
Get the right advice from P&B Law
Commercial leases require the expertise of a professional lawyer, as any missing clause can have broad impacts on a tenant or a landlord. All the information must be spelt out clearly to avoid a commercial lease dispute down the road.
Contact us today to get your commercial lease reviewed by a professional.
Related article:
What are my legal obligations as a tenant in a commercial lease?