What are my legal obligations as a tenant commercial lease
March 4, 2022

What are my legal obligations as a tenant in a commercial lease?

What should I expect in this kind of legal agreement?

Do you know your legal obligations as a tenant in a commercial lease?

Are you clear on what a commercial lease is?

We answer these questions in this short article, listing the top 3 legal obligations you have as a commercial lease tenant.
What is a commercial lease?

A commercial lease is a written agreement between the landlord or lessor and the tenant or lessee.

The landlord is the owner of the commercial property, and the tenant agrees to occupy it under the terms and conditions of the lease.

This kind of arrangement could apply to office spaces, retail tenancy in a shopping centre, or any other instance where a tenant rents a property for commercial purposes.

It is vital that you understand your rights and obligations as set out in your commercial lease agreement.

Find out more about commercial leases – including property law advice – from our Melbourne property lawyers.

We’re here to help you with any questions you may have about commercial leases.

What are my legal obligations?

The legal obligations of the tenant and the landlord are all set out in your commercial lease.

Refer to your lease for the specifics.

This article will discuss the usual top 3 legal obligations held by the tenant in a commercial lease.

1 – Rent Payments

Rent is the landlord’s return on investment (ROI) from owning the real estate in question.

Paying their rent is perhaps the most important part for a tenant of keeping their obligations in the lease.

Rent will signify a large portion of a tenant’s business expenses.

To remind yourself of how much the rent is, you only have to check the lease, where it will be printed in black and white.

There may also be a condition in the lease that the landlord will review rent periodically.

The review techniques most commonly in practice are:

  • Consumer price index (CPI) rent review
  • Fixed percentage increase
  • Market rent review

No matter the rent review method, it is essential that you have the funds to pay rent. Otherwise, a commercial lease dispute could arise.

If you feel something is amiss with the amount of rent due, or you think that the method of rent review is not fair or legally sound, get in touch with our Melbourne property lawyers for top-shelf property law advice.

2 – Security Bond

A landlord usually requires a security bond deposit from the tenant to mitigate losses for the landlord if the tenant defaults.

A default means that the tenant fails to pay rent as per the lease terms.

The security deposit offers the landlord more leverage, as a tenant will lose the bond if they either don’t pay rent or damage the property in any way.

In different states, the security bond amount can vary.

A security deposit may take the form of a:

  • Bank guarantee (for individuals); or
  • Personal guarantee (for companies).

You must put any other bond agreements into writing, particularly regarding the money’s use, withholding, and repayment terms.

If you need a qualified person to check over your lease to ensure everything inside it is fair and reasonable, ask our Melbourne property lawyers for help with property law advice.

Whether you are a landlord or a tenant, our advice could save you a lot of hassle, even legal proceedings.

Don’t wait around until it’s too late and you have a commercial lease dispute on your hands.

3. Outgoings

Outgoings refer to the running costs of the building and the land where it is situated. It’s not unusual for the tenant to be responsible for paying:

  • Their outgoings (such as phone, electricity or gas); and
  • The landlord’s outgoings (such as rates, taxes, and levies).

The lease should explicitly tell you who will be culpable for paying these costs. It should also detail how to nominate a figure for the outgoings and the process for payment.

For those new to commercial leases, it may come as a shock that they are responsible for all outgoings.

Business owners may think this is unfair or that the landlord seeks to gain the upper hand in the arrangement.

That’s why you need experienced Melbourne property lawyers to advise you on the content and wording of your commercial lease agreement.

When you get good property law advice, you soon know if what is written on your lease is the usual practice or not.

Here are 5 more benefits of using a property lawyer to help you with your circumstances.

Did you know that you have to pay the landlord’s legal fees?

If it’s not enough that you are responsible for rent, a security bond, plus all outgoings, you also are probably going to be footing the bill for the costs of drawing up the commercial lease.

So it pays to know some Melbourne property lawyers who can help you with on-point property law advice at an agreeable cost.

At P&B Law, we are not the biggest, but we could be the best in terms of the value we offer our clients.

Once they’ve experienced our customised care, they usually return again and again.

We do what’s needed to get results, and we charge a fair fee for the outcomes you desire.

Get in contact with us today to learn more about our commercial leasing services.