Entering into a lease can be complicated, for both landlords and
tenants. But by making sure a few matters are clear at the
beginning, the process can be made much smoother. We recommend
that, at minimum, you consider the following:
What will be the term of the Lease and what options will be
available for further terms? There will be expense in relocating
your business. You should try and negotiate a term that will help
maximise your potential to make back any money that you spend in
Rent and Outgoings and Turnover or just
Is the Lease a gross lease or will outgoings be payable in addition
to rent? Do you have to pay turnover rent? Turnover rent is common
in shopping centres, where tenants have to pay a percentage of
their turnover to the landlord.
What will be the method for rent review during the term of the
Lease? (Usually CPI or a fixed percentage agreed upon between the
Option term commencing Rent
What will be the method for review of the rent on exercise of the
option/s? Usually this is market rent but can also be CPI or a
fixed percentage. With retail premises you can have the market rent
determined before you exercise your option.
Landlord's responsibility for works
What works will the landlord be responsible for? Generally they
will be responsible for the structure and keeping the premises
Tenant's responsibility for works
What works will you be responsible for? Does the landlord require
you to comply with a fit-out guide? Does the landlord have to
approve the works before you can carry them out?
Will the landlord be providing a fit-out contribution? Sometimes
landlords will provide an amount towards your fit-out, especially
where it is a brand new building.
Rent free period
Will there be a rent free period? At the very least, you should try
and get a rent free period for the time it will take to set up the
premises for your use, that is to do your fit-out, so that you do
not have to start paying rent until you can open the doors and
commence business. If you are paying outgoings in addition to rent,
will there be an outgoings free period to go with the rent free
How much of a security deposit do you need to provide? The normal
is between 1 and 3 months. Some landlords do not require a security
deposit at all. If the rent is high on your lease and a 3 month
security deposit is required then the security deposit will be
quite high. Is it required as a cheque, or a bank guarantee?
Development Approval from Council
Do you require council approval for your use and works? If so will
the Landlord agree to make commencement of the Lease subject to
obtaining council consent?
Are there any dedicated car spaces included? Is there an additional
fee for the car spaces?
Who pays for the lease
Who is paying the legal costs? Often each party pays their own
costs. Otherwise if it is not discussed it will be assumed that the
tenant will be paying the landlord's costs, unless it is a
With a retail lease the landlord is responsible for their own costs
and the tenant is responsible for its costs. The tenant must pay
the registration fees. As a general rule, the tenant will be liable
for the landlord's costs if it is a non-retail lease.
These can sometimes be quite high. A "cap" can be agreed
on those legal costs, that is, how much the tenant will pay and
anything in excess must be paid by the landlord.
Even if everything listed above has been agreed, it is important
to review your lease in detail and obtain independent advice to
ensure that the terms are in your best interest.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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