Leasing premises is a major investment decision for anyone with
a business. It can be complex and fraught with potential problems,
not the least of which is the prospect of losing a business should
something go wrong!
When you consider that one of your most important business
assets is your lease, as a tenant it becomes critical that you
understand the implications of a lease and your rights and
In fact, your premises are often the most tangible part of your
business. Many aspects of business are affected by your location -
from attracting clients/customers through to delivery and receipt
of goods - why risk losing it all over a lease dispute? Expert
legal advice will ensure that your needs and your rights are taken
into account during a lease negotiation. Not only will it enhance
your business opportunities, but in the event that you choose to
sell your business, a sound and secure lease is vitally important
and could make or break the deal.
When you have found the right premises, in the right location
for your business, some specific issues you need to consider when
negotiating the lease include:
Whether you can gain the relevant licences (such as a liquor
licence) and the relevant approvals from Council to run your
business within the premises
whether specific legislation might apply to your particular
premises eg. retail leasing legislation, Heritage legislation
what warranties you can secure from the landlord regarding
damage to the building etc and whether you're covered in case
there is need for relocation or demolition of the building
how, and when, the rent will be reviewed and what your
responsibilities are in terms of outgoings
what is the term of the lease and when can you exercise any
options for renewal – you will also need to carefully diarise
reminders to ensure that you meet the relevant requirements for
exercising these options
what the make good provisions are.
General Items for Negotiation in a Commercial Lease
Most commercial leases will take into account the following
"items" that should be negotiated between you and the
landlord (lessee and lessor) and incorporated into the
Rental payments – how much and when to pay
commencement date of rent period, depending on completion of
fit-out and obtaining relevant approvals for business, etc
outgoings payable by the landlord or the tenant
term of the lease
options available for renewal and how/when to exercise the
maintenance – your landlord is generally responsible for
structural repairs and you are responsible for the day-to-day
maintenance of premises
use - what the premises can be used for, the type of business
assignment/Sub-letting – whether the landlord gives
consent and what approval procedure is in place
obligations of each party at the end of the lease.
Retail Leasing – Special Considerations
Retail leases are treated differently to other commercial leases
and are covered by a set of unique rules. The Retail Leases Act in
NSW has an impact on the negotiation and drafting of retail leases.
Ignorance can lead to significant penalties so expert advice is
Some important aspects of the Act include:
The definition of, and what constitutes, a "retail"
obligations for lessors and agents to disclose and provide
information to lessees quickly when entering into negotiation of a
lease, as well as throughout the term of the lease
provisions under the Act for fit-outs and how costs are dealt
with between the lessor and lessee
restrictions regarding the advertising of available retail
space to new tenants, unless the lessor has specifically offered a
renewal or extension to the existing lessee which has been
the security bond system requires payment of a bond to the
Retail Tenancy Unit for investment and management
there is a of the Act has been written to deal with misleading
or deceptive conduct by either party to a retail lease
independent retail valuers are used to determine rent reviews
in the event that both parties can't agree on the actual
detail is required from lessors in the disclosure statement
relating to "disturbances" which might interfere with the
lessee's operations if they are to avoid liability (previously,
a lessor only had to provide written warning of a likely
disturbance to avoid responsibility).
As a retail tenant, you should be aware of the impact of the Act
whether you are negotiating a new lease or when your current lease
expires and comes up for re-negotiation.
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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The High Court of Australia has granted special leave to appeal a decision of the NSWCA that upheld an adjudication determination under the NSW 1999.
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