Having the right premises in the right location is essential for the growth of your business (if Tenant) and to limit the risk of vacancy (if Landlord). There is risk in any lease for both the Landlord and Tenant and it is essential that your lease is correctly drafted to ensure that your risk is limited to the extent possible. We have seen numerous occasions where leases have been poorly drafted which is led to great loss and litigation. We assist our clients in negotiating and drafting lease documents specific to the property, use, ownership of improvements, Council and body corporate requirements. There is no such thing as “one lease fits all.”
We act on the following types of leases:
- retail shops;
- commercial offices;
- industrial premises;
- specialist properties – motels, hotels et cetera;
- multi-tenanted buildings including shopping centers
We are happy to prepare and advise on new lease documents, assignment documents, extension documents, incentive agreements and other landlord tenant agreements. We also offer a 48 hour turnaround of lease documents provided all relevant information is provided to us in a timely manner.
Our advice also extends to managing disputes to ensure that they are resolved as quickly as practically possible, or where in the case of major default, that default is acted upon quickly with the view of limiting losses. We have many years of experience in lease disputes and pride ourselves on the results that we attain for our clients.
We can assist with:
- preparing the original strong lease with appropriate conditions relating to security deposit and guarantors;
- prepare breach notices
- advise (and prepare the appropriate documentation) on termination, re-entry and forfeiture;
- advising on what damages are available;
- negotiating settlements;
- Institute court proceedings for recovery.
Some commonly asked questions…
FOR A TENANT
The lease term may depend on whether or not you are entering into a new lease, and therefore have the ability to negotiate, or whether you are taking an assignment of lease (the remainder of the lease enjoyed by the seller of the business). In general terms (in the case of a new Lease) the longer the lease term the higher the probability of negotiating an incentive; for example, a rent free period or contribution to fit out. A disadvantage of a longer term lease is that you are contracted until the end of the term of that lease and should the business face some financial difficulty you are stuck with a long-term liability unless you are able to assign the lease. Therefore, it may be advisable to initially seek a shorter term lease with a number of option to renew periods; for example a three-year term with two rights to renew the lease of 3 years each (total 9 years). The option periods are binding on the landlord but not on you. That is, you choose whether or not you renew for the next term.
FOR A LANDLORD
The longer the lease term, the better as this will increase the value of your property. When negotiating incentives, these should be at the start of the term, as opposed to spread across the term, such as rent free period or fit out. If you were to reduce the rent over the term of the Lease, it will affect the value of the property.
A gross lease is a lease where the rent includes all outgoings such as rates, insurance, common area cleaning, body corporate fees et cetera. A net lease is where you pay a monthly rent plus an amount to cover the landlord’s outgoings. It is essential when negotiating a lease that the lease type (gross or net) is established so that you can properly compare the rent against comparable properties to ensure that you are not paying too much.
This really depends on the current market conditions and on whether you are taking an assignment of lease or a new lease. It is unlikely that the landlord will grant an incentive if you are taking over an existing lease or where there are a number of tenants competing to lease the landlord’s property. Conversely, you may be able to negotiate an incentive such as a Rent Free period or contribution to your fit out in a new lease situation, especially if the premises has been vacant for some time.
A retail shop lease is a lease that is governed by the Retail Shop Leases Act 1994. The Act catches leases that are predominantly retail in use, and in certain circumstances non-retail uses where the premises are situated within a shopping centre. There are certain benefits afforded to tenants under the Act; for example, the landlord is prohibited from passing its legal costs of preparing the lease on to the tenant; the tenant and its guarantors are released from all liability upon assignment of the lease provided they have met disclosure requirements; “ratchet” clauses are prohibited (a ratchet clause provides that the rent at review cannot go lower than the previous rent – which can be dangerous for a tenant in a falling rental market). The Act also prohibits parties contracting out of the Act meaning that the terms of the Act would prevail over that of the terms of the Lease where there are inconsistencies; for example, where a landlord attempts to charge a tenant for its legal costs in preparing the lease.
An assignment of lease is in essence a transfer of an existing lease from the outgoing tenant (the Assignor) to the incoming tenant (the Assignee). There can be advantages and disadvantages in taking an assignment over a new lease depending on the terms of the existing lease and the current market conditions. We recommend that you consider the terms of the existing lease carefully before making a decision on whether to run with an assignment or new lease.
This depends on whether it is a new lease or an assignment of lease. Where it is a new retail shop lease each party must pay its own costs. If it is a non-retail lease generally the landlord will require that the tenant pay the landlords costs. This however, is a matter for negotiation.
Where there is an assignment of lease the landlord’s costs are generally met by the outgoing tenant (the Assignor) as they are contracted for the full term of the lease and are requesting consent of the landlord to transfer or assign the lease.