Leasing a commercial property is a significant business decision, and navigating the complex landscape of commercial leases can be daunting and best left to the trained-eyed. Whether you are a landlord or a tenant, understanding your rights and obligations under a commercial lease agreement can save you from potentially significant financial losses, disputes, or legal action. Therefore, seeking legal advice is a proactive step to comprehend the lease terms and avoid such risks.
Certain commercial leases are considered ‘retail’ leases which provide greater protections for the tenant. If the premises or business meets the requirements of a ‘retail shop’, the landlord must provide you with disclosure documents and cannot charge you for their legal costs. It is important to be aware of your rights as a tenant under a retail lease.
Base Rent - is the initial rental value agreed upon between the parties.
Rent Reviews - clearly state the calculation method used to increase the rent in the future. Methods could include:
A security deposit or bank guarantee is a set amount to secure the tenant's compliance with the lease. The landlord holds it as security for the property against rent defaults or property damage. There is a difference between security deposits and bank guarantees, so it is a good idea to discuss this with a leasing expert to understand the difference and your obligations before entering into a commercial lease.
The commercial lease must clearly outline the lease term and any renewal options.
The commercial lease should clearly state who is responsible for the maintenance and repairs of the property, including common areas, if applicable.
Outgoings can include utilities, property taxes, insurance and maintenance expenses. The commercial lease must clearly define all outgoings so both parties understand their obligations.
Special features on a commercial lease may describe things like unique property characteristics that you must be aware of or special conditions your business requires to trade. Whether it is about dealing with dangerous chemicals and contaminated land or the opening hours of a restaurant, both landlord and tenant must know precisely what rights and responsibilities they have under the lease. For instance, a unique property characteristic could be a historical building that requires special maintenance, or a special condition could be the need for extended operating hours during holidays.
Sometimes landlords will provide incentives to a new tenant to enter a commercial lease, such as rent free periods, early termination rights or a fit-out contribution. These terms need to be carefully reviewed to ensure they are not unenforceable penalties but genuine pre-estimates of the landlord’s loss.
Both parties should know that unfair contract terms can be declared void and even attract a penalty, under consumer protection laws. These could include clauses that unreasonably favour one party over the other or unclear or misleading terms. Identifying such terms in your lease agreement can be challenging, so seeking legal advice is recommended.
Before entering into a commercial lease, it's not just good business sense to seek legal advice from a commercial leasing expert, it’s essential. Expert legal advice will give you the confidence that you fully understand your rights and obligations and can help negotiate better terms if needed.
A commercial lease is a legally binding document that can significantly impact your business operations. To ensure you negotiate terms that provide the best possible business choices and protect your interests, speak to a property law expert. Contact our Property Law team today.
