Commercial and Retail Leases: Understand the Fine Print!

Published 12 Apr 2012
Jessica Diep

For businesses entering into a lease agreement for new premises there are a number of issues to consider before signing on the dotted line!  Unfortunately, leasing is an area that can be fraught with potential pitfalls and traps for the unsuspecting (tenants and landlords) and it pays to get sound advice from day one to ensure you don’t fall prey to the sub-clause...

Important Issues to Consider

Most commercial leases comprise terms that should be negotiated between the landlord and tenant prior to signing. As a lease on premises is one of the most important assets of any business, these items must be clarified and understood to avoid the potential for disputes at a later date. 

Make sure you are fully aware of your rights and obligations with regard to:

* Rental payments – how much and when it should be paid
* Commencement date of rent period, depending upon 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 option
* Maintenance obligations – the landlord is generally responsible for any structural repairs and the tenant is responsible for the day to day maintenance of the premises
* Conditions of use - what the premises can be used for and the type of businesses permitted etc
* Any Insurances required under the terms of the lease
* The obligations of each party at the end of the lease including any ‘make good’ provisions.

Assigning a Lease or Sub-Letting

Some commercial or retail leases permit a tenant to ‘assign’ the lease, or sub-let some or all of the premises, to another person or business.

It is particularly important to clarify at the outset of the lease negotiations whether this is to be permitted as any ambiguity or a failure to address this issue can lead to a serious dispute.  A lease agreement should contain a clause outlining whether the landlord agrees to sub-letting, and if so, what conditions and approval procedure are in place for the sub-tenant.

At Maclarens Lawyers we have experienced commercial and retail leasing lawyers who can provide assistance with drafting a lease, negotiating the terms and conditions of a lease, and representing clients interests.  To ensure you understand your rights and obligations, and avoid costly disputes, contact Jessica Ngoy on ph: 9897 4626 or email: jngoy@maclarens.com.au.