VIDEO: Leasing the Right Premises for Your Business

If you are a business owner, leasing the right premises in the right location for the right price is critical.

Regardless of whether you own a medical practice, a dry cleaners, a coffee shop or a manufacturing business, you need to consider so many different factors.  It can seem overwhelming, but with a little forward planning and an experienced legal adviser to guide you through the process, you can minimise any potential risk.

The first step when looking to lease a location for your business is always to decide on WHAT type of premises you wish to lease?

Different rules, regulations and conditions will apply depending on the type of property.  For instance, do you need a shop, an office or a factory?  

If it’s a retail or hospitality business, do you want a street front or shopping centre location?

Do you have any other requirements that may or may not be included?  For example, if you are opening a food outlet, do you need a seating area for customers?  Or perhaps a storage room for your stock.  Do you require car parking spaces or external signage if you are an office-based business?

When you find premises that suit your needs, your legal adviser will help you to address the four key issues you need to understand BEFORE signing on the dotted line:

1. How much are you going to be paying?

It is critical that you consider ALL of the costs associated with premises.  Will you be paying Gross rent or Net rent which is the base rent plus outgoings plus other levies.  In a large shopping complex you are likely to also have to pay turnover rent.  All these options can vary considerably and you will need to understand your obligations upfront.  

You should also factor in any fit-out costs, signage required and other set-up costs.

2.What can you negotiate at the beginning of your lease?

Firstly you will you to establish if you will require a DA from Council to run your business in the new premises?  This can be a costly and time consuming process and impact on the lease start date as well as when you can actually commence trading.  Allowing time to get a DA approved should be negotiated up front.

This is also the time to negotiate rent-free periods and contributions to your fit-out costs.

3.Are you going to be responsible for any repairs?

Again, depending on the type and location of the premises, you may find that there is an expectation that you will be responsible for any ongoing repairs.  For instance, in a shopping complex the leasee is almost always responsible for repairs.  In any other leased premises, responsibility is usually determined by negotiation at the beginning of the lease.  Make sure you understand your obligations in this area before signing a lease to avoid being caught out and to minimise the risk of any potential disputes with the landlord in the future.  Repairs to things like air-conditioning can be costly so it’s important you are clear about your obligations. 

And finally:

4. One of the most important issues to determine BEFORE signing a lease, is what your obligations will be at the END of the lease.

What happens at the end of lease when you hand the premises back, or Makegood, can be one of the most contentious issues in any commercial lease.

In most leases there will be a standard inclusion that the tenant returns the premises back to the condition they were in when first rented – regardless of any improvements done in the meantime.

It is vitally important that you understand what your obligations are in terms of Makegood at the very beginning of the lease.  You need to know exactly what was there at the start and what will be expected at the end of your lease.  Returning the premises to their original condition can be a costly and time-consuming process if you have made any significant changes so be warned…. You may find yourself paying rent well beyond the termination date of the lease until the landlord is satisfied with your makegood.

Leases can vary considerably so having an experienced lawyer at hand to review the lease, explain your obligations, and negotiate any terms and conditions is a sound investment.  

If you are looking for new premises for your business, Maclarens Lawyers can help.  It pays to understand all of your responsibilities, rights and obligations before you sign on that dotted line!