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5 costs of commercial leases may include:1.the legal costs of the landlord’s lawyer in preparing the lease;2. costs obta...
04/04/2022

5 costs of commercial leases may include:

1.the legal costs of the landlord’s lawyer in preparing the lease;
2. costs obtaining consent of the mortgagee (usually a bank) required to register the lease;
3. registration fees to the State Government body in charge of registering property interests on the title of land;
4.outgoings; and
5. fit out costs for making the premises fit your requirements.

It depends on whether you have a commercial or retail lease.Except in South Australia and Northern Territory, the laws i...
01/04/2022

It depends on whether you have a commercial or retail lease.

Except in South Australia and Northern Territory, the laws in other states generally stop the landlord from passing their legal fees to the tenant. However, if the tenant withdraws from the lease then the landlord may be able to pass on their legal fees. In NSW, the landlord can pass legal costs to a tenant if the tenant seeks amendments so if you negotiate a lease in NSW you may need to pay the landlord’s legal fees.

If the law does not stop the landlord from passing on their costs to the tenant, the tenant should negotiate that each party pays their own costs. To avoid any uncertainty, the tenant should document this in a heads of agreement. If the landlord does not agree the tenant should try to limit the amount of contribution to the landlord’s costs to a specific amount.

10 things you should consider:1. starting rent and annual increases;2. length of initial term and options to extend;3. r...
31/03/2022

10 things you should consider:

1. starting rent and annual increases;
2. length of initial term and options to extend;
3. responsibility for outgoings and what that includes;
4. requirements for subletting or assignment;
5. requirements and permissions for signage;
6. responsibility for maintenance and repairs;
7. permitted use of the premise;
8. any make good or refurbishment requirements on the ending of the lease;
9. the reasons the landlord can terminate the lease; and
10. whether there is adequate car-parking including the possibility of a car space.

Assignment means transferring the lease to someone else who then takes your place as the tenant.Usually, assigning a lea...
30/03/2022

Assignment means transferring the lease to someone else who then takes your place as the tenant.

Usually, assigning a lease requires the landlord’s consent. Check your lease to see the specific requirements. For example, the landlord may need to be satisfied by the new tenant’s financial resources or business experience.

So steps to assign the lease include:

1. obtain the landlord’s consent;

2. (retail lease) update Disclosure Statement and provide to the new tenant at least 7 days before assignment; and

3. enter into a deed of assignment.

Reasons a landlord might refuse consent:

1. the use of the premises changes;

2. the new tenant has less business skills; and

3. the new tenant has less financial resources.

If you want to leave a lease before it ends you can:1. negotiate with the landlord to end the lease early though the lan...
28/03/2022

If you want to leave a lease before it ends you can:

1. negotiate with the landlord to end the lease early though the landlord may not agree or ask for some compensation to do so; or
2. find someone to assign the premises to but again this may depending on the terms of the lease require landlord consent.

In either case, it is important to make sure you end your legal obligations to the landlord through a surrender of the lease or the terms of any assignment documents.

If you do neither then you may be breaching the lease terms and be required to pay compensation including all the rent due for the balance of the term of the lease.

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Make good clauses is a term in a lease where the tenant is required to do certain works to return the premises to a part...
28/03/2022

Make good clauses is a term in a lease where the tenant is required to do certain works to return the premises to a particular state at the end of the lease. This can be as simple as steam cleaning the carpet and repainting the walls to major works like removing everything down to the bare concrete. Thus it is important that clauses are reviewed carefully and any ambiguous language is clarified.

If the clause requires you to return the premises to their original condition at the start of the lease, it may be wise to have a condition report prepared that documents defects using photos, video recordings and in writing. Both parties should sign the report and it can be used to determine what needs to be done at the end of the lease. Tenants can also negotiate to leave certain fit outs if the landlord views them as improvements, which can save significant money in making good.

A fitout is when you modify the premises to suit your needs such as putting in walls to create additional offices. Somet...
25/03/2022

A fitout is when you modify the premises to suit your needs such as putting in walls to create additional offices.

Sometimes, as an incentive to lease the landlord will contribute part or all of the costs of fitout. This can be done by way of reimbursing you for the costs of the fit-out or the landlord can carry out the fit-out works based on mutually agreed plans and specifications.

A fitout incentive is usually provided by way of a separate agreement usually called an Incentive Deed. It is important to carefully read this document as it may include terms that require you to pay back the incentive if you break certain conditions. These terms are called clawback provisions.

Under certain circumstances such terms may be unenforceable, as in the case of the High Court decision in GWC Property Group Pty Ltd v Higginson and Others [2014] QSC 26 where it was held that such a term was a penalty.

Reasons you might want to buy instead of renting:1. you can use the space as you see fit;2. you have a lot of cash on ha...
24/03/2022

Reasons you might want to buy instead of renting:

1. you can use the space as you see fit;
2. you have a lot of cash on hand and/or do not need cash to grow the business; and
4. income from subleasing.

Reasons you might want to rent instead of buying:

1. you want to start with a small premises and then upgrade as you grow;
2. owning property means a mortgage, council fees, water rates and land tax etc.; and
3. ties up a significant amount of cash that may be needed to grow the business.

As a backup against the tenant’s ability to pay rent the landlord often requires a bank guarantee or security deposit in...
23/03/2022

As a backup against the tenant’s ability to pay rent the landlord often requires a bank guarantee or security deposit in an amount equal to 3 to 6 months rent.

Typically the bank guarantee will have an expiration date. Generally, the landlord will request that the expiration be 3 to 6 months after the expiry of the lease. This is to allow them to make a claim in the event there is a breach of the terms of lease as you exit the premises.

The terms of the lease may provide that a new bank guarantee must be provided as rent increases annually under the lease. This can be a hassle so if possible negotiate a fixed amount for the bank guarantee so that it does not need to be switched out every year.

What you can use a leased premise for depends on the terms, in particular the term called permitted use. For example, th...
22/03/2022

What you can use a leased premise for depends on the terms, in particular the term called permitted use.

For example, the permitted use might be “restaurant”. So you can run a restaurant on the premises but doing anything else is a breach of lease.

It is important to use words with a broad definition for permitted use. For example, the word “restaurant” might not include the sale of alcohol. So a description such as “food and beverage” is a more expansive description and offers more opportunity for business expansion. Broader words may also allow you more room to sublease part of the premises or assign the lease more easily. A permitted use of “Japanese restaurant” might work now but if you ever need to assign the premises it will become restrictive for potential people you can assign the premise to.

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Sometimes you lease a property and you do not need all of it or in a downturn in the economy you find that you may want ...
21/03/2022

Sometimes you lease a property and you do not need all of it or in a downturn in the economy you find that you may want someone to share the rent. Subletting is when you lease part or all of the premises you lease to someone else. That someone else will pay you but you are still responsible to the landlord for rent and what happens on the premises. It is important to check your lease if you wish to sublet because sometimes you require the landlord’s consent to do so.

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