You may be able to get more out of your commercial or retail lease but often these opportunities get missed. This is due, in part, to the fact that commercial leases are usually lengthy legal documents that can be difficult to understand.
Given there are differences between commercial and retail leases, it’s essential that you have a lease that matches your needs and expectations.
It pays to have your local commercial law firm review any offer to lease or lease variation or extension before your sign anything.
Here is a quick checklist of things to consider when it comes to getting more out of your commercial lease:
1. Do Your Homework
Don’t just settle for the first site that you visit, it’s worth shopping around. This will enable you to make an informed choice and get the best deal possible.
Clearly, the cost and frequency of payment are the most important factors for consideration. However, most commercial lease agreements will include an increase in cost over time.
You should consider negotiating a cap on the percentage increase to the rent, to avoid unmanageable costs later on. It’s also important to know what additional costs will be are incurred should rent be paid late.
2. Consider Length and Terms
This is where commercial leases vary from residential ones, in that they need to be more flexible to meet the needs of your company. If you are growing as a company, then a long-term lease may not be the best option, as you may outgrow the space before the term of the lease expires.
Often, leases that are commercial in nature will extend beyond a single year and most landlords prefer long-term leases. But you can ask for a short-term lease with the option to renew.
The important thing is to understand the length and cost of the full period you are legally bound for.
3. Negotiate, Negotiate, Negotiate
There are numerous elements that are up for negotiation when it comes to commercial leases, such as the rent amount, rent-free periods and fit-out allowance.
Commercial landlords are used to negotiating with tenants and it is common for them to agree to an initial rent-free period or sometimes providing a fit-out allowance.
You may also be able to negotiate other inclusions such as parking spaces, storage space or the use of equipment.
4. Rights and Responsibilities
The lease should itemise who is responsible for maintenance and repair of the premises, including the air-conditioning and waste removal etc. Responsibilities for the building and any equipment are often shared between landlord and tenant.
The tenant is usually responsible for repair subject to fair wear and tear and the landlord takes care of any structural repairs.
It’s important to check the lease for all your outgoings in the form of costs that you will have to pay for in addition to regular rent. This is likely to include utility bills such as water, electricity and internet costs. These costs may not be directly stated in the agreement and it will be important to be clear on them before signing.
5. Subleasing Rules
Subleasing is where the lessor looks to sublet the premises out to another party, which is often governed by provisions in the original agreement with the landlord.
Limitations to subleasing will vary depending on the lease, however, it is almost always required that the landlord is notified of the intention to sublet.
6. Default and Termination
The lease contract should outline what happens at the end of the lease, whether it’s by the lease term expiring, the tenant defaulting on their payments or the landlord deciding to cancel the lease.
It should outline the process that must be gone through in each instance and clearly state the rights and responsibilities of both parties.