What to consider with a commercial lease

Even if you are a long-time business owner, you can’t be expected to be an expert in commercial property law.

The reality is that most businesses will need to rent a commercial space to pursue your business goals and that may mean a complex negotiating process. Before signing a lease and making a long term commitment, you need to learn a bit about what is involved in negotiating a commercial lease agreement.

First Evaluate Your Business Needs

Before signing a commercial lease we recommend you first sit down and evaluate your business needs.

Think about each of the following:

  • The amount of square metreage you will need.
  • The number of employees you will be accommodating.
  • The cost per square metre of space you can afford.
  • The zoning laws needed for your business. Does the suburb you are considering allow for your type of business?
  • Can your customers visit your business easily? Is there enough parking? Do you need to provide wheelchair access? Do you need to provide bathrooms?

Answering these questions accurately is crucial to being able to find a property that truly meets your business needs.

Why You Need a Good commercial lawyer before signing

When you do find the perfect location it is then very important that you assemble a team to assist you in negotiating the commercial lease with the prospective landlord. If you’re based in Newcastle or Lake Macquarie, we can assist you with the requirements of a commercial lease agreement NSW.

When negotiating the terms of a commercial lease you will be probably be dealing with a commercial real estate agent and an experienced landlord so you need an experienced commercial lawyer on your side.

Most Important Issues to look out for in a commercial lease

Once you have found a location and have a commercial lawyer on board, it will be time to start reviewing the lease offerings with a commercial real estate agent.

It is important that your lawyer helps you understand how to negotiate a commercial lease agreement and ensure you read all of the possible lease clauses fully before reaching an agreement.

Your lawyer will help you negotiate the following issues:

  1. The cost structure of the lease payments; eg the length of the lease and any possible rent increases.
  2. True square metreage available to you.
  3. Zoning approval documentation.
  4. Cost of utilities (electricity and water etc) and the party responsible for their payment.
  5. Inspections allowed prior to and during the term of the lease; including which party will bear the cost of repairing or replacing items identified as not being up to legal standard.
  6. Cost of repairs; both due to ordinary wear and tear and those of a more extensive nature.
  7. Property return rules. For example, will you be required to return the premises to its original condition? This includes paint colours, removing shelving or other minor property alterations and reconfiguring changes in space partitions, such as temporary walls.
  8. Subleasing arrangements.
  9. Penalty clauses.
  • Options to renew.

Don’t be emotional when signing a lease

During the course of your negotiations, it is important that you do not enter into a lease agreement from a purely emotional standpoint.  It will be necessary for you to trust both your real estate agent and your solicitor to work out a deal that is in your best interests. As they are not emotionally involved in the lease process and have experience in this area it is important that you listen to their advice and trust in their professional experience.

What happens if you need to break a commercial lease?

Finally, every lease should clearly define the available options to opt-out of the lease. The lease terms should define the opt-out parameters in the event that your business has to close before the lease is finished. While no-one wants to plan for failure, it is important that the terms of early termination of lease are well defined and understood by all parties.

What happens if there is a legal disagreement between landlord and tenant?

Lastly, make sure you read and carefully review the clauses that relate to the handling of legal disagreements between the landlord and the tenant.

You are able to negotiate such clauses as:

  • Payment of legal fees;
  • The use of mediation to initially settle legal differences;
  • Abolishing the legal right to sue the landlord or the tenant in favour of using binding arbitration.

If you need more information or would like the help of an experienced commercial lawyer please contact Dawson & Gardiner. We have some of the most experienced commercial lawyers in Newcastle and will look after your business interests.

Phone our commercial solicitors on (02) 4954 8666