Understanding a Commercial Lease

Standard Commercial lease agreements are usually long and complex as they are designed to protect both the landlord and the tenant. A Commercial lease needs to protect both parties and cover what might happen over the time of the lease. A good agreement can mitigate potentially serious issues that may arise in the future.

When looking at a commercial lease tenants and landlords must make sure they do not to overlook potential long-term issues and focus on the more obvious questions of rent and rent reviews.

At Dawson & Gardiner we can offer help in negotiating the terms of a commercial lease.

TENENTS need to know that there are some terms that are negotiable. Our lawyers will make sure any terms that are agreed to appear in the lease.

LANDLORDS need to know what terms to include to protect not only the rent but also the property itself and what outgoing costs the tenant should pay.

Elements of a lease to understand

Terms: The duration of the lease is the term of the lease. It is possible to negotiate flexibility into the term and options of the lease to suit your business circumstances.

Rent: Payment of rent in exchange for the right to occupy a premises is an essential element of any lease. Landlords have the right to terminate a lease of a tenant who fails with rent payments and deny them access to the premises. The landlord’s right to terminate the lease and take possession of the property will usually be contained within an express clause.

Outgoings: The outgoings are the costs associated with a lease. The lease document is a written agreement of the type of outgoings a tenant will be liable for and the percentage of those operating expenses they will need to pay. As with residential leases, these outgoing costs may include water rates, land tax, management fees, strata or other levies and council tax.

Bonds: Typically, most commercial leases include a bond agreement despite there being no legislative requirement for one. The tenant and the landlord need to decide on the conditions for the use of the bond and the repayment of the bond. The lease also needs to specify when the bond will be returned to the tenant after the lease has ended and under what circumstances the landlord can withhold funds from the bond.

Fixtures: Tenants generally pay the cost of installing shop fixtures and fittings. After the lease has ended, the tenants also usually remove the fit-out and return the shop to the condition it was in before the lease began. As a tenant you need to check that your commercial lease agreement contains an inventory of the landlord’s fixtures and fittings and your right to install and remove fixtures.

Refurbishment: Some leases require the tenant to refurbish the premises at regular intervals. This may benefit the tenant’s business but it can also come at a significant cost. Make sure that your lease clearly sets out the nature, extent and timing of any refurbishments and limits this to an agreed timeframe you feel comfortable with.

Maintenance: A commercial lease agreement should also clearly outline what repairs and maintenance the tenant is responsible for and what is the obligation of the landlord. Often the tenant is responsible for general repairs and maintenance and the landlord is responsible for structural defects and repairs.

Recommendations about Commercial Leases

To give your business the best possible chance of success it is vital that you know your rights and obligations under a commercial lease and negotiate good commercial terms with the landlord. Engaging a lawyer who has experience with commercial leases to advise you on your proposed commercial lease before you sign makes good business sense.

Dawson & Gardiner commercial lawyers in Cardiff, Newcastle pride themselves on offering reliable and professional lease advice for tenants and landlords involved in the leasing process. We draw on our expertise and knowledge to identify potential issues and to better the value of your lease. Contact us about commercial lease advice. You can call us on 02 4954 8666