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Many people do not understand how complex a commercial lease transaction can be and that it can be fraught with potential problems. Entering into a commercial or retail lease is a serious financial commitment and if the lease documents are not drafted carefully, this can have serious implications for the commercial success of your business.
It is crucial that the lease documentation be correct from the outset to avoid, or at the very least limit, any disputes during the term of the lease. It is important to understand that once the lease begins, both parties will be committed to the terms and conditions of the lease.
1. What is a lease?
A lease is an agreement between the owner of property (the landlord) and the person who is given rights to occupy the property under certain terms and conditions (the tenant). For the most part, it is up to the landlord and tenant to decide the terms of the commercial lease.
2. Types of leases
There are two main types of leases available to businesses that depend on whether or not the intended use of the premises is classified as predominantly retail or commercial. Whilst there are many similarities between the two, there are also legal differences such as different requirements as to the terms and length of the lease, as well as the payment of fees.
3. Retail leases
Retail leases are governed by the Retail Leases Act 1994 (NSW), which gives retail tenants some extra protection and imposes strict disclosure obligations on both the landlord and the tenant. However, retail leases that last for 25 years or more, or relate to premises which are greater than 1,000m² in area, are not governed by the Act.
4. Commercial leases
Commercial leases are leases that do not constitute retail or residential leases (i.e. where the types of business are not listed under the Retail Leases Act 1994). They are not usually standard-form documents and are not generally regulated by legislation but by common law. There is, of course, an exception to this; if the business premises form part of a shopping centre, then the Retail Leases Act 1994 will apply regardless of the business type. These leases are normally prepared by a solicitor and contain significant obligations on a tenant in relation to the occupancy of the leased premises.
5. Legal advice
Whether you are a landlord or tenant, it is important to seek advice from a legal expert in order to ensure that your rights and obligations are adequately protected during the course of the lease. At HPL Law Group, we have the expertise to ensure that the lease documents reflect your agreement and protect you from the unforeseen.
We have experience acting for landlords in commercial lease transactions and understand that protecting the interests of the landlord is just as important as protecting the interests of the tenant.
Whether acting for the landlord or the tenant, we can protect your rights in a range of aspects including:
(a) rental payments: how much and when to pay;
(b) clarification of rent outgoings payable by the landlord or the tenant;
(c) how and when to exercise the options to renew;
(d) rent reviews;
(e) assignment of leases and sub-leases;
(f) options to purchase;
(g) assignment/subletting: whether the landlord gives consent and what approval procedure is in place;
(h) obligations of each party at the end of the lease;
(i) personal guarantees and other securities; and
(j) insurance requirements.