In general, a Landlord and Tenant will agree to the main commercial terms of a Lease prior to discussions with a solicitor. When considering a lease, the parties will usually agree to the following terms:-
- The area to be leased (whether a shop, building or part thereof);
- The rent per annum;
- Whether outgoings will be payable;
- The commencement date, term of the lease and any options; and
- The permitted use for the lease.
From experience it is at this point that, while the parties are not legally committed, they are generally emotionally committed to the deal. The Landlord’s solicitor will then prepare the terms of the Lease.
While preparing the Lease, a solicitor must deal with items that were not discussed directly between the parties, but are within the usual leasing arrangement of the client. I find the most common items on which a solicitor must seek instructions are:-
- Precisely what outgoings do you want to charge the tenant?
- Is a bond required?
- Is a guarantor required?
- If a survey plan is required, who pays those costs?
- Who pays the costs for the Landlord to prepare and negotiate the Lease? (Note – does not apply to leases of retail shops)
- At the end of the term, what is the tenant expected to do with the premises – repaint? Recarpet?
Each of these items can be negotiated through, but can create friction between the parties – as the Landlord wants to be paid, but the Tenant feels as though they have been tricked to agree and then burdened with additional costs and obligations that were not discussed.
The easiest way to ensure that there are no surprises is for the parties to discuss these issues when negotiating the deal. Many times, a real estate agent preparing a “Heads of Agreement” will disclose most of these items. If you are considering entering a commercial lease, we encourage you to download the attached PDF containing what we believe are the most essential terms for Commercial Leasing.
While the attached prompt will not always provide all of the commercial terms, it will provide guidance to the Landlord and Tenant during the negotiation process. At the end of the day, a Landlord wants to get paid, and a tenant wants to know what they are signing up for.
Should you have any Commercial Leasing queries do not hesitate to contact our commercial solicitor Angie Richards on 4617 8100