The lease of your business premises can be your biggest business asset or your biggest liability!
Before entering a new lease for a commercial property it is important to obtain legal advice on the terms of the lease.
Generally speaking the lease is prepared by the lessor’s solicitors.
It is imperative the tenant obtains legal advice on the terms of the lease before signing the lease to ensure they understand the legal meaning of the terms of the lease, their rights and obligations under the lease and to negotiate any favourable changes to the lease terms.
Where a property is intended to be used for a retail purpose, or is within a group of retail shops, the lease will be governed by the terms of the Retail Shop Leases Act 1994 (Qld) (the “Act”) which requires a tenant obtain legal and financial advice prior to signing a lease. Such legal advice on the terms of the lease must cover at a minimum:
- How rent is to be calculated and reviewed;
- The tenant’s liability to contribute to the lessor’s outgoings and how outgoings are calculated;
- Any other payments required under the lease and how they are calculated;
- The term of the lease;
- Any special or unusual terms or conditions;
- Any bond or bank guarantees required;
- Whether or not the lease contains an option to renew;
- Obligations of the tenant on expiry of the lease;
- Whether or not the lease contains a relocation clause or a demolition clause and if it does, the way in which the clauses operate;
- Permitted use of the property and exclusivity of permitted use;
- Consequences of the tenant breaching the lease conditions; and
- The entitlements of the parties when dealing with the lease or business assets as security.
In addition to legal advice, it may be appropriate for a tenant obtain professional assistance and advice with respect to:
- Town planning matters, including the licences or permits required to carry on the intended business;
- Building laws;
- Any statutory approvals required to carry on the intended business; and
- Financial advice in relation to the operation of the intended business.
A prudent tenant would obtain legal advice in respect of any lease, whether the lease is considered to be a retail shop lease or a commercial lease which is not subject to the requirements of the Act to obtain legal advice.
Further, a tenant should obtain advice on the terms of the lease when purchasing an existing business and having a lease transferred to them.
If you require assistance in relation to preparation of a lease, reviewing a lease prepared by a lessor, or the purchase or sale of a business which includes a transfer of a commercial lease, please contact McLaughlins Lawyers on the Gold Coast for assistance and advice.
Author: Amy Zipf
Partner: Ian Kennedy