Commercial leasing can be daunting for newcomers. Particularly if you’ve come across from residential leasing, this is a whole new kettle of fish. Don’t worry though, Property Law Partners are here to provide you with support throughout the process. Here are our top five tips for commercial landlords.
1. Make sure the lease says what it should
This is especially important when purchasing. Leases are individually drafted and the wording and terms (as well as quality, unfortunately) may differ depending on who has drafted the lease.
If you are purchasing a commercial property, you may have been told that the lease operates in a certain manner. While it may be the case that this has actually been occurring, the lease may say something different.
Once you take over that property, you become bound to the terms of the lease as drafted, and not actually what may have been happening in the previous landlord’s position.
This means that it’s really important to have your contractual ducks in a row, rather than assuming that the deal will be honoured once you come along.
We had a recent matter where outgoings were only entitled to be recovered on a certain event occurring. This had not occurred, however, the tenant had been charged for outgoings.
This brings us to our next tip, look at how outgings are calculated and charged…
2. Look at how outgoings are calculated and charged
This is especially relevant where there are multiple tenancies and licence areas. A landlord should look to recover all their outgoings (or as many as possible) So the leases need to work with each other to ensure that these are recovered over the entire parcel.
There may be instances where there is a small tenancy, which has a large licence area, so consideration should be given as to whether outgoings are payable on just the lease area, or within the licence area taken into consideration.
3. Make Good and what happens at the end of the Lease
It is generally the position that the tenant will need to “make good”. Meaning they’ll need to restore the property back to its original, shell condition. However, circumstances change and the landlord should consider whether they want, at their decision, a right to require the tenant to leave the fitout. This is so that they can use the benefit of it, rather than having to start from base building works again.
4. Ensure all your outgoings can be recovered
Times change. Often, new taxes and payments are imposed upon land owners. You should, as much as possible, draft leases so that future costs payable can be recovered.
5. Keep up to date with legislative changes
Keep up to date with legislative changes and check before doing something you can’t fix. Current times are an example of how rights and obligations can change quickly.
Before taking major steps, for example terminating a lease, you should check with your lawyer to ensure that how you are doing so complies with all current obligations. We are finding that there is a move towards tenant protection, rather than in favour of the landlord. Having a tenant in default can be stressful enough, without adding extra pressure by exposing yourself to an unwanted situation.
Have a question about commercial leasing or documentation? Get in touch with our friendly property lawyers.