Step 5

Negotiate the lease

Negotiation is a process whereby the landlord and the tenant agree on the terms of their lease. It's an important part of the leasing process, and in theory, everything can be negotiated.

Often inexperienced tenants will accept the first offer put to them by a prospective landlord, especially if they are particularly keen on specific premises and become emotionally attached. This is not good negotiation practice and can lead to an unsuitable lease for your business. There is no requirement or obligation on a prospective tenant to accept the first offer put to them by a prospective landlord.

Although a lease may be presented as a standard lease, it does not mean the terms and conditions cannot be changed by negotiation to suit both tenant and landlord. Leases can be negotiated and should be tailored to suit the particular circumstances of the individual business situation and business premises. Importantly, a lease should be negotiated on terms and conditions that will enable your business to succeed.

Before you begin to negotiate take time to consider and identify your leasing requirements and those needed to make your business a success.

It is useful to group your leasing requirements into those that:

  • you must have and cannot proceed without;
  • are desirable, will affect your business overall and are worth fighting for;
  • do not overly affect your business and you are willing to compromise on; and
  • do not affect your business.

Negotiation of the lease will in many cases involve the parties to the proposed lease going back and forth a number of times on their requirements before finally agreeing. This usually involves making changes to the proposed lease document, which is said to be in “draft form” until finalised.

Ensure that all agreements, representations (statements), and promises that are made during negotiations are put in writing.

If the conditions of the proposed lease are not acceptable and cannot be negotiated satisfactorily, be prepared to walk away.

Standard lease

Many people ask for a "standard Commercial Lease" template, however, no template or similar document is freely available. The best practice is for leases to be individually developed around the unique circumstances of the parties negotiating the lease. The Real Estate Institute of Western Australia (REIWA) lease agreements are often used but are not available for public use unless a REIWA agent is involved.

It is strongly recommended that landlords and tenants do not prepare the lease documentation themselves. If you plan to enter into a lease for commercial premises, you are strongly advised to engage a solicitor with expertise in commercial tenancies to advise you on your lease. The solicitor will take account of your concerns, risks and the matters agreed upon during negotiations to ensure the lease is customised to your circumstances as much as possible, and upon which you can rely. Always obtain professional advice before any lease document is signed, money is paid, or occupation of the leased premises commences.

At the outset the cost of legal services may be of concern. However, it will be re-couped over the years of the lease due to its reliability and the protections drafted into the lease by the solicitor acting on your behalf.

The lease should not commence and the tenant should not take possession of the premises until the lease has been duly agreed and signed by all parties.

For a comprehensive guide download Business Guide: Commercial Leases – main issues to consider. 

We have a range of fact sheets and booklets to download so you can be fully informed about the Commercial Tenancy (Retail Shops) Agreements Act 1985 which regulates retail shop leases in Western Australia.

What's next…

 

Related Information

Business Brief
Leasing Commercial Property

Business Guide
Commercial Leases Main Issues

Download free eBooks on leasing

The free eBook guides include:

  • Leasing business premises - a commercial and practical guide
  • Common Questions about the Commercial Tenancy Act booklets
  • Fact sheets for retail shop laws

Contact a specialist commercial tenancy adviser on 13 12 49.

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