You’ve heard the saying that ‘only fools rush in’ and that couldn’t be truer when it comes to signing a lease.
In the excitement of deciding to start a new business and wanting to get the doors open as soon as possible, many new business owners rush into a leasing agreement without taking the time to fully understand what they have committed to.
If you’re looking to sign a retail lease, here are the top five things you should know before putting pen to paper.
Important leasing terms and conditions to check before signing
Your lease will outline a number of terms and conditions specific to the property. When reviewing the lease, look out for the following features and make sure you are happy with what is outlined:
- the length of the lease and your option to renew
- the dates to exercise any option/s for additional lease terms
- the amount of rent you are required to pay
- the frequency and rent adjustments outlined for rent reviews
- outgoings and other occupancy costs
- the permitted use of the premises
- if there are any exclusivity clauses (eg: no other businesses can sell the same goods that you do within the same retail complex)
- make-good at end of lease
- the landlords ability to terminate your lease early if they decide to redevelop the property
When have you entered into a lease?
Under the Commercial Tenancy (Retail Shops) Agreement Act 1985 (CTA), you have entered into a lease when you have:
- taken possession of the premises, or
- started paying rent, or
- the lease has been signed by you (as the tenant) and the landlord
Before carrying out any of these tasks, you should make sure you have fully reviewed the lease and sought legal, commercial and business advice on any areas you don’t understand or require clarification on.
Paying for advice is worth it
Getting professional advice is important, which is why we are mentioning it again!
Signing a lease is a legally binding and serious financial commitment. Take the time to look over the lease closely and ask any questions before you sign on the dotted line.
A lawyer can help you understand, review and negotiate your lease and ensure that all conditions are right in terms of law, legislation and compliance. If you don’t have a lawyer, read our building your support team guide on how to find the right lawyer to help your business.
Your landlord’s obligations to you
For leases covered by the CTA, at least seven days before entering into a lease, the landlord must provide you with:
- a disclosure statement
- the proposed lease
- a tenant guide
- the current year’s itemised expenditure (operating expenses) for the premises
The disclosure statement includes important financial information, such as rent outgoings and other obligations. As the tenant, pay close attention to the details of the disclosure statement and make sure it contains all of the information, benefits or commitments promised by the landlord, or their agent, that may have contributed to your decision to lease this particular business premises.
State Government requirements that override retail leasing stipulations
There are key requirements covered by the CTA that landlords are required to carry out (and override any contradictory conditions in the lease). These include:
- repair and maintain the property (shopping centres)
- provide an audited statement of annual outgoings (in most cases)
- pay for the preparation of the lease
- cover their own legal costs in complying with the CTA
- send reminder notices to you, as the tenant, to exercise renewals and options
Please remember, the tips and tools provided here are intended for general information only. When it comes to signing a lease, the best piece of advice we can give you is to take your time and get legal advice. Some additional sources of information to help you include:
- calling our free business advisory service that can guide you on leasing commercial premises
- reading the leasing business premises section of our website for more information on reviewing and negotiating a lease
- download our building your support team guide to help you find a lawyer to help you negotiate your lease