Commercial Leasing

If you own commercial property or want to lease premises, a commercial leasing arrangement will form an important part of your investment or business strategy. Landlords and tenants should carefully consider their proposed arrangements which should be documented in a written agreement setting out their respective rights and responsibilities. If the premises falls under the definition of ‘retail’, the lease documentation and negotiation process must comply with specific retail leasing requirements.

With many leasing disputes arising because the lease terms are unclear or not properly understood, it is in the best interests of both parties to have their proposed arrangements reviewed and to obtain independent legal advice before entering the transaction.

We have extensive experience in commercial leasing matters and will guide you through the process to achieve a fair arrangement and to ensure you are aware of your rights and obligations.

What is a commercial lease?

A commercial lease governs the relationship between a landlord and tenant regarding the occupation of premises by a tenant to carry out its business activities. In exchange for paying rent and upholding the obligations under the lease, a tenant is entitled to uninterrupted possession of the premises and should be free to conduct its business in accordance with the permitted use. A commercial lease may pertain to any non-residential premises such as industrial, retail, factory, or office space.

Retail leases

Premises classified as ‘retail’ under retail leasing legislation need special attention. Retail premises typically include premises used predominantly for the sale of goods and/or services. Your lawyer can confirm whether the arrangements you propose to enter are subject to retail leasing legislation.

Retail leasing legislation is designed to level the playing field between landlords and tenants by providing certain protections for tenants considering and entering into a retail leasing arrangement. Amongst other things, landlords must comply with mandatory disclosure requirements and may be restricted from recovering certain expenses that might otherwise be recovered under a regular commercial leasing arrangement.

What does a lease agreement cover?

In addition to the more obvious matters such as the period of the lease and amount of rent, the agreement should cover terms regarding unforeseen events such as what happens if the premises is damaged or destroyed.

Typical lease terms include, but are not limited to:

The parties and property. Parties entering a lease need to know who they are dealing with. Title and company searches may be obtained to confirm that the parties are accurately described in the lease and legally entitled to enter the transaction.
The leased area. The lease should include a legal and physical description of the premises, with a plan identifying the leased area and its dimensions. Use of car spaces, storage facilities and amenities, etc. should also be noted.
Permitted use of premises. The lease should state the permitted use of the premises. Tenants should ensure that the proposed use of the premises complies with any council or other requirements and any necessary licences are obtained.
The term of the lease. The term of the lease and any renewal options should suit the tenant’s business plans and the landlord’s investment strategy.
Options. Leases containing options to renew will specify a time period within which a tenant can exercise (give notice) to renew the lease. Option periods should be diarised to avoid missing out on the opportunity to renew.
Outgoings. The lease should state who is responsible for the property’s outgoings and list the relevant items. Outgoings include utility services, rates and taxes, cleaning, gardening, and security. A tenant may be responsible for all, or a proportion of outgoings and an estimate of these costs should be obtained by the tenant before entering the lease.
Rent and rent reviews. The lease will contain details of the rent, the frequency and method of payment and when and how a rent review may take place. Rent reviews may be by reference to the Consumer Price Index, market review or a set percentage on each anniversary of the lease.
Fitout and refurbishment – a description of any fitout agreed should be included and who is responsible for the work, approval requirements, and any obligation to restore the premises at the end of the lease.

Whether you are a landlord or tenant, a commercial leasing arrangement typically involves a long-term financial and legal commitment. We can advise and guide you through the process and review your documentation to ensure your rights are protected and the lease arrangements are compliant, fair, and reasonable.

If you need assistance, contact [email protected] or call 03 9546 8155 for expert legal advice.