It is important to obtain the right tenancy and lease to help protect your growing business. It is best you seek specialist legal advice before entering into any lease as these documents are not ‘standard’.
A tenant advisor and lease lawyer can:
- obtain the best terms for your tenancy
- save you money over the life of your lease
- ensure the agreed terms are incorporated into the lease, and
- provide you with advice on the law.
STEPS
- Find a property that suits your needs
- Negotiate terms of the lease with the landlord
- Have your lawyer review the lease
- Negotiate changes to the lease via your lawyer
- Agree on the final lease
- Sign the lease
- Have the lease registered (recommended if possible)
- Keep a copy of the registered lease
- Find a property that suits your needs
What things should you consider before choosing a location for your store?
- Profit
Project your revenue and expenses before entering into a lease, including the length of time required to make a profit. Ensure the terms of the lease meet your needs.
- Target Customers
Know your target customers including age, financial status, buying behaviours and habits to decide on the appropriate location.
- Location
Speak to neighbouring tenants and ask them questions about the traffic of people in the area, main entry and exit points (if in a centre), why the previous tenant vacated and about business in general in the area.
- Condition of the Premises
Prepare a condition report before deciding on the premises, including photos. Consider the type and costs of the fitout.
- Parking
Consider where your customers and staff will park. If there are dedicated car spaces, ensure they are clearly documented in the lease.
- Negotiate terms of the lease with the landlord
Have your lawyer or agent assist you before agreeing on the terms of your lease. Things you can negotiate include:
- Outgoings
Limiting outgoings.
- Incentives
A rent free period or a monetary contribution towards your fitout.
- Security
The landlord may seek to obtain a personal guarantee and or a cash bond or bank guarantee. Please exercise caution and avoid providing a personal guarantee where possible.
- Option period
It is always advisable to have one or multiple options to extend the term of your lease. This will assist if you are considering selling your business in the future.
- Lawyer costs
Try to avoid agreeing to pay for any lawyer costs of the landlord. If you are a retail shop then some states have a legislation that prohibits these costs being recoverable by the landlord.
- Exclusivity
You could request a sole right to conduct your type of business within the ‘centre’ which will decrease competition.
- Assign or sublet
Ensure you are able to assign or sublet the lease with minimal conditions.
Once the above terms have been agreed this is generally documented in a “letter of intent” or “heads of agreement” and then signed by both parties.
- Have your lawyer review the lease
Do not be fooled by the term “this lease is standard”. You may be agreeing to a lease that you may not be able to afford due to its hidden costs. You may risk losing thousands if you do not obtain specialist leasing advice from a lawyer.
Many leases are skewed to the landlord’s advantage and by obtaining advice from a leasing lawyer they can ensure that the lease is favourable to you.
Good lawyers pay for themselves. In most cases they can save you more than you pay for them over the life of your lease. Seek expert legal advice to your advantage.
- Negotiate changes to the lease via your lawyer
It is often the case that even though terms are agreed between the parties they may not be incorporated into the lease. If agreed terms are missed in the lease then you will lose the benefit of these terms.
Further, many clauses have hidden costs which your lawyer can seek to amend to save you money.
- Agree on the final lease
Once all negotiated amendments are finalised and your lawyer has advised you of your rights and obligations under the lease, you are then ready to sign the lease.
- Sign the lease
The lease will be signed by you and the landlord. Some states require it to be signed in duplicate or triplicate. If you are able to register the lease then your lawyer will advise you where to sign to ensure you are compliant for registration.
- Have the lease registered (recommended if possible)
The cost of registration is minimal and is recommended but not mandatory. Registration of the lease will protect your interest in the property by giving notice to third parties including buyers of the property and any mortgagee seeking to obtain possession or sell the property.
- Keep a copy of the lease
Scan and keep a copy of the signed lease on your computer for future reference.
By Marianna Idas
E Lease Lawyers
