What Tenants Need to Know Before They Sign a Commercial Lease

There are several important legal implications to consider when signing a commercial lease. These key elements will determine the financial cost of your business property.

Permitted Usage
Sometimes landlords send out contracts that don’t include a permitted use clause. For commercial property leases, you want to negotiate this term more broadly so there won’t be as many restrictions on what you’re allowed to do within the premises. Not only that, you can further grow your business or sell it to a future buyer for other purposes.

Rent Conditions
You want the lease in hand if you’re going to decide what is an acceptable rent policy. Is rent expected to be paid on a weekly or monthly basis? Are you able to keep up with the payment schedule based on your current income? How high or low is the vacancy rate, as experienced by the landlord? Are you granted a rent-free trial period to prepare for trades? And lastly, is the landlord willing to contribute?

Rent reviews should be addressed too. They factor in the price adjusted for inflation, the market rent review, and the fixed amount or fixed percentage review. The CPI rate scales the value by movements within a catchment area. An appointed retail valuer will calculate the current market rent. Regarding the fixed percentage increase or decrease, it’s applied annually to the lease, revealing the entire rent cost to a business owner.

The Lease Term
Your lease should specify when rent reviews are conducted. Additional charges to the base rent must be stated after the start of the lease. Also, it needs to support and recover your rental investment within a reasonable duration. A thriving business may be suited for a longer lease whereas newer businesses usually rely on a shorter one to save money on rent. Concerns about security are worth mentioning as well.

Whenever you are on temporary leave from your business, you can sign a sublease agreement nsw, which lets you rent out part of the property to other tenants. As the sublandlord, a sublease distributes rent towards third parties to help you run daily operations while away from the site. However, this contract won’t negate the terms of the original commercial lease.

Options for Renewing a Lease
If you want to extend your lease term, you have the option to renew it without any unwarranted obligations. In securing your tenure, it’s all about the level of flexibility, such as when to renew, how to exercise the option, is it possible to transfer the lease, whether a market review is coming up, or if there are any breach terms.

Outgoing Expenses
The landlord is still responsible for maintenance repairs and operating equipment on the property. These outgoings will cover security measures and cleaning the building premises. While tenants are expected to pay for these, they can negotiate the expenses to a certain extent. (i.e., Your right of review and supplied disclosure of fees.)

Security Deposit Fees
The commercial lease is there to make sure you comply with the terms and conditions of staying on the property. Your landlord has the right to terminate the lease for any given cause. But paying the security deposit does provide them with protection against outstanding charges or potential damages. The landlord could hold onto your bonds though they do accept bank guarantees as an alternative deposit.

Issuing a Bank Guarantee
A bank guarantee ensures your landlord receives rent even when you are unable to pay off your debts. The bank will ask for your outgoings to cover the next 3 to 6 months, though the actual cost depends on the lease term and usage.

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