Commercial Leasing: Landlord Edition

A landlord of commercial property has the job of drafting the commercial lease. The lease agreement is a complex document that sets out the rights and obligations of the parties. When drafting a lease, the landlord’s lawyer will have regard to the particularities of the property and the tenant’s particular type of business. The use of the premises will impact what the terms of the lease will be. The lease will be comprised of both the general conditions of the lease and the special conditions. Some of these provisions will be essential terms with strong consequences if breached and tenants should have regard to these terms.   

Description

The premises are described by the property address and the volume and folio number of property identifier. The size of the premises is also often mentioned and defined in square meters. This is usually included in the Disclosure Statement.  A plan of the premises can also be annexed to the lease, which will clearly identify the perimeter of the premises. This gives the tenant a clear understanding of the property being leased and avoids arguments later if there is an issue.

 

Use

The permitted use of the premises will be defined in the lease schedule. Typical uses are retail, industrial or office. There can, of course, be more specific uses of the premises specified, such as warehouse, hairdressing salon or vehicle servicing, as just three of many examples. It is generally advantageous to the tenant to be less specific about the use of the premises, so as to make it easier to assign the lease should the business not work out or need to be moved to alternate premises. This is because a landlord is often not compelled (depending upon the terms of the lease) to assign the lease to a party wanting to use the space for a use not stated in the lease.

 

Base Rent

Base rent is usually calculated as a set price based off of the square meterage of the premises. It is a fixed amount.

 

Turnover Rent

Turnover rent is an amount of further rent payable, based on a percentage of sales, often over a predefined amount of turnover, This is common shopping center leases. For instance

 

Outgoings of the Premises:

The lease may be inclusive of building outgoings; typically, though, outgoings are paid over an above the Base Rent and, where applicable turnover rent. Outgoings can include: Landlord ownership and maintenance:

  • Electricity, Water, Sewer charges
  • Council Rates
  • Property insurance
  • Land Tax (but not in relation to retail leases in Australia)
  • Cost for building personnel, such as security and cleaning

 

Security Deposit

The Security Deposit is the bond of yesteryear. In fact, they are interchangeable terms. The security deposit is paid the landlord prior to handover of the premises to the tenant. Landlords will call upon the security deposit when there is a breach of the lease with a financial consequence and, after demand, the tenant has not made the payment. The tenant will then have to replenish the portion of the security deposit so applied.

 

Repairs and Alterations

Tenants will be responsible for any damage done to the property but will not be at liberty to alter the structure of the building without the landlord’s prior permission. If repairs need to change the structure, landlords will oversee it and the tenant will be the one charged for such works. Landlords maintain the control over alterations by requiring tenants to ask permission before making any changes to the property.

 

Insurance

Tenants are required to take out appropriate insurance. Insurance coverage will include:

  • building insurance
  • public liability insurance
  • landlord insurance
  • business interruption insurance

Non-payment of Rent

In the case of non-payment of rent, a landlord may terminate the lease without notice.   This can be by way of termination by written notice or lockout of the premises.

Subleasing

Landlords must consent to any subleasing agreement a tenant desires to enter into. The landlord may be asked for substantial references that demonstrate that the tenant is respectable, responsible and solvent as a general rule. Sometimes the landlord can increase the amount of the security deposit. Landlords cannot deny tenants subletting unless there are solid and “reasonable” grounds for denying the new tenant.

Surender of the premises

When the lease term comes to an end, tenants must surrender the premises. Tenants will surrender the premises in the original form the property was handed to them unless the landlord agrees otherwise. This is known as make good.

**This article is for informational purposes only and is not intended to be legal advice. In relation to your individual situation, always seek advice specific to your circumstances from a lawyer.

 

Insight into Business Law

Business law, also referred to as commercial and mercantile law, involves the start-up and running of a business. Business law solicitors assist businesses with filing, obtaining, and producing legal content that will allow the business to either start or continue working. Legal Career Path states that there are two distinct areas in business law; “regulation of commercial entities through laws of partnership, company, bankruptcy, and agency and the second is regulation of the commercial transactions through the laws of contract.”

Businesses are considered individual legal entities. Business law solicitors need to make sure they are filing and obtaining correct paperwork so the government will view the company as an existing entity. A business law solicitor works as an advisor to the company to ensure the business chooses the entity that is in their best interest. Another consideration for a new business, it needs employees. solicitors will help determine the proper protocols for hiring and firing employees. Other protocols include dispute resolution, payroll, taxes, and benefits. Business law solicitors will teach the business the rules and regulations of managing their employees.

If the business’s primary action is to sell consumer goods, there are more rules and regulations to follow. The Australian Consumer Law lays out the rules for sales, bulk sales, frauds, contracts, credit, and transaction security. An solicitor will go through this Code and highlight what rules the business will have to follow. Other legal responsibilities solicitors can assist a business with include, drafting and negotiating contracts, intellectual property, antitrust, and bankruptcy.

Drafting and negotiating contracts can be a part of a business’s everyday workflow. Whether it is drafting a lease agreement or creating a contract with a third-party vendor, most companies do not know how to draft these documents. They will either use their legal counsel or hire a business law solicitor from a firm. With start-up companies, it will be easy to run into an intellectual property conflict. When creating a new product or idea, the company needs to ensure that they are the ones that have control over the rights of the new product or idea. An solicitor will have to be well practiced to get involved with the IP Australian Government. Most businesses want to grow, business law solicitors make sure the company is conducting itself according to competition law. All companies fear one day they will have to file for bankruptcy. There are different ways to file for bankruptcy, which have different requirements and business solicitors can educate the company on the pros and cons of each.

 

Business law solicitors do not usually get involved in the court system, they are a productive countermeasure to ensure businesses do not have to appear in a court trial. There are some initial hearings before the company seeks approval of the business entity. If the company finds itself in a legal situation down the line, they typically bring in a litigator and do not use their business law solicitor. A business law solicitor can either work for the company as an employee or they can come from their own firm. Business law firms usually have a niche of cases they take on such as the intellectual property is their main focus and expertise.  

**This article is for informational purposes only and is not intended to be legal advice. In relation to your individual situation, always seek advice specific to your circumstances from a lawyer.

 

Commercial Leasing Agreements: Tenant Edition

Looking into real estate can be a challenge to some people. Other people may just see a good location and sign right away, not knowing what they are contracting themselves into. Other people take the time discussing the terms of the lease with the landlord. When you begin to look for commercial property, compare prices of other properties, determine how long you want to lease the property for, express what other expenses you are willing to pay, and most importantly read over the lease agreement before signing it. Tenants must be careful when signing leases because they are difficult and can be costly to get out of.

Landlords will try to get you to sign leases without reading over them. You should always read over your lease to check for any discrepancies from what the landlord had previously stated. There could be hidden expenses in sections of the rent or utilities portion. Landlords may agree to move tenants to a different property if one becomes available during the term of the lease, but if the lease does not state the terms of that agreement, it could leave the tenant paying for moving expenses. If the property is bigger than the building they are currently residing in, there may be higher costs to moving. If the office supplies and equipment are too big or there is too much, landlords could make the tenant move the equipment because it was not laid out in the lease. The lease should state the extent the landlord will be involved in the moving process and what will be the responsibility of the tenant during that time. Make sure the length of residency in the lease matches what you have agreed upon. You do not want to think the agreement is only six months and end up stuck in the lease for a year. If you are having trouble reading the lease and the legal jargon involved, reach out and get help from a commercial lawyer.

Having a plan and taking the time to look over the agreement can save you stress, time, and money in the future. The expense of a lawyer now could outweigh the expense of trying to terminate a lease. The commercial lawyer will help in the process of contracting a fair agreement between landlord and tenant and inform the tenant of everything the agreement states. Later on, if there is a dispute over the lease agreement, there is already a lawyer familiar with the terms of the agreement and can help settle the matter. So do not go signing a lease without reading through the ins and outs of it or having someone read over it and explain it to you.