So, you have found a commercial premise (or a commercial tenant) that you think is suitable, and have agreed on the general terms for the lease. You have checked the lease schedule (lease term, rent, rent review, etc) and everything looks fine, but are you missing something?
In this first of a series of articles, we demystify some of the complexities surrounding commercial leasing.
Here are some important initial considerations for landlords and tenants alike.
Pro Forma Lease
The vast majority of leases in the ACT fall under the provisions of the Leases (Commercial and Retail) Act 2001. An early requirement of the Act is that the landlord provide the tenant with a copy of their proposed lease as early as possible in the lease negotiations.
It is important, both as a landlord and as a tenant, to ensure that you are fully across the details of your lease document. Whilst the majority of commercial leases in the ACT will contain similar terms in the general sense, the format of each document and its specific clauses vary greatly from landlord to landlord (and from legal firm to legal firm). These can be difficult documents to navigate if you don’t know where to look. This is an area in which Tetlow Legal is happy to assist.
Disclosure Statements
The Act also requires a landlord to supply a tenant with a Disclosure Statement for the proposed lease at least 14 days before the lease is entered into. The Disclosure Statement is a document providing a useful summary of the proposed lease terms, including details (and estimates) of any outgoings to be recovered by the landlord, as well as disclosures for any unusual requirements that are not normally contained within a lease.
There are significant consequences, for both landlord and tenant, if the rules and timings surrounding Disclosure Statements are not complied with. Landlords will often ask tenants to waive these timing requirements, and it is important that both parties seek legal advice regarding this.
Permitted Use
Most leases will include a clause defining what the tenant is permitted to use the property for (eg. what type of business they can operate). From a tenant’s perspective, it is preferable to have this clause drafted as broadly as possible so as to ensure that their initial use (and any potential future uses) are permitted under the lease.
However, in addition to the lease, it is essential for both the landlord and the tenant that proposed uses are also consistent with the “purposes clause” of the Crown Lease that the landlord holds from the ACT. Failure to comply with the Crown Lease could have significant consequences for both parties.
If you would like to find out more about commercial leasing in the meantime, please call Anthony Simpson on (02) 6140 3263 or email [email protected].