Leigh Adams Business Lawyers acts in all types of transactions in relation to commercial real estate leasing, as well as retail and industrial leasing.
Many people are unaware that there is no such thing as a “standard lease” as their terms are negotiable. This applies all the more in a competitive market and the following issues are most commonly the ones where legal input is suggested.
Heads of Agreement
Generally, heads of agreement save time and money but cost you more! The problem with heads of agreement include the following:
- Are they immediately legally binding in full?
- Are they only immediately legally binding in part?
- Are they only indicative of what the parties seek to be included in a subsequent legal contract?
We negotiate heads of agreement to ensure that negotiations progress but we enable other clauses or more complete clauses to be inserted if that is what the parties intend. In addition, when dealing with heads of agreement, Leigh Adams Business Lawyers ensures that our clients do not inadvertently negotiate themselves into a corner.
Rent and Escalation Clauses
Some commercial leases have escalation clauses which can be financially crippling in long-term leases. The Retail Leases Act gives some protection to tenants on this issue. Where aggressive market rent review clauses have been proposed by the lessor, it may be possible to negotiate incentives like rent-free periods. We can help you with these negotiations.
Fitouts are usually done at the tenant’s expense but if the tenant offers a long-term lease then the lessor may be happy to pay for some portion of the fitout. However, it is common for the tenant to be responsible for the cost of removing all of the tenant’s fitout from the premises at the end of the lease,. This can be very expensive and it is also important to consider the cost of redecoration. While retail leases have a measure of protection for tenants, a commercial lease may require the tenant to fully repaint and recarpet the premises at the end of the lease. We identify the risks and traps for our clients and give options as to how negotiations can be undertaken to move the transaction forward.
Guarantees and Security Deposits
There is no law which requires a tenant to give any security for the performance of its obligations under the lease. However, a lessor will invariably ask for security. The issue becomes how and how much. Bank guarantees, security deposits and personal guarantees are commonplace but with the advent of the Personal Property Securities Act, other alternatives are possible. We are able to explore these alternatives and suggest securities that suit our clients’ needs.
Zoning and Uses
It is common for tenants to adopt a use of the premises which is provided for under the lease, but without checking firstly whether council zoning allows it and if it does, then actually obtaining that usage approval from the council before the lease commences.
Failure to consider these issues can have a significant negative impact on the value of the business if and when it comes time to sell the business down the track. We are able to obtain this information for our clients to ensure a smooth leasing transaction and we are able to ensure that there are no hiccups when it comes time to sell the business or to assign the lease in the future.
Obligations of the Lessor
Many tenants who act for themselves in commercial leasing matters inadvertently deprive themselves of important entitlements. We can inform tenants of common obligations of lessors which can be negotiated for inclusion in most commercial leases. They include obligations to maintain services to the premises and to keep them in proper working order. The lessor should also have an obligation to maintain all plumbing and all electrical fittings and wiring and to keep them in proper working order. These obligations should also extend to the lessor’s fixtures. There should also be an obligation on the lessor to keep the premises weatherproof.
Many commercial lease disputes arise because outgoings are not properly considered, or if considered, they are not properly defined. We can clear the air about what outgoings need to be paid by the tenant and what outgoings should be paid by the lessor. We consider when they are to be paid and how they are to be paid. What happens if the outgoings have to be paid but they cannot be quantified by the time the payment obligation arises? We also provide practical solutions to deal with such matters.
Retail leases in New South Wales are by and large governed by the Retail Leases Act 1994. We act for many retailers and we are well-versed in the Act. We can ensure that our client, whether lessor or tenant, understands their obligations under the legislation and functions within the limits of those laws.
Personal Property Securities Act (PPSA)
Many lessors and tenants alike are unaware of the impact of the PPSA on commercial leases. Some leases have provisions which entitle the lessor to retain a tenant’s property left behind at the completion of the lease arrangement. The lessor is given the right to consider the property as abandoned and sell it and apply the proceeds towards any as yet unpaid obligation of the tenant. But what if the tenant left the premises because of insolvency? Do others have a right to the property or its proceeds of sale and how can the lessor ensure its rights under the clause prevail against third parties? We can advise on such matters and ensure that the lessor is in a strong position.
Enforcing Terms and Conditions of the Lease
Lessors and tenants alike generally understand that litigation can result in a lose-lose situation and most right-minded parties try and avoid litigation if it is at all possible.
We negotiate practical dispute resolution clauses for our clients. They typically deal with matters such as negotiation, collaboration, mediation and arbitration and provide a clearly defined path for an aggrieved lessor or tenant to take in order to resolve the dispute as soon as practicable and as cheaply as possible.
If a dispute has arisen under your lease, we are able to assist you in coming to a practical and workable solution, if one is possible.
There are many things to consider when negotiating a commercial lease. The above comments are only some of them. Call Leigh Adams Commercial Leasing Lawyers to discuss these and other things you need to be aware of when you negotiate your commercial lease – (w) 02 9964 0022, or firstname.lastname@example.org. We get you there.