Commercial leases – don’t just set and forget

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Leasing? How boring! This is a common reaction when the subject is raised.

Not true! A business’s goodwill, value and ability to borrow is heavily influenced by the security of its hold on the trading premises.

Most leases are negotiated, signed and then filed away. Mostly that is where they stay. The document is not seen again until a few years later, when someone remembers there is an option to renew date coming up. 

However, where a problem emerges, the first thing everyone does is to rummage through their files to pull out the lease. Think of these situations:

  • The air conditioner breaks down. Who pays, landlord or tenant? What if the tenant hasn’t been keeping up the regular maintenance?
  • A self-managing landlord decides to appoint a property manager and starts adding management fees to the outgoings paid by the tenant. Can they do that? 
  • The tenant misses the option date. Can they be denied an extension of the lease? What if it is a retail shop lease and the landlord hasn’t given the tenant the required reminder?
  • The landlord wants to sell. The tenant wishes they had thought to ask for a first right of refusal.
  • The end of the lease is approaching, and the landlord wants the tenant to strip the premises back to their initial state and paint, recarpet and redecorate the premises. How far can the landlord go?
  • A restaurant wants to borrow to buy new equipment, but the bank is reluctant because there are only a couple of years to go on the lease and the tenant didn’t ask for an additional option term last time.
  • A business owner wants to sell but finds it hard because there isn’t long to go on the lease.
  • A customer is injured walking across the common area car park to the premises. Who is responsible for making the insurance claim?

The fine print of the lease can save the day in all of these situations, or most conflict situations for that matter.

All it takes is getting good legal advice, and negotiating the lease to your best advantage, right at the outset.

The courts will usually follow the written word of the lease document where there is a dispute. Only where the terms of the lease are ambiguous or incomplete will a court usually look at outside documentation to help decide the dispute.

All you have to do is be well prepared at the start. FC Lawyers are experts in advising tenants, landlords on all kinds of retail, industrial and commercial leases from start to finish. If you’re stuck regarding commercial leases, or want more information on the above, please contact our team today.

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