Leasing commercial property is a big step that affects your business operations and finances. It involves renting a property for business use under a legally binding agreement. To make the best decision, it’s crucial to understand your lease terms, legal obligations, and how to negotiate effectively.
Things to Consider Before Signing a Commercial Lease
Signing a commercial lease is a big decision that requires careful thought. Before committing to a commercial lease, keep these key factors in mind.
1. Lease Terms
- How long is the lease? (Usually 1–5 years or longer.)
- Does it align with your business goals?
- Are there options to renew?
2. Costs
Leasing a commercial property involves more than just paying rent. Be aware of additional costs such as:
- Outgoings (expenses like council rates, water, and insurance)
- Maintenance fees
- Bond or security deposits: Understand the total financial commitment to avoid surprises later.
- Permitted Use: Ensure the property’s zoning and lease terms allow your intended business activity (e.g., café, office, or warehouse).
3. Maintenance Responsibilities
Clarify who handles repairs and maintenance, especially for structural issues or major systems like plumbing or air conditioning.
Your Legal Obligations as a Tenant
When leasing a property, you agree to specific responsibilities, including:
1. Rent Payments
Pay rent on time and in the agreed manner. If you’re struggling, talk to your landlord early to explore solutions.
2. Property Maintenance
- You’ll usually handle minor repairs and upkeep.
- Landlords typically manage structural repairs, but confirm this in your lease.
3. Compliance with Lease Terms
Follow all lease rules, including permitted use, subleasing, and renovation restrictions. Breaching terms can lead to penalties or eviction.
4. Adherence to Australian Laws
Ensure your business complies with health, safety, environmental, and accessibility regulations.
How Can You Negotiate Favourable Lease Terms
Don’t accept the first offer—negotiate terms that support your business:
1. Rent
- Research local rents to ensure fairness.
- Request benefits like rent-free periods or gradual increases.
2. Renewal Options
Negotiate clear renewal terms to lock in your location if your business succeeds.
3. Fit-Out Contributions
Ask the landlord to cover part of the costs if you need to renovate the space.
4. Flexibility Clauses
Negotiate options for early exit or subleasing to protect yourself if circumstances change.
Common Pitfalls to Avoid
Be mindful of these mistakes when leasing:
1. Hidden Costs
Look for extra fees (e.g., building upkeep, legal fees) in the lease. Ask for a detailed cost breakdown.
2. Ambiguous Terms
Vague clauses can cause disputes. Seek clarity or legal advice to ensure the lease terms match your understanding.
3. Overcommitting
Don’t sign for more space or a higher rent than your business can afford.
4. Lack of Growth Planning
Ensure the property and lease terms allow for future business growth, such as adding signage or making upgrades.
Make the Lease work for you
Leasing a commercial property doesn’t have to be overwhelming. By negotiating smartly, understanding your obligations, and planning for the future, you can secure a lease that supports your business goals.
Need Expert Advice on Leasing? Contact Walker Pender
Are you ready to lease a commercial property but unsure about the legal details? Walker Pender’s experienced commercial lease lawyers are here to help. We’ll review your lease, negotiate favourable terms, and ensure your business is protected. Contact us today for expert legal guidance tailored to your needs!
