Entering a Commercial Lease Agreement

As we move forward into the new year, many of our clients are looking to start new businesses and enter leases.

And whether you’re looking to open a new coffee shop in Sunnybank Hills or purchase an established business in West End, it is likely that you landlord will have you sign an Offer to Lease.

Here are some answer some commonly asked questions to help you be prosperous in your contract agreement.

What is an Offer to Lease?

Regardless of whether you’re entering a new lease or taking on an existing lease as part of a business purchase; a landlord will often require you, as a prospective tenant, to sign a head of agreement. This is commonly known as an “offer to lease”.

An offer to lease is a short document detailing the key areas which the lease will cover. This usually includes rental, outgoings, premises size, security bond, rental increases, options and who pays the cost of the lease.

What are your risks?

As the lease is often created by the landlord, it can often be in their favour. Therefore, may include terms in the contract which can be harmful to a tenant in the future if not thought through or removed.

These may include:

–    Turnover rent;

–    Strict fit out periods;

–    Personal guarantees;

–    Relocation and demolition clauses; and

–    Special conditions.

When should I seek advice on my lease?

Once an offer to lease is signed by both parties and a deposit paid, it becomes a binding legal document (unless its terms specifically state otherwise). This means the tenant has agreed to the terms in the agreement.

Advice should be sought prior to the draft lease being prepared. Afterwards is often too late to vary the agreed terms which may be harmful to the tenant.

What types of leases require advice?

While you are only required to seek legal advice when entering a retail shop lease, issues can arise in commercial leases just as they can retail shop leases. Because of this, we always recommend seeking advice regardless of the kind of lease being entered.

How should I move forward?

Entering a lease can be a complicated and often confusing process. Therefore, seeking advice before signing any lease documents is vital and we always recommend it.

If you have any questions or require advice on an offer to lease or draft lease, contact our Commercial Team on 3345 4388 or at commercial@hatzis.com.au today.