5 tips from commercial property solicitors Australia when negotiating a commercial lease
Engaging commercial property solicitors in Australia at the earliest possible stage is critically important. This applies whether you are a landlord or a tenant because commercial leases are complex legal documents. However, the best starting point is to ensure that you are well informed and in full control of the commitment you are about to make.
What is a commercial lease?
A commercial lease agreement sets out the rights and responsibilities of a tenant and landlord. Leases can bind parties for long periods of time, so, when negotiating or renegotiating a lease, it’s important to take the right steps to customise your lease agreement to suit the individual commercial and legal requirements you need.
Some of the matters outlined in a commercial lease include:
- The rental amount
- What outgoings the tenant will pay in addition to rent
- Payment timeframes
- Length of the lease (known as the term) and any option periods
- Rent reviews or increases each year and on the exercise of an option
- Tenant expectations
- What the landlord will and won’t provide
- Terms and conditions
Do I need a solicitor to lease commercial property?
In short, absolutely.
A trusted commercial property lawyer can help craft a lease that protects your interests and which properly reflects your commercial interests and needs. Retail leases also require specialised knowledge as they differ from standard commercial leases.
There are steps that you can take to make the process quicker, smoother and more effective. Here’s a list of tips to help you achieve the best possible outcome when negotiating a commercial lease. We’ll start with the summary, then go into the details.
- Start with a financial analysis and budget
- Look around
- Hire a representative during negotiations
- Work out what clauses will make or break the deal
- Don’t underestimate your value
Let’s go through the reasons behind each step.
Start with a financial analysis and budget
Before you even start to negotiate the terms of a lease, sit down with your accountant and work out what you can afford to pay for a commercial space. If you’re looking at renegotiating an existing contract, take a deep dive into your financial position to date and analyse the percentage taken up by the current lease. This will ensure you understand how much you comfortably have to spend when looking at a space and/ or whether your existing lease is placing too much pressure on the business.
Don’t take a landlord’s word for it when it comes to the fair price for renting a space or property. Make sure to see for yourself! Physically go out and inspect other properties to ensure you understand what the median price is for relative properties. This will give you a solid negotiation point when placing an offer or renegotiating an existing lease with your landlord. If you are a landlord, hire a trusted real estate agent to advise you on the market rent that is realistically achievable for your premises.
Hire a representative during negotiations
Tenants often ask do I need a solicitor to lease a commercial property?Engaging in a lease agreement alone can be daunting, and often empowers the landlord’s representative when it comes to contract demands and negotiations. Hiring a solicitor to assist with contract negotiations sends the message to your landlord that you will not be taken advantage of and will be in a strong position to negotiate a deal that benefits both parties. Landlords needs to ensure that all of their interests are properly protected in a well drafted lease. This is not achievable with pro-forma leases. A commercial property solicitor will customise a lease to a specific commercial situation based on the landlord’s individual circumstances.
Work out what clauses will make or break the deal
No initial commercial property contract is complete without a list of clauses that protect the landlord. It’s important to engage a trusted solicitor who will identify and explain the pros and cons of each clause. A solicitor will help you negotiate the terms of concern and determine the right areas to push back on. Together with your lawyer you will decide the areas that will be non-negotiables, meaning you are prepared to walk away if they are not amended or removed. Your solicitor will use this information to help deliver the best outcome for your business.
Don’t underestimate your value
Don’t underestimate how difficult it is to find a good, consistent and profitable tenant. Don’t rush or skip your due diligence because you are afraid of losing out on a lease. It’s important not to negotiate in haste. Know your worth as a tenant and move in a manner that will set the tone for the long-term working relationship you expect with your landlord.
If you are looking to negotiate or renegotiate a commercial lease, Lawpoint’s team of highly experienced commercial property solicitors is the first place to start. We will fight to make sure you get the best possible tenant arrangement. Contact us today on (02) 9517 1887 or email [email protected].
For more general information on commercial property leases, we recommend the following: