Points to consider when entering into a lease
The following points cover some of the important things to consider when entering into a lease:
What happens when the lease term expires? Is there an option to renew the lease for a further term if you want to or are you going to be forced to move out?
Rent reviews :
How often and how will the rent be reviewed? Is the rent going to increase yearly by say 5% or should you negotiate an increase that reflects say:
(a) the Consumer Price Index (currently at about 2%); or
(b) market rent?
Can you use the property for what you plan to use it or are you going to be restricted in what you can do with the property?
Who will be responsible for paying the council rates and land tax? What you expect to pay may differ from what you are required to pay under the lease agreement.
What happens if you do not want to continue with the lease? Will you be stuck paying rent until the lease expires or can you assign the lease to someone else? What are the requirements for assigning the lease?
Change of owners :
What if the owner of the property decides to sell the property? Will your lease be protected? (Some but not all of the terms may be protected by statute.)
Damage or destruction :
What if the property is damaged or destroyed? What can you be held responsible for and do you remain liable to pay the rent?
Who is responsible for maintenance of the property, and to what extent, and how will maintenance works impact on your business?
Shopping centre :
If the lease is for a shop in a shopping centre, do you know:
(a) whether a competitor will be allowed to move in next to you?
(b) what your core trading hours are?
Tenants may think when entering into a lease agreement that everything is clear. However in practice this is very seldom the case and the money you saved by not having someone review the lease agreement could end up costing you substantially more money which you could have invested in growing your business.