Whether you’re a first-time business tenant or a regular with experience, it’s always important to know your obligations under your lease. Here are five top tips for tenants from our Commercial Law team:
- Retail vs Commercial
Know whether you are entering into a retail lease or a commercial lease. A retail lease generally means a shop which sells goods/services in small quantities to the public. A retail lease offers protections for tenants under the Retail Lease Act 1994 (NSW). In comparison a commercial lease normally applies to a commercial premise where goods or services are sold or hired in large quantities (wholesale) or sold for resale
There are key differences between the two types so it’s important to seek legal advice.
- Term of the lease
Firstly, will you be able to afford the rent for the whole term? If there’s a chance that the answer is no, you should be aware that it’s difficult to get out of a lease early.
Secondly, is the lease long enough for you to achieve what you need to? If a lease ends there is no guarantee that the landlord will give you a new lease and you may need to shut up shop and move elsewhere.
Aside from rent, you should confirm whether you have to pay outgoings such a taxes and council rates. Note that services like gas or electricity are usually separate and additional to outgoings.
One way to exit a lease early is to assign the lease to someone else. Generally, a tenant will sell their business and transfer the lease along with it.
Commonly the tenant must request consent from the landlord to assign the lease to the new tenant provided the new tenant meets certain standards. If the landlord agrees the parties will sign a deed of assignment to transfer the lease.
- Responsibilities of each party
It’s crucial for the lease to clearly outline each parties’ responsibilities. If this isn’t clear it’s most likely going to cause a dispute in the future when the parties argue over who is liable.
Usually a tenant will have a lot of obligations such as repairing damage; keeping the premises clean and in a good condition; returning the premises to its original condition at the end of the lease; and complying with the permitted use of the premises.
In comparison a landlord is usually responsible for structural repairs to the building.