Use this list to better understand the Commercial Lease Terms in your lease document.
Your Lease will be full of Commercial Lease Terms. Often the document will contain very long sentences which can sometimes cloud the real meaning of the clause or term.
The chart below may help you to understand some of the standard Commercial Lease Terms.
Deciphering your lease doesn’t need to be such a challenge.
|Clause Name||What your Commercial Lease Terms mean|
|Parties / Lessor / Lessee||The names of the landlord and tenant.|
|Premises||A description of the space you’re renting. If you are only renting part of the property, it is usual for a sketch plan to be included in the lease.|
|Rent||The rent you will pay for the premises. Usually shown on an annual and monthly basis and either inclusive or exclusive of GST (How the rent is calculated for the various lease years.) Rent is usually a net rent which does not take into account Outgoings.|
|Term||How long the lease will run. There will be a commencement date for the lease and an end date as well.|
|Deposit||A security deposit required by the landlord – usually some month’s rent. Not always required but not an unusual requirement.|
|Holding Over||What happens if you don’t move out as planned at the end of your lease. If you are allowed to stay then the terms and conditions on which you are allowed to stay.|
|Use||What you intend to use the premises for defined for certainty. Always remember to make the intended use as comprehensive as possible and include any future uses you might have.|
|Outgoings||The charges which will apply in addition to the Rent. This could include rates and charges, insurances, body corporate charges and special services.|
|Taxes||This will include any future taxes and GST unless GST is dealt with specifically. Will not include Land Tax and other Commonwealth taxes.|
|Insurance||Covers which insurance policies you must take out or pay for.|
|Security||Covers building security and who pays for it.|
|Parking||Deals with car parking for the centre, staff car parking and any exclusive car parks.|
|Maintenance||Usually a part of Outgoings. If a budget for Outgoings is prepared then maintenance issues will be an item in the budget.|
|Alterations and Repairs||Explains the requirements for the landlord’s approval of alterations to be made and repairs which must be made if the property is damaged.|
|Assignment and Sub-Letting||Explains the requirements for the landlord’s approval for the transfer of the lease or the sub-letting of a part of the Leased Premises.|
|Options||Covers your right to extend the lease and the period of notice to be given to the landlord. Also, the terms on which the lease can be extended under option.|
|Defaults and Remedies||Explains what happens if you or the landlord fail to live up to the terms of the lease.|
|Destruction of Premises||Covers what happens if all or part of the building is destroyed.|
|The power of Attorney||You appoint the landlord as your Attorney. This is a usual term of a lease.|
|Guarantors||If a company is a tenant then it is usual for a director/s to provide personal guarantees to perform the terms of the lease.|
|Dispute Resolution||Some leases will provide a means by which disputes can be resolved without going to Court. Disputes under Retail Shop Leases are covered by the Act, which sets out a specific means of resolving disputes.|
|Demolition||It is now fashionable to include a demolition clause in leases. This allows the landlord to give notice to you as a tenant to leave the premises so that the Premises can be demolished and replaced.|
|Re-Location||Some leases will contain a clause which allows the landlord to move you to another shop in the complex but there are conditions which will apply to the relocation. In smaller complexes it is not usual for a clause of this type to be included in the lease.|
|Right of First Refusal||If you have negotiated this right to buy the Premises from the landlord if it wishes to sell the property then this could be to your advantage but specific conditions will apply to the implementation of this type of clause.|
The list set out above is not an exhaustive one. It is intended to assist you to have an understanding of some of the more common type lease clauses.
We hope that this paper helps you understand what Commercial Lease Terms are about and that you always have the right to negotiate the terms and conditions of the lease.
If you have questions about any of these Commercial Lease Terms or an impending lease, please contact Don Gayler for assistance.