Negotiable terms in a commercial lease include duration, options to renew, annual rent increases, market rent reviews, permitted use, liability for land tax, and whether the Retail Leases Act is to apply. It can be daunting for both tenant and landlord. We can identify the risks and benefits to you of a lease and advise you on terms to better protect your interests. We can also negotiate on your behalf.
The terms of a commercial lease will vary and are usually influenced by factors such as the size of the premises, the uses permitted for it, and the market demand for it. If a tenant is a company, a person (frequently a company director) usually provides the landlord a ‘personal guarantee’ on behalf of the tenant. This is a promise by the guarantor to honour the company’s obligations under the lease if the company fails to.
Many leases of commercial premises in Melbourne and Victoria are retail leases. Retail leases are heavily regulated by the Retail Leases Act. Most of the obligations in the Act are on the landlord, to protect the tenant. A tenant has many remedies upon identifying a failure by a landlord to comply with the Act. For instance, a tenant may be entitled to a period of not paying outgoings, a period of reduced rent, or an additional period to remain in a premises at the end of a lease. We advise tenants and landlords on their rights and obligations under retail leases.
A tenant or landlord may assign, vary, renew, or surrender a lease by agreement. A business may also enter a licence to use a commercial property where it needs a flexible, temporary, or short-term premises. Under a licence, the licensee (the business paying to use the premises) has limited rights compared to a tenant. For instance, the licensee may not have the right to exclusive use of the premises. We advise and represent clients on these matters.