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If you do not already have suitable premises for your business, you can choose to either buy or lease. The best option for you can be determined with the help of financial and legal professionals. If you decide to lease premises, this guide offers practical advice to help you enter a lease and avoid common pitfalls.
Commercial and retail leases set out the legal terms and conditions under which a business may occupy premises. Before entering a lease agreement, whether you are the lessor or lessee, it is highly recommended to have an experienced property lawyer formally prepare and review the agreement. This ensures that your interests are protected and helps maintain a balance of rights between the parties. A clear lease agreement with expertly drafted terms can minimise lease disputes and save both parties time and costs.
When you identify a suitable location for your business, ensure you know everything about the premises before negotiating with the letting agent. Remember that the landlord and agent have limited disclosure obligations (e.g., they are not required to disclose if natural disasters previously damaged the property).
You may receive a letter of offer or intention to sign. Never sign a letter of offer, letter of intention, lease, or pay any deposit without fully understanding the terms and conditions. A lease can be crucial to the profitability of a business, often being central to its goodwill, value, and future sales. Occupancy costs may be a significant business overhead. Consult your financial advisors about the best way to structure your lease and understand its financial impact. Always obtain legal and financial assistance before committing anything to writing.
A lease is a contract that outlines the terms of possessing a property for a specified time at an agreed fee. Different laws and conditions apply depending on the type of business, the premises’ location, and the tenancy’s length. Failing to understand your rights and the lease terms may cause you to breach the lease or lose important rights.
Leases are legally binding, so it is essential to have your legal advisor thoroughly review the lease before signing. Your legal advisor can help you avoid expensive misunderstandings that could cost you money and your business.
If you are leasing premises for retail purposes or within a retail shopping center (where five or more retail shops are located), the retail shop leases legislation will apply. This legislation sets mandatory minimum standards for retail shop leases in Queensland and offers tenants more protection than standard commercial leases. It covers disclosure obligations, turnover rent, options to extend, outgoings payable and recovery requirements, rent review mechanisms, trading hours, relocation and demolition procedures, dispute resolution, and tenant compensation rights.
Short-term leases provide flexibility but also carry the risk of not being able to renew your lease or recover your investment in the business. The terms of maintaining the premises are usually the same as for long-term occupation. Discuss options with your legal and financial advisors.
Leasing for longer periods ensures stability but may have a more considerable financial impact if you are unable to trade. To protect your rights as a long-term occupier, leases for more than three years require registration with the Titles Office.
The terms of the lease are negotiable. Have your legal and financial advisors review the lease to ensure fair terms. Consider the:
Once you decide to lease certain premises, the usual process is:
In addition to rent and outgoings, tenants may need to pay lease registration fees, mortgage consent fees, and the cost of any survey plan. In some commercial leases, landlords require tenants to pay their legal fees, which can be negotiable.
Other costs may include:
Both parties should obtain independent legal advice regarding their rights and obligations to minimize lease disputes. When both parties have a proper understanding of the agreement, their rights, and their obligations, it helps prevent misunderstandings and potential conflicts.
This guide is for informational purposes and does not constitute legal advice. For specific legal concerns, consult your solicitor.
If you would like to discuss your personal circumstances with one of our experienced family lawyers, please contact our office today on 1300 244 342 or email us at admin@kingsfordlawyers.com.au and one of our conveyancers will assist you.
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