Publications – Leases

ANTIPPA LAWYERS

Since 1961

THE INVESTMENT OF A LEASE

Why it is important to have a written lease?

Establishing a business can be a challenge and yet maintaining a well developed business can be a more daunting task. Foremost in most face-to-face retail businesses is the issue of position.  Invariably, this will involve the tenant considering a lease.
A written lease will help:

  • To clearly establish the obligations and the rights of the landlord and the tenant;
  • To provide certainty for the continuation of the business of the tenant and the income of the landlord;
  • To avoid unnecessary disputes and associated costs of an ambiguity of the terms of a lease;
  • To provide a mechanism for dispute resolution.

Stability and protection are important for the tenant.  This will enable the business to continue at those premises for the duration of the lease and any further options.  Consequently, the business can grow and develop goodwill.  A stable lease will avoid the costs of removal and re-installation of plant and equipment.  The tenant can rely on the lease to operate its business without fear of unforeseen eviction or unwarranted termination by the landlord.

Further option terms are advantageous for the tenant.  The tenant would have the right to continue operating its business at the same premises and, therefore, maintain its goodwill.  Any option should be properly exercised in writing and accepted by the landlord.  If the business is not as successful at those premises as anticipated, the tenant may choose not to exercise an option or to renew the lease.  No costs would be payable to surrender the lease at the end of the term.

It is advantageous to have a written lease of a long duration composed of multiple options.  Rent is primarily based on floor area for that location.  The type of business and its goodwill can also have a bearing on the rent assessment.  The method of rent increase each year during the term of the lease, during any further term and at the commencement of the further terms should be considered very carefully.  The methodology cannot usually be changed later.  A business may endure through good and poor economic climates.  The parties to a lease cannot change the rent review mechanism depending upon the economic climate.  These are matters of negotiation and can make all the difference as to whether a business will be successful and for the premises to be continued to be let.

This list is not exhaustive.  It presents only some of the factors for consideration as to why it is important to commit to writing the lease negotiations.  A written lease will consider issues, from the outset, which perhaps the parties had not countenanced in their pre-lease negotiations.  The parties should seek legal advice before entering a lease so that the lease is drawn properly considering each of the issues.

The law relating to leasing is complex.  Our 50 years of experience in commercial retail leasing, property law, other small business and property investor issues enable us to provide you with proper legal advice before entering a lease.  It is always cheaper to ask for advice before you sign.  After you sign, it is too late.  Please contact us should you require our assistance.

ANTIPPA LAWYERS

Solving disputes for Business, Commercial & Property since 1961
Room 3 Level 5
2 Collins Street
Melbourne, 3000,
Victoria, Australia.
Tel: + 61 3 9650 2115
Fax: + 61 3 9650 2762
E-mail: lawyers@antippa.com.au
More information: http://www.antippa.com.au