Commercial Lease Negotiation:

A commercial lease is a legally binding agreement between the lessor (property owner) and the tenant or lessee (business owner) that sets out all the terms and conditions for the lease of a property. During the term of your lease, it is important that you comply with all of the conditions set out in the lease and be aware of the responsibilities of both parties, as well as how much discretion you have with making changes to the property to suit your business needs.

Here’s a few key points to help negotiate a commercial lease that works for you.

Before Signing a Lease

A commercial lease is a serious financial commitment and is not one that should be entered into without consideration of the terms. We recommend that before signing anything, you do your due-diligence. As a starting point, New South Wales Small Business Commissioner suggests that you check with the local council to ensure the business you are wanting to operate is permitted in that zoning. They also highlight the importance of seeking legal advice before signing a lease to make sure that the obligations of you as the lessee, as well as those of the lessor are understood. Seeking legal advice may also help you to negotiate better terms if required.

Avoiding and Dealing with Disputes

When you enter into an agreement, it is a good idea to keep accurate and consistent documentation of any meetings or discussions regarding the lease. This should happen both before and after signing any documentation. You can do this by keeping details of everything that was discussed including noting the time, date and location; general meeting minutes. This can also help to resolve any issues quickly and can result in a more favourable outcome for you should any dispute arise.

Ending a Lease

The end of a lease can have different outcomes depending on the original contract you entered into. Something you should strongly consider is having a clause in your contract that allows you to renew the lease on the same terms as the original elapsed period. This is mostly referred to as an option to renew the term of the lease at the end of the original lease. If you don’t have this clause in your lease, it means that the landlord can choose to either end your lease or can even increase the rent as they see fit. It is strongly recommended to include this clause, which usually needs to be exercised three to six months prior to the end of your lease term, but you should carefully check the period in your negotiated lease.