Australia: Negotiate the terms of a commercial lease
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Negotiating the terms of a commercial lease, such as duration, exclusive use, and costs, can be a daunting experience for both tenant and landlord. Given the complexity of a commercial lease and the myriad of clauses that are part of the agreement, it is always recommended that you seek independent legal advice to first understand the terms of a lease before entering into any agreements. negotiations to ensure that your expectations, rights and obligations are taken into account. consideration during the negotiation process. It is also to ensure the best protection for you and your business, whether you are a tenant or an owner.
Areas of consideration in a commercial lease
Our commercial lawyers have helped many business owners and tenants negotiate the terms of a commercial lease. There are many areas to consider during the negotiation process, including the following:
- As a tenant, inspect the premises yourself to make sure it is an accurate representation of what is in the lease. For example, is the square footage included in the lease actually all usable space or does it include “dead space”? Measure the space yourself to make sure you’re not paying for square footage you aren’t using. If the measurements are not consistent, you may be able to negotiate a reduction in the rental fee.
- Make sure the rent reflects the market rate – landlords often assume that the rent paid by the current tenant is a benchmark for future rent negotiations and reviews. However, this may not accurately reflect the current market rate. Market rent can be determined across comparable properties.
- Avoid hidden and ambiguous terms in a commercial lease, which can be detrimental to either party to the lease. If a term of the lease is ambiguous, it can result in disputes and litigation between the parties. It is recommended to have very explicit and clear terms in a commercial lease to avoid cases of unnecessary and avoidable litigation and litigation.
- Negotiate flexible rental conditions – this is particularly crucial in the current landscape, given the disruption that the current pandemic has caused to many businesses. Running a business during the pandemic has left landlords and tenants more anxious and uncertain than ever.
The future of leases will see more and more apparent terms that allow parties to express options, “ways out” and flexibilities of leases (contracts), which may include force majeure and frustration clauses. It is important to make sure that you understand the implications of such clauses and to work closely with a commercial lawyer to negotiate these terms to ensure that you are not disadvantaged as a result.
- Inclusion of penalty charges or unjustified payment terms in the lease which are more favorable to one of the parties must be dealt with upfront during the negotiation phase. After the conclusion of the lease, any breach of a lease term can prove costly for the offender. Therefore, it is important to ensure that the lease establishes clear dispute resolution processes to facilitate disagreements between the parties.
Contact our commercial lawyers to help you negotiate your commercial lease
As commercial and real estate lawyers, we have extensive experience in assisting individuals and businesses in negotiating favorable lease terms, whether it is the owner or the tenant.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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