A commercial property lease is a rental agreement between a lessor and lessee to use an office, warehouse or a similar facility to run a business. Entering into a commercial property lease agreement is a significant business decision and therefore, proper due diligence should be conducted to analyse the terms and conditions of the agreement and to understand the rights and obligations you are agreeing to under the lease.

Since a commercial property lease is a legally binding agreement affecting the value of a business, it is always recommended to seek legal advice in drafting and negotiating the lease.

Contents of a commercial lease

A commercial lease should at a minimum contain the following details:

(a) The parties to the agreement;

(b) The property to be leased;

(c) The rent payable and how will rental increase be determined;

(d) The lease commencement and termination date;

(e) Any option(s) to renew the lease ;

(f) How the leased property will be used;

(g) What are the parties’ obligations under the lease; and

(h) What are the outgoings payable by the lessee.

Factors to consider in a commercial property lease

Both the lessor and the lessee needs to consider certain important factors in a commercial property lease:

(a) Lessor to consider

Two of the lessor’s main concerns are the rent income and the state of the premises being leased.

The lease should include provisions on how the lessor can enforce the payment of rent and ensure the building is kept in good condition and state of repair.

If the lessee is a company the lessor should consider obtaining a bank guarantee from the lessee or have a guarantor to ensure that the leasee will carry out its obligations under the lease.

(b) Lessee to consider

in addition to the rent payable and lease term, the lessee should consider what outgoings it will be required to pay under the lease, the kind of repairs it is responsible to pay for and the make good requirements when they vacate the premises.

other matters like handing over of the property for fit-out and the responsibility of fit-out cost etc also needs to be determined and negotiated between the parties.

Rights and obligations of the lessor and the lessee

(a) Lessor’s rights and obligations

The lessor has the right to receive timely payment of rent and incidental charges, the right to enter the property for inspection and carrying out repairs and also entry is permitted in the event of non-payment of rent and applicable taxes etc.

The lessor can also resume possession of the leased property if there is a fundamental breach of the terms of the commercial agreement or the lessee’s conduct constitutes a ‘repudiation’ of the lease.

(b) Lessee’s rights and obligations

The lessee’s rights and obligations include the right to quiet and peaceful enjoyment of the property without interruption, timely payment of lease rent and incidental costs, using the leased property in a “tenant-like” manner, handing over of the property on expiry of the lease term, obligation to remedy any damage caused to the property etc.

Termination of lease

A lease can come to an end upon expiry of the lease term. In certain circumstances, the lease can end prior to the expiry of the lease term. Early termination of the lease can occur due to:

(a) The lessee surrendering of the lease; or

(b) breach of fundamental term by either the lessor or the lessee.

Stamp duty and legal cost

The lessor can request that the lessee pay both parties’ legal costs.

Owen Hodge lawyers can not only guide you with expert legal advice on all aspects of commercial property leasing but can also assist you in drafting lease agreements, negotiating terms of the lease, assignment, enforcing any breach, recovery of possession, lease renewals.

Building & Construction Law
Building Warranty Claims
Commercial Conveyancing: The Buying Process
Contract Disputes
Corporate Mergers & Acquisitions
Law & Business
Retail Lease Act
What To Look At In A Commercial Lease Contract
Business Mergers & Acquisitions
Commercial Contracts
Commercial Contracts Between Businesses for Supply or Sale of Goods
Commercial Contracts
Commercial Conveyancing: The Selling Process
Commercial Conveyancing
Commercial Leases

Commercial Lease Agreements
Commercial Loan Agreements
Commercial Property Leasing
Consumer Credit Law
Franchising Disputes
Land And Environment Laws Particular To Developers
The Personal Property Securities Act
Property Developments
Property Leasing
Rural Conveyancing
Terms Of The Lease That Need To Be Considered

How can we help?

Fill out the form below and we’ll get in touch with you to discuss how we can help