Key Legal Checks Before Leasing a Business Premises
Signing a commercial lease is one of the more significant commitments a business can make, as the terms agreed to at the outset will govern the relationship with the landlord for the entire lease term. Many business owners focus on the location and the rent figure without giving the legal detail of the lease the attention it deserves, which can lead to costly surprises further down the track. Lawyers in Brisbane regularly assist business owners in reviewing leases before they're signed. This article will outline some of the key legal checks worth making before you commit to a commercial premises.
Understand What the Lease Actually Covers
Understanding the full scope of the financial obligations involved is an essential first step. Outgoings such as council rates, water charges, building insurance and land tax can be passed on to tenants under many commercial leases, and the specific treatment of these costs can vary considerably from one agreement to the next. The lease should also clearly define the premises being leased, including any car parks, storage areas or common spaces that are part of the arrangement. Lawyers in Brisbane can review the lease terms in detail and ensure that what you're signing accurately reflects what was agreed during negotiations.
Check the Permitted Use Clause Carefully
The permitted use clause in a commercial lease sets out what the premises can legally be used for, and it's an area that catches many tenants off guard. If the permitted use is defined too narrowly, a business that evolves over the lease term may find itself in breach of the agreement simply by expanding the range of its operations. Conversely, a permitted use that doesn't align with the relevant zoning or council requirements can create compliance issues entirely separate from the lease itself. Before signing, it's worth confirming that the permitted use reflects how the premises will actually be used, both now and in the foreseeable future, and that it's consistent with the applicable planning requirements.
Review the Rent Review and Option Provisions
Rent review mechanisms and option clauses have a substantial impact on the long-term cost and security of a commercial tenancy. Rent reviews can be structured in several different ways, including fixed increases, market reviews or Consumer Price Index adjustments, and each carries different implications for how affordable the premises will be over time. Option clauses, which give the tenant the right to renew the lease at the end of the initial term, are equally important, as they provide security of tenure that's valuable to any business that invests in fitting out and operating from a location. Lawyers in Brisbane can explain how the specific review and option mechanisms in a lease are likely to operate in practice and whether any terms warrant negotiation before the agreement is finalised.
