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February 2011

A hassle-free lease contains all relevant terms and conditions and clearly identifies all rights and responsibilities. Leases for business premises are usually prepared by the owner’s solicitor. So, if you intend to lease premises for a business it is important that you and your solicitor carefully check and agree on the details before you sign.

Initial negotiations

When you believe you have found the right premises for your business the letting agent will have you a letter of offer or intention, for you to sign.

Do not sign or pay any deposit unless the offer clearly states that it is subject to a solicitor’s approval of the lease with a full refund of the deposit if the lease does not go ahead.

The Lease

When you have received the lease prepared by the owner’s solicitor, it should clearly set out the terms and contain the rights and responsibilities of the owner (lessor) and yourself (lessee). For your protection and to minimize litigation and disputes, have a lawyer thoroughly check the details before you sign.

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)

If you intend to lease a retail shop it is vital that you are fully aware of the provisions of this Act.

It deals specifically with the requirement of a disclosure statement from the owner to you and other issues including:

  • rent review;
  • turnover rent and figures;
  • promotional levies

Terms of the lease

The terms of a lease are negotiable so speak to one of our solicitors about inspecting the lease to be sure the terms are fair.

Consider the following:

  • the initial rent and the method of increasing the rent should reflect the offer
  • your ability to transfer or assign the lease if you decide to sell, and the expense of doing so the possibility of subletting the premises
  • whether local town planning laws allow your business to operate
  • your rights to end the lease if the premises are damaged or destroyed
  • duration of the lease and right to renew it
  • who pays for:
    1. keeping the premises in good repair;
    2. rates and taxes;
    3. outgoings and other charges; and
    4. all the additions, improvements, and fixtures made during the lease
  • the types of insurance required and who obtains it;
  • the types of insurance required and who obtains it;
  • your obligation to remove partitions and reinstate the premises after expiry;
  • the consequences of failing to pay rent;
  • your right to end the lease before it expires;
  • ways of resolving any disputes;
  • whether the Commercial Tenancy (Retail Shops) Agreements Act 185 (WA) applies to your lease and what that means
  • special obligations under a shopping centre lease; and

Securing your interests

Apart from negotiating the best possible terms, iLaw will:

  • ensure the lease reflects the commercial terms agreed to;
  • advise you on the operation of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (if applicable);
  • advise you on your responsibilities under the body corporate rules, if the premises is strata titled;
  • advise you of the effect of easements or other competing interests; and
  • advise you on your obligations under the lease.

Approved Lease

The lease is usually sent to the tenant’s solicitor for their approval or amendment. Once the terms are finalized, the tenant and then the landlord will sign the lease. The landlord’s solicitor will arrange for the lease to be stamped and, if necessary, registered on the State’s Land Register.

As an ongoing tenant

Be sure to:

  • comply with the conditions of the lease
  • give notice in time to renew the lease
  • understand your rights if you stay on without renewing the lease
  • obtain the landlord’s consent if you wish to change the type of business you run
  • understand the landlord’s right to end the lease
Please Note: The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of iLaw’s legal practitioners who will consider their particular circumstances