Posted
on 02/06/2011
Have you found your first office space or are you expanding and
moving into larger premises? When it comes to commercial property
for sale or lease, there are numerous legal terms and definitions
to understand - not to mention that a typical commercial property
lease can be up to 70 pages long. It's important that businesses
get professional legal advice when it comes to negotiating lease
terms and understanding the agreement that they are about to enter
into. However, an initial understanding of the terminology and the
important conditions surrounding a commercial property lease will
help you find a property that's right for your business.
Entering into a lease is usually a considerable commitment for
both the landlord and tenant and you'll want to make sure you set
terms that will fit your needs.
Among the many points you will need to understand, some of the
most common items to be found on any commercial property lease will
include:
Term and Options - most commercial leases
include a fixed lease term and then an option to extend the lease
for another term. For example a 1 x 1 lease would be a lease term
of 1 year with the option to extend the lease for an additional
year so long as the tenant is not in default. You will want to
consider the length of time you wish to stay on the premises and
the investment you'll be making in the "goodwill" of your company
by staying there. Tenants will need to exercise their option within
a certain amount of time that will be specified in the lease. Once
the lease term and option expire, it is up to the tenant and
landlord to renegotiate a lease.
Rent Review - how often will the rent be
reviewed and what are the terms for increasing the rate? Many
landlords will peg the rent to the Consumer Price Index while
others will change the rate based on market demand. Rent review can
greatly affect your business operations, especially if you plan on
locking in a long term lease.
Sub leasing and Assignment - if you're a
small business just starting out, you might consider leasing larger
premises and then sub leasing or assigning the extra space to
another business temporarily. If you want to assign your lease to
another party, you'll generally need to get the landlord's
approval, but you'll want the process to be a relatively
streamlined straightforward, without exorbitant costs.
Outgoings - these are the costs incurred
by the landlord for maintaining the common property, such as
bathrooms, foyer areas, lifts, security and other overheads.
Outgoings are usually factored into the rental rate based on the
floor space of the leased premises (if you are leasing 2% of the
total available floor space in the complex, you will be responsible
for 2% of the outgoings). Depending on the type of lease you enter
into, outgoings will be charged differently; in a net lease you
will have to pay outgoings on top of your rent (to be calculated
month to month) while in a gross lease, the outgoings have already
been factored in to the rental rate and will be subjected to the
rent review process.
Finding the right office space is like hunting for your own home
- you want to make sure you won't be facing any unpleasant
surprises down the track. Ask questions regarding the maintenance
of the common areas, and try to find out everything you can about
other tenants' experiences with the property. Gaining a better
understanding of common lease terms will help you find a place that
is the best fit for your business.
Sources:
http://www.quinnscattini.com.au/docfiles/Leasing.pdf