Australia Markets open in 1 hr 45 mins

9 things to remember when taking out a commercial lease

Property Observer
9 things to remember when taking out a commercial lease

Signing your business up for a property lease is a lot different than renting a home to live in.

Here’s nine things you should keep in mind when taking out a commercial lease.

1. IS THE RENT APPROPRIATE?

Exactly what space are you renting? Does it include common areas such as hallways, rest rooms, and elevators? How does the landlord measure the space –some measurement practices include the thickness of the walls. Also keep in mind that commercial lease agreements usually provide for an annual percentage-based rent increase.

Also read: Apartment market crash could lead to mass joblessness

2. SET COST PARAMETERS FROM THE START

Negotiate with the landlord for a cap on the percentage increase to avoid unmanageable costs later on with the rent going up when you least need it. Check to see if there is a use clause. Many lease agreements will incorporate a use clause to define the activity the tenant can engage in on the premises.

3. WHO’S RESPONSIBLE FOR WHAT?

Who will maintain and repair the premises, including the heating and air conditioning systems? Responsibilities for the building and any equipment are often shared between landlord and tenant. The agreement should spell this out clearly.

Also read: Is the Aussie property boom back?

4. SET YOUR OWN TIMEFRAME

Most landlords prefer long-term lease agreements. If it’s a new business, it might pay to ask the landlord for a short-term lease with an option to renew. This may raise the rent you pay, but it could be a better alternative than agreeing to a lengthy term.

5. CAN YOU MAKE CHANGES TO THE PROPERTY?

A lease should address what improvements or modifications can be made to the property, which party will pay for the improvements, and whether the tenant is responsible for returning the unit to its original condition at the end of the tenancy. It should also spell out who will own the improvements when the lease expires.

Also read: Asian home buyers less likely to default on their mortgage

6. REMEMBER THE LITTLE THINGS

If the business needs it, make sure that the lease agreement does not prohibit putting up signs that are visible from the street. Agree on who is responsible for rates, taxes, insurance and other outgoings; for example, contents insurance or council and water rates. It’s also important to check if the lease agreement allows subletting. This is important because the lessee is still responsible for paying the rent if the business fails or relocates. An assignment or sublet clause in place allows the business to find someone else to cover the rent.

7. KNOW YOUR RIGHTS

Does the lease have a Right of Assignment clause? If you have to sell the business, a Right of Assignment clause gives you the option of transferring the lease to a new tenant. Is there an option to renew the lease or expand the space you are renting? How would the lease be terminated? Is there a notice requirement? Are there penalties for early termination?

8. SEEK FINANCIAL ADVICE

Before you sign, you should check the deductibility of rent and your tax liabilities with your financial adviser. If the agreement requires the business to purchase leased goods or equipment, it could invalidate your right to claim rent as a tax deduction. A financial adviser is essential here.

Check rent deductibility and tax liabilities with a financial adviser before you sign a lease.

Also read: Sydney house median peaks over $1m again, but units turning into negative

9. ARE THERE ADDITIONAL CLAUSES?

If you are leasing premises in a shopping centre, it’s worth asking whether you have to comply with the centre’s fit out rules (shopping centres can often be more restrictive), whether you are required to contribute financially to the centre’s marketing and promotional activities and whether your business would be affected by any ownership plans to redevelop or expand the centre.

 

  • Finance
    Australian Associated Press

    AAP Markets Report October 24

    Movements on overseas markets.

  • Finance
    Australian Associated Press

    ASX in for steady open as Wall St rebuilds

    Australian shares are set for a steady open after Wall Street climbed back from sharp overnight losses, though economic worries have kept a lid on the market.

  • Finance
    Australian Associated Press

    Wall St tumbles led by weak industrials

    Weak industrials led by Caterpillar and 3M and tech stocks have added to the dour mood on Wall Street, with the three indexes diving more than 1 per cent.

  • Finance
    Australian Associated Press

    Energy leads widespread declines on ASX

    Energy and materials stocks have dragged the ASX back toward last week's six-month low.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Tuesday, October 23.

  • Finance
    Australian Associated Press

    Property settlement firm PEXA launches IPO

    Online property settlements company Property Exchange Australia is seeking to raise up to $862 million in an IPO.

  • Australia set for worst harvest in 10 yrs
    Finance
    Australian Associated Press

    Australia set for worst harvest in 10 yrs

    Rural analysts are predicting Australia's worst winter harvest in 10 years, with drought and overnight frosts ravaging eastern grain crops.

  • Finance
    Australian Associated Press

    Healthscope again targeted with $4.1bn bid

    BGH Capital and AustralianSuper have returned with another bid for Healthscope, five months after the private hospital operator rejected their takeover attempt.

  • Finance
    Australian Associated Press

    CBA $426m Indonesian insurance stake sale

    Commonwealth Bank is selling its 80 per cent stake in an Indonesian life insurance business and will boost its capital reserves with the profits.

  • Finance
    Australian Associated Press

    AAP Markets Report October 23

    Movements on overseas markets.

  • Turbulence ahead from elections: Deloitte
    Finance
    Australian Associated Press

    Turbulence ahead from elections: Deloitte

    Deloitte economist Chris Richardson says progress toward surplus could be unsettled as politicians try to woo voters in federal, NSW and Victorian elections.

  • Finance
    Australian Associated Press

    Australian share market closes lower again

    The Australian share market has closed lower, largely a result of international worries.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Monday, October 22.

  • Telstra outage hit 1,433 Triple Zero calls
    Finance
    Australian Associated Press

    Telstra outage hit 1,433 Triple Zero calls

    Telstra has to improve its network after an ACMA investigation found more than 1,400 Triple Zero calls went unconnected during an outage.

  • Finance
    Australian Associated Press

    WorleyParsons grows with $4.6b acquisition

    WorleyParsons is set to almost double in size after agreeing to acquire Jacobs Engineering's energy, chemicals and resources division in a $A4.6 billion deal.

  • Flight Centre shares fall on guidance
    Finance
    Australian Associated Press

    Flight Centre shares fall on guidance

    Flight Centre shares have fallen as much as 12 per cent with investors unimpressed by the travel provider's updated guidance.

  • Clearances lag heading into auction season
    Finance
    Australian Associated Press

    Clearances lag heading into auction season

    National capital city auction clearances have lagged below 50 per cent for the fourth straight week amid a widespread market downturn

  • Virgin Australia flags H1 profit rise
    Finance
    Australian Associated Press

    Virgin Australia flags H1 profit rise

    Virgin Australia expects to lift first-half underlying profit at least 22 per cent to $100 million after seeing its first-quarter revenue jump 9.7 per cent.

  • Finance
    Australian Associated Press

    AAP Markets Report October 22

    Movements on overseas markets.

  • Finance
    Australian Associated Press

    By-election shock to affect Aust markets

    The Australian share market is tipped to open lower again this week following the shock result in the Wentworth by-election.

  • Finance
    Australian Associated Press

    US S&P 500 slips on rates concerns

    Wall Street has finished the session flat to lower as worries about international trade tensions and rising interest rates weigh on market confidence.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Friday, October 19.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Friday, October 19.

  • Banks, energy lift but ASX in the red
    Finance
    Australian Associated Press

    Banks, energy lift but ASX in the red

    Australian shares are down but the market regained ground as the banks turned around a poor morning.

  • Finance
    Australian Associated Press

    High Court refuses $46m cartel fine appeal

    A Japanese car parts company ordered to pay a record $46 million fine for colluding with a competitor has been denied leave to appeal by the High Court.