Signing a lease is one of the biggest and most important commitments for your business. Many tenants focus on the ‘rent’ , or the ‘term’ and skim over that clauses that are most likely to end in dispute.

Here are three clauses worth understanding before you sign:

1. Make-Good Obligations

The make good or yielding up clauses describe how you must return the premises when the lease ends. 

Tenants overlook it at the start because it can be years away and they are excited to get into the new premises.

What to look for:

• Does the clause define "make-good" clearly, or is it vague?

• Do you return it to the ‘condition as at commencement’, or an ‘empty shell’ – or something else?

• Are you required to remove all improvements, or only those the landlord specifically requests?

What to negotiate:

A very clear understanding of what will be required (photos may assist to show current

2. Rent Reviews

Rent reviews are in every commercial lease. Its crucial you understand how that will affect your expenses each year.

What to look for:

• How will the rent increase and how often (CPI, fixed etc)

• Are there specific clauses which prevent rent decreasing or setting limits (cap and collar)?

• Is there a market review, and is the process set out ?

What to negotiate:

Once you understand what the lease says, ask questions or ask for amendments to remove uncertainty.

3. Assignment and Subletting Rights

You’re excited for your new premises, we get it. Business is going well, and you aren’t looking to sell. But things change, and taking the time at the start to get it right could save you a lot of time and money in the future.

The assignment and subletting clauses are often overlooked – take the time to read them.

What to look for:

• Does the lease let you assign and/or sublet?

• What conditions are placed on that (ie new tenant must meet certain requirements)?

What to negotiate:

Flexibility, while also understanding the landlord needs to protect its asset. Look to limit conditions and streamline process and timeframe.

Takeaways

There is more to a lease then the “commercial terms” you negotiated. Take the time to get it right now, and you will thank yourself down the track. These are just 3 common areas that can be contentious, there are many more and its always good to speak to an experienced property lawyer who can help guide you.

Disclaimer: This advice is general in nature and is not intended to be legal advice.

If you would like legal advice, please call our office on (07) 5619 0440 and we would be pleased to assist you.