Entering a commercial or retail lease can be daunting. The sums of money involved when you multiply the annual rent by the number of years in the lease term can be quite significant. With such large sums of money and liability at stake, there is risk for both tenants and landlords, and each of those parties must give serious consideration to a range of issues.
WHAT LEASES COVER
Leases are lengthy legal documents – there are many things to cover. These matters include:
- how rent is reviewed;
- who is to pay outgoings and what is included in outgoings;
- what improvements the parties will make to the premises;
- make good obligations when the lease ends;
- the provision of personal or bank guarantees; and
- what happens if a party to the lease defaults.
Given the length and complexity of most leases, they should be carefully reviewed to ensure that they reflect the true agreement between the landlord and the tenant.
AGREEMENTS TO LEASE
In many instances, an Agreement to Lease is entered into before the formal documentation is produced, which is often prepared by an agent. The main purpose of an Agreement to Lease, also called an ‘Offer to Lease’ or ‘Letter of Intent’, is to set out the basic terms of the proposed lease. It is very important that your legal adviser is involved in this pre-agreement stage, as the binding nature of these documents can be unclear. It is also difficult to negotiate away from these “pre agreement” terms in the formal lease.
If you are a landlord or a tenant and are considering a lease, please call us for advice prior to signing any documentation, even if the agent advises you that you are not bound by the document you are signing.