Commercial lease is the lifeline of business, it is signed well, even if the future business is not good, the lease itself is valuable; conversely, if the lease is not signed well, good business will be affected. When you sign a lease, you are signing a legal contract. All the rights and obligations of the owner and tenant are embodied in the lease. Therefore, it is wise to consult a lawyer before signing the lease.
So, what issues should we pay attention to before signing the contract? What about a sublease? What if you want to sell the lease? What key points should be grasped before signing a lease? We offer the following suggestions to help our friends who do business in Australia:
I. legal basis for Australian commercial leases
In NSW (New South Wales), retail leases are signed primarily under the Retail leases Act 1994 (Retail Leases Act 1994). The Act imposes strict obligations on owners and tenants of retail stores below 1000 square meters. For example, the landlord must provide a public statement to the tenant within seven days of the commencement of the lease to inform the tenant of the important public information about the property and the lease. Similarly, tenants need to provide a public statement to the owner.
II. What is a commercial lease
Commercial lease is a kind of legal contract between owner and merchant to regulate the rights and obligations of both parties. The parties may negotiate to determine the terms of the lease. Generally speaking, business lease dates include the following:
- The beginning of the lease, the end of the time;
- Whether the lease contains a renewal clause and how the renewal power is exercised;
- How much is the rent, how and when the rent is increased;
- In addition to the rent, other miscellaneous fees are provided for;
- Whether a security deposit is required;
- The responsibility and obligation of the owner;
- The responsibilities and obligations of the tenant;
- Requirements for insurance;
- The requirement of decorating storefront;
- Requirements for subletting and selling business, etc.
A, Retail leases
If your business category is on the Retail Leasing Act 1994, then this Act applies to your case. Retail leases have more provisions on how leases operate. Sometimes your business is not on this list, but if it is in a shopping mall, it may still fall within the scope of this Act. If you are not sure, please consult your lawyer.
B, shops in shopping malls
Because of easy parking and heavy passenger traffic, more and more businesses choose to open their business in shopping malls or malls. Although the shopping centre has a large number of public venues and car parks, maintenance teams, security guards, publicity activities, lighting, air conditioning and management companies, the additional expenses are also higher. Therefore, some shopping arcade tenants are required to share the costs. Generally, the ratio of the rented area to the total area of the mall is calculated. Some market leases require a certain percentage point of revenue to be paid as an additional rent, which should be deleted as far as possible, otherwise it would be extremely inconvenient and controversial to review business books on a regular basis.
In addition, it should be noted that shopping malls and shopping malls have business hours requirements and regulations. There is a lack of flexibility compared to independent street shops. Both have advantages and disadvantages, it is recommended that you should contact your lawyer before signing the contract, and listen to expert advice to avoid unnecessary trouble.
IV. How to negotiate leases with owners / shopping centres
Before signing the lease, try to do your homework, including investigating other businesses, sales, traffic, etc. When a business starts, it usually takes a lot of time, energy, and money to do renovations and other establishment, and it takes a while for the business to get on track. Therefore, the author thinks that at this time, we should strive for a 33-year lease or 55-year lease. Otherwise, as soon as the business begins to return to make money, the lease expires and there is another place to start again. Loss of decoration costs do not say, but also lose hard to accumulate the customer base. As a result, the five-year Option is both beneficial to the continuation of business and to future transfers.
Retail leases should last at least five years. If you want to sign a retail lease for less than five years, the law requires you to provide the owner with a certificate. This certificate can only be signed by a lawyer. The optional term of Option Term in commercial leases guarantees the tenant's right to renew the lease. In general, the tenant is required to notify (Written Notice). Of a written renewal of the lease at least six months before the lease expires The owner cannot refuse to renew the contract without cause.
To operate a shop in a shopping centre, tenants have a "sharp weapon" that can avoid competition, that is, to require in the contract that "there can be no more stores with the same scope of business in the same mall" and so on, so as to ensure that there is a "single show" in the mall. There are no competitors. For example: we helped a Chinese restaurant sign this clause and attached the menu to the contract with French fries attached to it. Later, a brand of fast-food fries shop entered the mall, and the business scope of the Chinese restaurant collision, the owner constitutes a default, but the owner has signed a lease with the fast-food fries shop, if the contract is broken, the loss is heavy. Therefore, owners can only make concessions to reduce the rent of Chinese restaurants, only to reach a settlement.
V. renovation issues
In general, the tenant usually pays for part or all of the shop installation and decoration. Moreover, tenants may have to bear the cost of restoring the store to its original status at the end of the lease, unless they have a written agreement allowing the store to remain in its current state. During the renovation period, the tenant must ensure that the rent can be paid, or negotiate with the owner to obtain a rent-free period.
In addition, shopping malls usually have building standards for shop decoration. Owners (or agents) must provide their standards so that the tenant can calculate whether he or she can afford to pay for the furnishings. The landlord must inform the tenant of this information in writing before the lease begins.
Some commercial centers sublet shops, in addition to rent and management fees, the lease also requires tenants to share rent, maintenance costs, cleaning costs, and so on. In this case, the tenant should be asked to look at the landlord's maintenance records and find out how much is charged outside the rent. The expenses involved in commercial leases are not only so simple as rent, but also a lot of expenses.
VI. How rent increases are calculated
Rent increases in proportion, when the relevant provisions, will be reflected in the lease. Specific provisions, such as:
- Rents generally rise only once every 12 months;
- Each rent change may not be calculated in two ways, giving one party the right to choose one of them (for example, the higher one cannot be chosen between 5% or the consumption index);
- In a lease, rent cannot be reduced when a method of calculation is used (for example, the lease cannot specify: 'change of rent based on the current market price of rent, provided that the market price of rent does not fall').
VII. Sublease or sale
Commonly known as "sublet", in fact, covers the law of two ways of change "sublet" and "lease transfer." According to the law, "sub-lease" means that the lease relationship of the original lessee is not discharged, and the "assignment of the lessee" is the direct substitution of the new lessee for the original lessee to establish a lease relationship with the lessor. In these two forms, it is necessary to determine the owner's written consent, sublease compensation and other issues. Any business has its own risks, and in the event of failure, it is no longer realistic to continue to perform the lease, if there are good sub-lease or sub-let terms in the lease that allow tenants to sublease to others. Obviously, it can help tenants reduce the risk of default and legal liability to a certain extent.
When you want to sell your business, you usually sell the lease together. The duration of the remaining lease may affect the price of your sale. You need to submit a written request to the owner, unless the owner gives you a good reason, the owner is not allowed to refuse your request. However, the owner will decide whether to sign or renew the contract based on the new tenant's business experience, age, financial situation and reputation. Commercial lease is not a game, once signed or breached, it will have great legal and economic consequences on both sides. Therefore, we hope that you can contact your lawyer for your best interests.
VIII. If business is not good, can the lease be terminated ahead of schedule
Since the lease is a legal contract, once signed, the tenant will have to bear rent and other obligations for a fixed period of time, that is, even if business is not good, the tenant will have to bear all the costs, including the rent, for the entire term of the lease. Unless the owner agrees to terminate the lease in advance without holding the tenant accountable.
