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By Mikaela Frame
Whether you’re starting a new business, leasing a commercial premises or purchasing an existing business, understanding your lease is an important part of protecting your interests.
A common misconception is that you only need a lawyer to look at a lease if it runs for three years or more. This isn’t the case. Even a shorter-term lease can contain provisions that have significant financial and legal consequences.
Should a lawyer review your lease?
Whether you’re a landlord or a tenant, having a lawyer review a lease before you sign it can help you understand exactly what you’re agreeing to.
For tenants, a lawyer can identify provisions that may be particularly disadvantageous, including obligations around rent, outgoings, repairs, maintenance, make-good requirements, termination and renewal.
For landlords, legal advice can help ensure the terms of the lease comply with applicable legislation and that the agreement is properly structured. Certain provisions may be unenforceable or inconsistent with legislation, so getting advice early can help avoid problems later.
Importantly, legal advice isn’t only useful when a lease is being drafted. If you’ve already received a lease prepared by the other party, you can still have it reviewed before signing.
Retail lease vs commercial lease: what’s the difference?
Retail and commercial leases are not necessarily the same.
Retail leases are subject to additional legislation and requirements that can place specific obligations and restrictions on landlords. Depending on the premises and the type of business being operated, a lease may fall within the relevant retail leasing legislation.
Examples of businesses that may operate under a retail lease include:
• Hairdressers and barbers
• Newsagents
• Restaurants and cafés
• Other businesses operating from retail premises
Non-retail commercial leases can cover a much broader range of premises and businesses, including:
• Industrial warehouses
• Data centres
• Medical consulting rooms
• Other commercial or warehouse premises
Determining which type of lease applies is important, as the legal requirements can be significantly different.
Buying a business with an existing lease
If you’re purchasing a business that operates from leased premises, don’t assume that the lease automatically transfers to you with the purchase.
The sale of a business and the transfer of a lease are separate legal matters. Depending on the terms of the existing lease, the landlord may need to provide consent to an assignment, or a new lease or revised terms may need to be negotiated.
This is why it’s important to obtain legal advice before completing the purchase of a business.
A lawyer can review the existing lease, identify your obligations, determine whether the lease can be transferred and help you understand what needs to happen before the purchase proceeds.
Get advice before you sign
A lease is more than just an agreement about how much rent you’ll pay. It can set out significant obligations that continue throughout the life of your tenancy.
Whether you’re a tenant entering into a new lease, a landlord preparing an agreement, or a business purchaser taking over an existing premises, getting legal advice early can help you understand your position and avoid costly issues down the track.
At Nikolovski Lawyers, we can assist with reviewing, negotiating and advising on commercial and retail leases, whether you’re entering into a new lease or dealing with an existing agreement.
