Commercial Lease Agreement

Commercial Lease Agreement

Leasing law is biased against the Landlord in Australia. Fight back by getting your Tenant to sign a Commercial Lease. This Lease Agreement is suitable for all Australian commercial property. It also accommodates:

1. where the tenant is acting as trustee of a trust
2. guarantors

Self-Managed Super Fund own commercial property?

What is the sole purpose of your Self-Managed Superannuation Funds (SMSF)? By law, your SMSF only benefits retired members. Take care that a member does not accidentally benefit from the SMSF. There are special issues when an SMSF owns and rents out commercial property.

The rules are stricter when your SMSF leases a commercial property to a member. This includes your member’s family and business.

Our Commercial Lease complies with the Superannuation law, including:

1. a compliant written lease agreement
2. an arm’s length transaction – the trustee cannot give ‘special treatment’ to a related party through a lease for commercial property. E.g. rent is at a market rate etc…
3. the requirement for duly paid rent, according to the terms of the Commercial Lease
4. the trustee takes appropriate action to remedy breaches
5. sufficient evidence for the SMSF auditor and ATO that it confers no member advantage

The law firm’s Commercial Lease:

• provides low-cost dispute resolution
• reduces unconscionable conduct claims against the Landlord

Commercial lease vs Retail Lease

In Australia, there are two types of leased properties: residential and commercial. To break that down further, commercial leases are either: ‘commercial’ or ‘retail’. Each State regulates both.

‘Commercial’ leases are for offices, warehouses and industrial sites. There is little ‘retail’ activity. A ‘commercial’ lease ignores rules that protect the tenant. The tenant and landlord have equal power.

However, ‘retail’ tenants are ‘at the mercy’ of the big shopping centre owners. Shopping centres control 38% of Australian retail space. There is $45B of shopping centres in the 6 biggest owners. They are: Westfields, CFX, Federation, AMP, Dexus and Lend Lease. Therefore, in the interest of ‘fairness’, a ‘retail’ landlord’s powers are restricted. You are building only a Commercial Lease. This is not a Retail Shop Lease. If you need a Retails Shop Lease telephone us.

Subletting?

The Tenant has no authority to sub-let under this Lease. This is unless the Landlord and Tenant mutually agree. The ‘waive and variation’ clause permits subletting and assignment – but only with the Landlord’s consent.

Landlord protected from Damages

If the Tenant defaults in payment, the landlord recovers agreed on damages. A unique formula calculates damages in this Commercial Lease. This accords with the Court cases.

Landlord gains flexibility with waivers

Many lease agreements are not updatable. However, with our lease, the Landlord may alter the Commercial Lease, together with the Tenant. This suits changing needs. The Landlord escapes that obligation.

Why a Guarantor?

A Lease agreement is between two parties: the landlord and the tenant. Sometimes, a guarantor acts as a third party to give extra security to the landlord.

A guarantor co-signs the lease agreement with the tenant. The guarantor takes on the tenant’s financial and other obligations under the lease.

What is a Guarantor?

The guarantor in a Lease agreement adds and signs their name to the contract. The guarantor agrees to pay if the tenant is not able to pay the rent. Specific clauses of the lease outline the responsibilities of the lease guarantor. These include when payment is to be made and other responsibilities.

A guarantor stands in the shoes of the tenant. Whatever the tenant fails to do under the lease the guarantor must now do. The guarantor agrees to guarantee all of the tenant’s obligations under the lease. These obligations are not just the payment of rent. It includes such things as the cost of making good damage to the premises, default by the tenant and early termination of lease, the loss suffered by the landlord in reinstating and re-letting the premises, the cost of the reduction in rent if the premises are re-let on terms less advantageous to the landlord and legal costs for the tenant default.

It is an onerous responsibility.

A Landlord often wants another person to guarantee the performance of the tenant. Perhaps the tenant is just a company with no assets.

Landlords often demand a guarantor when the tenant has little income or assets. Perhaps the tenant’s income or credit score is not enough to secure them the desired lease.

Redevelopment and relocation clauses

Automatically, we put in a demolition and redevelopment clause into your Lease. It allows the landlord to terminate a lease early so you can carry out major works to renovate or redevelop the premises.

Tenant gives Power of Attorney to Landlord

When the lease it over the Tenant is gone. But what if the Tenant put a caveat over your property? The POA helps get the caveat and other encumbrances off your property.