Leasing a commercial space is a huge step for any SME owner. It’s also a very exciting one, as it signifies the moment your vision turns into a tangible reality. But the process of leasing a new commercial space can be stressful and is not a decision that should be entered into lightly.
Besides worrying over details such as where you want your space to be located, its size and structure and what shade of paint will work best, there are a number of legal and financial considerations that need to be taken into account.
We always recommend gaining professional legal advice when making a major business decision such as taking out a commercial lease. However, as a starting point, we have provided a list of common pitfalls that are worth considering.*
Your lease term – is it worth the investment?
Certain aspects of your fit out simply can’t be moved to another premises. You’ll likely be investing a lot of capital into your fit out, so it’s essential to settle on a lease term that will ensure you get value out of this investment.
At the same time, it’s important to understand the ramifications of locking yourself into a long-term lease (especially if you are entering into a risky venture).
If you are relatively certain that you are going to be successful, rather than securing a long-term lease, we recommend looking at securing consecutive options in your favour. This allows for flexibility in the future, once your business is up and running.
Go back to basics
When entering into a commercial lease, paying attention to the basics can save you a great deal of strife in the long run. These checks may seem obvious but it’s worth ensuring that the following considerations are all double (and triple) checked when entering into your lease:
- Does the lease describe the premises you have inspected (including any parking that is included)?
- Does the Landlord own ALL of the property they are leasing?
- Is the property you are leasing currently being leased by someone else?
- Do you have a copy of your fully signed lease?
Do your due diligence to ensure you don’t enter into any disputes that could negatively impact your business down the road.
Can you use your space for your desired purpose?
This may sound like a no brainer, but be sure that you can legally use the premises for the business you want to operate. Check Development Approval requirements to ensure you have development consent for the business you want to conduct.
Even if your lease explicitly states that the premises can be used for that purpose, if the purpose cannot be approved by local government you will have to wear the consequences.
On that note, it’s best to ensure that the ‘permitted use’ on your lease is broad as this will make it easier to assign or sub-lease the lease should you no longer wish to operate business from those premises. For example, avoid a specific permitted use such as ‘Subway store’ and aim for a broad scope such as ‘Retail store’ or ‘Any legally permitted use’.
Obviously there are a number of other considerations to take into account, especially surrounding your rent and payment options, but by undertaking these basic due diligence checks, you can avoid the risk of serious complications with your lease agreement down the road.
If you are considering entering into a commercial lease, contact the Elite Legal team today to discuss your rights and ensure you receive the fairest outcomes for your business.
*Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only, and the contents of this blog do not constitute legal advice and should not be used as such. Elite Legal recommends seeking formal legal or professional advice in particular matters.