What you need to know before signing a commercial lease

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A commercial lease is a legally binding agreement between a landlord and a business tenant for the rental of property. As the future prospects of your business could rely on the terms of a lease agreement with the landlord, getting it right from the beginning is crucial.

Difference between residential and commercial:
Different to residential leases, commercial leases are generally more complicated as the terms can vary significantly from lease to lease. Another difference is that the laws for commercial leases provide less consumer protection against deceitful landlord practices. As the needs of each tenant can vary, most things are negotiable within commercial leases. Terms that are subject to change may include rent, the length of the lease, the ability to assign a lease, and allowable improvements.

Retail premises legislation:
Each state and territory has specific retail leases legislation, called the Acts. The Acts define which premises are considered to be retail premises, and aim to ensure that all retail leasing arrangements are fair. Each state and territory’s legislation includes mechanisms built in to resolve disputes between landlords and tenants. When choosing a business location, you should consult the Act for your state or territory.

Negotiating a lease:
When signing a commercial lease, they are usually negotiable between each party. Elements to be set out in the lease can include signage, fit-out premises, using common areas, and the use of public facilities. As a tenant, you should consider your specific circumstances and what will work best for you and your business before making a commitment to a lease. Accepting the first lease that you receive can be detrimental, and demonstrate poor negotiation skills. It would be best practice to consult a legal advisor when signing a lease, to ensure you are getting the best out of the agreement and not being taken advantage of.

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