So you have your business plan mapped out, have secured funding for your venture and are now ready to take a giant leap and secure premises for your operation. Before signing on the dotted line make sure that you know all there is to know about Retail and Commercial Leases.
Firstly, Retail and Commercial Leases are governed by the Retail and Commercial Leases Act 1995 (SA).
Before you enter into a retail or commercial lease, you need to obtain a copy of the lease for negotiation and a disclosure statement from the landlord. The disclosure statement will outline all significant elements of the lease, including but not limited to:-
– The property address; size of letable area
– permitted use of the area
– term of the lease
– amount of rent payable
– whether the lessee is required to pay outgoings
– right of renewal, and
– consequences of breaching the lease.
Before signing it is critical that you carefully read this document and have a thorough understanding of all the terms.
At this point it is important to note that the minimum term for a lease period is 5 years. 5 years can sound like an eternity when you are starting a new (and unproven) business. However, there are exemptions to this which may be described in the document as a short-term lease, an exclusionary clause or sub-lease.
You must make sure you understand the full effect of your lease period prior to signing the lease.
In the event that your business were to fail, it is sometimes possible to assign the lease. This can only occur with the consent of the lessor. Under this procedure, you request consent to assign the lease in writing, providing the lessor with all information of the proposed assignee. This information includes the assignee’s financial position and relevant business experience. Upon receipt of this application, the lessor must provide to you a notice in writing as to whether or not consent is granted. This needs to be done within 42 days. Furthermore, if consent to the assignment of the lease is granted you would be would be liable under the lease until either:-
– The second anniversary of date which lease was assigned;
– The date which the lease expires; or
– If the lease is renewed or extended after assignment, then the date which renewal or extension occurs.
In the event that landlord fails to grant consent to the assignment, you will be liable for the remainder of the duration of the lease. It is not difficult to appreciate that entering into a Retail or Commercial Lease is not without risk.
In any event, retail and commercial leases are always complex. It is prudent to seek advice from a solicitor if you are thinking of entering into a commercial lease arrangement. A solicitor is best equipped to provide you with appropriate advice. For advice on property law or leases in general, please contact Jason Coluccio or the team at Welden & Coluccio Lawyers.