Broadly speaking, there are two types of commercial leases:
- commercial, and
Unlike commercial leases, retail leases are state specific. In other words, legislation in each state and territory sets out how retail leases operate, a lessor’s obligations and a tenant’s rights. Consequently, tenants who occupy commercial premises have less protection than their retail counterparts.
This article explores five key points a tenant should keep in mind when reviewing their commercial lease, in particular, the repair and maintenance clauses.
1. Check Whether the Retail Lease Legislation Applies
As noted above, tenants under a commercial lease have less legislative protection. The first step is then to determine whether your lease is a commercial or a retail lease.
The definition of ‘retail premises’ differs from state to state. It’s possible that the landlord has provided you with a commercial lease, but your premises could fit the definition of a ‘retail premises’. If this is the case, additional leasing protections could apply.
2. Inspect the Premises
You should thoroughly inspect the premises before signing the lease to determine the condition of the property at the beginning of your tenancy.
The inspection should include matters such as:
- Does all the equipment function appropriately?
- Does the premises need any repairs to the structure, services or overall condition? For example:
- Are the electrical connections working appropriately?
- Are the locks and doors in good condition?
- Are the drainage pipes clear?
- Is there any evident water damage?
Ensure that your lease only requires you to return the premises to the condition it was in when you started. If the landlord or previous tenant has not freshly painted the property, but your lease requires you to repaint the premises at the end of your lease, that’s hardly fair.
3. Include Landlord or Agent Promises In the Lease
If you’ve inspected the premises and the landlord (or the landlord’s agent) has agreed to make particular repairs or works to the premises before or when the lease starts, ask the landlord to insert these representations in the lease.
This way, you can rely on the lease if the landlord does not undertake the repairs. You may also want to include clauses where the landlord guarantees that they will maintain particular aspects of the property, for example:
- connections for services like electricity, gas and telephone, and
- the working condition of any equipment, such as an air conditioner.
4. Understand Each Parties’ Obligations
If retail lease legislation does not cover a lease, then the deed of lease will determine the parties’ obligations. This means if the lease does not cover the obligation to repair and maintain the premises either by the landlord or the tenant, the premises may not need to be maintained and can technically fall into disrepair.
It’s important that you check the repair and maintenance clause to determine the amount of assistance you can obtain from the landlord throughout the length of your tenancy.
Most leases require the tenant to obtain certain insurances, for example:
- public liability insurance and plate glass insurance, or
- insurance for damage to your property or equipment at a minimum.
The landlord, however, will also likely have its own insurance obligations, such as building insurance. Check that you have the appropriate insurances in place, so you are covered when maintenance and repairs are needed.
Entering into a commercial lease may seem like a straightforward process. However, each commercial lease differs as do the obligations of the tenant and the landlord. It forms the basis of your relationship with the landlord and determines the level of assistance and support you receive throughout the term of the lease.
Accordingly, you should have a specialist leasing lawyer review the document and negotiate any amendments to ensure it is fair.