Covering all bases

Proper preparation and appropriate agreement for lease (AFL) terms are crucial to ensure a smooth and successful move. There are many issues which need to be considered early in the negotiation process to give greater the bargaining power. These include:

  • fitout coordination
  • timelines
  • tax effective incentives
  • mechanical and utility services
  • outgoings
  • energy efficiencies
  • insurance provisions
  • clear landlord obligations
  • and responsibilities
  • subletting and assignment flexibility
  • rent review and renewal terms
  • accurate measurements and surveys
  • landlord legal expense issues
  • make good and end of tenancy obligations
  • guarantee and security obligations
  • lease enforceability against mortgagees and future owners
  • signage
  • naming and directory rights
  • permitted usage rights.

Getting the right advice

There will be several advisers – real estate, accountants, architects, builders – who are involved in this process over all, but knowledgeable and practical legal advice can be the glue that binds the whole process and helps to ensure you are in your new premises on time and within budget.

Here are some of the key stages at which the right legal advice can make a difference:

Review of Initial Proposal

A lawyer will be able to review the proposed letter of offer, meet with you (and if you wish, your accountant) to make recommendations as to the offer’s wording and assist in having those recommendations reflected in the final offer. The lawyer will also search the title to the property to check that the correct landlord entity is named in the offer and that the property description is correct. Typically, at this stage draft formal lease documentation is not reviewed.

Good legal advice at this point can help set the tone for the remainder of the transaction and place you on a path to a smooth transition.

Review of Formal Documentation

Once the letter of offer has been agreed and signed (and ideally expressed as being conditional upon agreement to the terms of the formal agreement for lease being reached), a full legal review of the formal lease and, if applicable, AFL documentation will be necessary. Your lawyer will recommend amendments or additions to the lease and AFL documents and liaise with the leasing agent and the lessor’s lawyers to have the recommendations incorporated in the documents.

If the premises are yet to be built or substantial construction, refurbishment or fitout are yet to occur, there will be “lessor’s works” provisions and/or a “lessee fitout period”. These provisions and other relevant provisions should be contained in an AFL. The AFL precedes the actual lease document, although a draft of the lease in an agreed form will be annexed to the AFL. Once the works are complete, handover has occurred, the commencement date determined and the new premises surveyed, the lease document is entered into and is able to be registered at the Lands Titles Office.

End of tenancy

Another crucial aspect of moving is advice associated with the end of any existing tenancy and related obligations and rights. At this point, your lawyer would undertake a review of this lease and any associated bank, directors or other guarantees and make an assessment of the relevant provisions in the legislation relating to retail leases or residential tenancies would apply to it. Your lawyer would then meet with you and, if need be, the lessor or its managing agent, and confirm in writing your position. If there are significant “reinstatement” or “make good” works to be undertaken by you, negotiations with the lessor/managing agent may be helped if you have first obtained advice as to the likely cost of attending to those works.

The message is relatively simple: early legal input and having a good team of advisors ready to assist you are the keys to getting into your new premises with a minimum of stress, making it a “smooth move”.