Are You Doing This When Entering Into A New Commercial Property Lease?

In this episode:
00:38 – The best way of preparing commercial lease documents
02:20 – What is a redevelopment clause?
03:19 – Protecting yourself from property fraud

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Hi, Anna Lynch here from Perth Commercial Property, with this week’s commercial news update. What I’m going to cover today is the preparation of commercial leases, the inclusion of a redevelopment clause in commercial leases, and what you need to consider as a lessee. Also, the improper dealings caveat, Form C4 which Landgate has created in order to assist in protecting you against property fraud.

Okay. Let’s start with the preparation of commercial lease agreements. Let’s assume we’ve located a high quality tenant that wants to lease your property. The next decision you have to make is in what form the lease agreement will be prepared. Now, I can tell you that there isn’t a standard commercial property lease form. REIWA does produce a commercial lease agreement for use by REIWA members. Now, Perth Commercial Property is a REIWA member. However, we advise that your commercial lease documents are prepared according to the individual characteristics of each lease. Therefore, we strongly advise that you engage the services of an experienced commercial property solicitor in preparing your lease documents.

The next question is that, of cost… who pays?  I can tell you that there isn’t any legislation that governs the preparation of a commercial lease, unless of course, that lease is a retail lease. Let’s assume that your lease is a non-retail lease. In this instance, you’re free to negotiate who pays, or who carries the cost of the preparation of the lease documents. In Western Australia, it’s very common practice for these costs to be on-charged to the tenant. The owner selects the solicitor to use in preparing lease documents. However, it is the tenant, the incoming tenant, who covers these costs. However, if the lease is to be for a retail property, the retail shops act actually specifically outlines that these costs cannot be on-charged to the tenant.

Okay. Next, I’m going to cover… what is a redevelopment clause in relation to a commercial property lease. Now, a redevelopment clause usually entitles the owner to terminate a lease agreement before the end of the lease term. This is in order to undertake major renovations or to redevelop the property. Now, before I go into the inclusion of a redevelopment clause in your commercial lease, you might want to consider the following;

  • How much notice must you be provided before a redevelopment clause is invoked
  • What it will mean to your business, in terms of relocation or the loss of potential good will from your current establishment.
  • Lastly, what would be the effects of any investment that you’ve spent on fit out. Do you want to spend as much on fit out, if there’s the potential that you can be asked to leave before the end of the lease term.

Finally, we’re going to cover off on the improper dealings caveat, Form C4 designed to protect or assist in protecting you against property fraud. Now, in response to recent property fraudulent cases in Western Australia, Landgate is now offering a service whereby you can lodge an improper dealings caveat. The lodgment of the caveat would then prevent any instrument or document which ordinarily needs to be signed by the owner from being registered, such as the transfer of land, registration of mortgages or leases.
Now, in order to lift the caveat, all owners must, in fact, present themselves to the Landgate office in Midland and as a minimum, have a 100 points of ID check. It’s worth noting, also, that a power of attorney cannot simply lift the caveat. Now, every time you lodge or release the caveat, the current cost is $160. That’s it for this week’s commercial property update. Be sure to give me a call or send me an email should you have any questions.

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