Leases and the Law: Which Party Pays for the Creation of a Commercial Property Lease?

leasing a commercial lease

As either a commercial property owner or as a tenant, a lease agreement is a vitally important document.

A commercial lease attempts to set out the rights and obligations of both parties to the contract – that is, the landlord, known as the lessor, and the tenant, known as the lessee – of a commercial property such as a factory, warehouse, shop, industrial premise or office space.

As such, it’s crucial that you know your rights and responsibilities when it comes to not just lease inclusions, but also the payment of legal fees incurred in having the documents drawn up.

Both parties are advised to utilise the services of an experienced lawyer/solicitor/conveyancer to ensure a lease is drawn up correctly and to both parties’ satisfaction, commercial real estate agents in Perth will have experienced commercial property solicitors they can refer who specialise in generating lease agreements for commercial real estate.

One of the most common questions that we find people asking us at Perth Commercial Property is…

“Who is responsible for paying the legal fees for a lease?”.

The answer to this is that it actually depends on the nature of the property.

In the past, landlords who owned a retail shop in Western Australia were able to pass their legal fees on to the tenant to pay, as fees were not regulated. However, amendments were made to the Western Australian Commercial Tenancy (Retail Shops) Agreements Act 1985 that came into effect on 1 January 2013.

Since that time, landlords have been prohibited from recovering legal costs incurred from the preparation and execution of leases from tenants.

You will need to speak to your legal representative to confirm if the property you are leasing is indeed a Retail Shop. There are a number of factors that define a retail shop including the nature and number of surrounding commercial premises.

There are other factors that come into play, as well as some exemptions, so you will need to seek legal advice to be sure.

If a commercial property does not fall under the retail category, then the legal fees incurred for a lease agreement to be created can be negotiated between the lessor and the lessee.

It is extremely common in WA, for the tenant to pay for any reasonable legal costs incurred by the landlord to have a lease prepared and negotiated.

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