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February 27, 2017
Tips for Leasing Commercial Property in Perth

Your decision to enter into a commercial lease agreement, whether short or long term, will be one of the biggest financial commitments you’ll make as a business owner.

It is a good idea to treat it just as any other business transaction and seek advice from a legal perspective.

Here are a few tips on leasing a commercial property space.

1. Understand Your Obligations

Many pro forma business tenancy agreements will detail what the incoming leaseholder will be responsible for. It is common for a number of outgoing expenses including utilities, rates, taxes and insurances to be written into the agreement in such a way.

During negotiations, be sure to read through the agreement until it is clear what responsibilities you will be obliged to take on under the lease.

2. Know Your Exit Options

Success is never a guarantee in business. As such, you should pay close attention to whether any lease you are considering has a Right of Assignment clause.

This will give you the option of transferring — or subletting — the commercial lease to another party if you have to relocate or exit the industry and sell the business.

You may also wish to check under what circumstances the lease would be subject to termination, what penalties would be involved and if there would be a notice requirement.

3. Address Options for Improvements

Other important aspects to consider are if any improvements may be made to the premises, under what circumstances this would occur, who will own the modifications and whether you as the tenant would be responsible for returning the property to its original condition.

The agreement should lay this information out, but it is highly advisable that you make this a priority when doing your due diligence.

4. Negotiate Rent Reviews

It is common for commercial property lease agreements to specify an increase in rent following a set period. This is typically based on the Consumer Price Index, but may be an amount set out in the document.

As a prospective tenant it will be in the interest of your business to negotiate the start date of any rent reviews, if the clause is present in the lease. i.e. after a period of three years.

For commercial properties in Perth, the tenancy agreement must specify the basis for calculating the rent increase. This can be an amount agreed to by both parties or based upon a ‘fair market’ value. If it is the latter, both parties may appoint an independent valuer.

5. See to Your Business Needs

Lastly, many lease agreements include a use clause that determines what business activities the tenant can engage in whilst occupying the premises.

If there’s anything that will impact the normal course of business for your company, be sure to voice your concerns during negotiations. This may include such things as putting up external or roadside signage.

Contact David Lewis, Partner at LBH on dlewis@lbandh.com.au if you are considering entering into a business tenancy agreement and would like advice on the matter.