LEASE AGREEMENTS

There are two main types of leases:
residential tenancy (setting out terms
between a landlord and occupier) and commercial (setting our terms between
landlord and lessee.

Residential tenancy agreement
Used for residential premises such as houses and flats, this type of agreement sets out the terms between a landlord (owner) and a tenant (occupier).

Either the estate agent responsible for procuring the tenant or the solicitor for the landlord will prepare the residential tenancy agreement. It contains the details of the lease including:-

• description of all the parties to the agreement
• maximum number of persons to occupy the premises
• description of the premises
• rent payable and when it is payable
• term of the agreement
• date of commencement of the agreement
• amount of the security deposit.

Commercial lease
Used for commercial premises such as a factory, office or shop, this type of agreement sets out the terms between a landlord (lessor) and a tenant (lessee). The Lease is usually prepared by the lessor’s solicitor. The following checklist of matters should be considered when negotiating the terms of the lease:-

• name of lessee - is it in a sole or company name?
• details of premises - are amenities such as toilets, air conditioning and car parking spaces included?
• length of the lease - what is the term of the lease? Is a rent-free period available for fitting out? Is there an option to extend the lease beyond the initial term? How is the option to be exercised?
• amount of rent - what is the current rent? What is the formula for increasing rent, eg by CPI, by a fixed percentage or by “market rent”?
• security deposit or bond - it is usual for lessors to request a bond, equivalent to anything between 1-3 months rent. Can a bank guarantee be obtained in lieu of a cash bond?
• legal costs and disbursements including stamp duty - it is usual for the lessee to pay the stamp duty. Most lessors attempt to “pass on” their legal fees, to the lessee. Payment of legal costs is negotiable. Some lessees attempt to negotiate on the basis that “I’ll pay my legal costs, and you pay yours”.
• outgoings - is the lessee required to pay the outgoings associated with the premises, eg rates, insurances, maintenance, land tax etc?
• maintenance - who has the responsibility to keep the premises in good repair?
• cleaning and repairs - does the lessee have to repaint or recarpet now, during or at the end of the lease?
• insurances - what insurances are compulsory under the lease, eg public risk insurance, plate glass insurance and insurance of stock, fittings and fixtures? Does the lessor’s name have to be included on these insurance policies?
• permitted use - what use is allowed for the lessee to make of the premises?
• council development approval - is the current zoning permitted for the intended use? Is development approval required and has it been obtained?
• default - how flexible is the lease if the rent is late or other breaches of the lease occur? Does the lease stipulate that the lessor has to give a “warning” allowing the lessee the opportunity to make good the problem? Is interest payable on overdue rent?
• sub-letting and assignment - is it possible to share the premises with other people? Can the lease be transferred or assigned to someone else, eg on the sale of the business? Are there any conditions associated with such a transfer or assignment?

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If you are thinking of entering into a residential or commercial leasing arrangement please do not hesitate to contact Kerrisons The Law Firm:
Phone 02 4655 7066 or email us today.