Blog - Commercial

27 February 2019

6 TIPS TO AVOID TENANCY ISSUES WITH COMMERCIAL LEASE NEGOTIATION

There are no real ‘tricks of the trade’ when it comes to commercial lease negotiation. General common sense and an experienced property manager can go a long way for both parties to stay happy throughout the lease term. However, owners can run into trouble without proper guidance.

We’ve compiled a list of 6 tips to help you avoid tenancy issues with commercial lease negotiation.

Steps to ensure a mutually successful commercial lease negotiation

Step one: Ensure the commercial terms are agreed upon

Ensure the terms of the commercial negotiation are drawn up in a Heads of Agreement and signed off by both parties prior to instructing a lawyer to prepare the lease.

It’s important both parties clearly understand the terms, and the Heads of Agreement should never be signed until you’re both comfortable.

While the Heads of Agreement is typically a non-binding document, it should guarantee there are no disputes over the commercial terms during lease execution and over the course of the lease term.

A person signing commercial lease terms

Step two: Have a lawyer present

Always have a lawyer prepare the commercial lease documents. A lawyer with experience in commercial lease negotiation is highly recommended. This will ensure everything is in order and runs smoothly for both parties.

Step three: Keep the lines of communication open with the tenant

Make sure the tenant’s obligations are clearly highlighted in the lease document. Have your lawyer make this happen to ensure accountability.

It’s important that both parties agree to, and uphold, a few basic expectations such as responding to correspondence within a reasonable time frame. The relationship will run far more smoothly if the landlord and tenant are easily contactable should issues arise. Keeping the lines of communication open in these early stages of a commercial lease negotiation between landlord and tenant is imperative, which takes us to step four.

Step four: Tenant to obtain approval from applicable regulatory bodies

If there are to be any fit-out works undertaken by the tenant, approval is obtained from the appropriate regulatory bodies prior to any works commencing. Examples of these include local councils.

It’s worth including a clause in the lease agreement specifying that no alterations be made to the property without approval from both the landlord and the applicable regulatory bodies.

Step five: Seek out the help of a property manager

Employing an experienced property manager to handle your property is crucial for not only you but your prospective tenant as well.

Think of it as having a middle-man so you do not need to stress about managing your asset. Having your property in capable and professional hands allows you peace of mind and assurance your property is being maintained appropriately.

An experienced property manager can also help to maximise your investment.

A property manager and owner shaking hands over an office desk

Step six: Have a pre-lease inspection

Conduct a pre-lease inspection of the property and document the condition of the tenancy prior to lease commencement. This step of the commercial lease negotiation is beneficial for both landlord and tenant. It is strongly recommended that you take photos for documentation purposes (your smartphone is the perfect way to do this).

You’ll also need to ensure that the mechanical services of the building (for example lifts, air-conditioning, etc) have service agreements in place and are maintained properly. For commercial property leases, most tenant issues arise due to issues with the breakdown of these services and can add unnecessary strain to everyone involved. Therefore, having all these agreements in place from the beginning of the lease is the best way to handle them.

Ensure your property manager has detailed information on service agreements. This way they can manage any issues as they arise without too much involvement from your end.

Speak to a commercial property specialist

As you can see from the above steps, being organised and knowing what you’re dealing with from the start is the best way to be sure your commercial property lease is set up to succeed.

At TGC we specialise in commercial property and will give all the advice you need when it comes to maintaining the upper hand in commercial lease negotiations. Get in touch with us today to discuss your leasing and property management needs!

Date: 27 February 2019 Author: TGC Writer
Commercial
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About the author:

TGC Writer

TGC is the largest privately owned commercial real estate agency in the Sydney CBD, with over 20 years experience servicing the CBD, City Fringe and greater Metropolitan property market. We’re committed to assisting you with your total property needs, including buying, selling, leasing and property management.

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