Long Saad Woodbridge’s commercial, property, and leasing teams have significant experience acting for both landlords and tenants in leasing matters. This extends to all property types, including retail, commercial and industrial, across all states in Australia.
As a result, our team has observed trends in certain commercial aspects of leases that are often “sticking points” across multiple matters, being items that the landlords and tenants consistently tend to disagree on.
Given the volume of applicable relevant legislation, regulations, lease-types and common law principles, it is of critical importance to engage an experienced and knowledgeable, yet commercial and practical, property solicitor.
CONTENTIOUS ITEMS IN LEASES
Our team has prepared the following key points to be aware of in leasing matters:
- Net vs Gross Lease: A lease will either be a “net lease”, meaning that the tenant pays a rental amount plus a contribution to the landlord’s outgoing costs (such as council and water rates), or a “gross lease”, where outgoings are already factored into the rental amount. Tenants mostly prefer gross leases as they have certainty of what their monthly costs will be, whereas landlords prefer net leases as they can ensure that 100% of the recoverable outgoings will be paid, as they are not based on an annual forecast that may not be accurate.
- Land Tax: Certain leases, such as retail leases, often prohibit the landlord from recovering land tax from a tenant. However, under commercial and industrial leases land tax can be recovered if this is agreed between the parties. Tenants prefer not to pay land tax as they do not benefit from this (as opposed to council and water rates), whereas landlords want tenants to pay this to maximise the yield from the property.
- Security: Tenants prefer not to provide any security at all, as it gives rise to additional legal exposure and often additional cost. However, landlords almost always require a cash bond or bank guarantee (when the tenant is an individual) or a personal guarantee from directors (when the tenant is a company).
HOW A PROPERTY & LEASING LAWYER CAN ASSIST
Long Saad Woodbridge’s commercial, property, and leasing team will:
- Ensure that any lease matches the agreed commercial terms, usually reflected in a “heads of agreement” prepared by the leasing agent.
- Ensure that all clients are fully aware of their legal rights and obligations in relation to these items, to avoid negotiations over items that are outside of their control.
- Thoroughly review proposed leases when acting for tenants, to ensure that the requirements are reasonable and practical, and that the document is as balanced as possible (as they generally favour landlords).
- Prepare robust, detailed and accurate leases when acting for landlords, to maximise protection in all aspects, and minimise room for disputes and ambiguity.
If you are considering entering into or negotiating a lease for any property type across Australia, as either a landlord or tenant, please reach out to our experienced team to guide you through all aspects of your lease from start to finish.
Important Disclaimer: The content of this article is general in nature and for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.
