Be smart about commercial leases

Commercial leases are known for including very little built-in protection for tenants, so do your research before signing on the dotted line.

Rawson Property Group business development manager, Craig Mott, shared some advice.

“The residential property mantra of location, location, location is also key to a successful commercial lease,” Mott said, pointing out that location benefits could include easy highway access, while others would benefit from public transport sites or a location which provides for increased foot traffic.

“Even the most favourable lease cannot make up for a location that simply does not have what your business needs to thrive.”

If you have not dealt with a commercial lease before, you may not be attuned to terms such as flexitime, remote- and hybrid-workplace setups which could leave you possibly misunderstanding the physical space you actually have.

Mott said some landlords measure the area from wall to wall, while others often include the walls’ depth in their measurements. In some cases, a commercial lease also includes common spaces while others could list these separately.

“Some commercial spaces need full build-outs, while others need very little modification. That can make a huge difference to immediate affordability, unless you negotiate for your landlord to cover the costs.”

Enquire about external signage because some commercial properties have limitations on this.

“Rent and fit-outs are not the only possible property-related expenses you could be faced with,” Mott warned.

He advised to check liability for rates and utilities, as well as repairs and maintenance or whether these fall on the landlord. One should also ensure rental escalation clauses in the lease are reasonable and market-related.

With nothing being certain in life, Mott suggested planning with flexibility in mind.

“Shorter lease terms are usually less risky and give you an earlier out if your circumstances change. Opting for a longer lease should see you ensure the inclusion of a fair breakaway clause with reasonable termination processes which do not include overly punitive cancellation penalties.”

Keep in mind that commercial leases are not set in stone, and you can negotiate the terms of the lease.

Most importantly, however, is to ensure that every agreement is signed on paper and that nothing is taken on faith. This would ensure the best protection for both landlords and their tenants.

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