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LEASES
AVOID THE PITFALLS
Commercial leases are frequently the subject of legal disputes. Parties should be aware of important areas that are often overlooked.
  • The condition of the premises is something that needs to be examined thoroughly by a lessee. Problems such as leaking roofs or faulty air conditioning are frequently not discovered until it is too late. The parties should make clear who will undertake any repairs that are required.
  • To attract a lessee, a lessor may offer incentives, including a rent free period or fitout. Fitout includes things such as signage and partitioning. To avoid the cost of fitting out the premises, a lessee may be prepared to pay more rent where fitout remains.
  • A make good clause obliges a lessee to remove fitout and restore the premises to the condition they were in before the lease began.
  • A lease may stipulate that outgoings are not payable or, conversely, it might provide that outgoings are payable in addition to rent. If the lease does not allow the landlord to recover outgoings and they increase, the landlord may receive less in the hand after payment of the outgoings. On the other hand, if the lease provides that outgoings are to be paid by the lessee and outgoings increase, the amount payable by the lessee also increases.
  • Perhaps the most important thing for both parties is that any promises, variations or understandings need to be put in writing. For example, there have been countless cases where a lessee, having made an agreement with a landlord, has made alterations to the premises only to have a new landlord claim that the alterations are not in the contract. By having everything in writing both parties can be sufficiently certain of what their rights and obligations are.