Commercial Leasing – the Legal Hurdles and Solutions

Commercial Leasing – the Legal Hurdles and Solutions

Prior to studying law and being a legal conveyancer. I’ve spent a number of years working in commercial/retail management and leasing.  One thing I noticed, years later, nothing changed when it becomes for negotiations and at times, hardball tactics, between commercial Landlord and tenants. The commercial lease document remains the same, having a reference page/reference schedule of the main terms and conditions such as the address/title of the premises/property, lease term, date of the lease, expiry date, option, rent, outgoings, rent review details, permitted use, insurance, bank guarantee or bond, director guarantees if the tenant is a company, landlord details and tenant details. Required to be registered at the Land Title Office/NSW Land Registry Services, if the lease term is three years or more.

Some states, they have landlord and tenant act legislation, as amended, that such laws are targeted towards landlord and tenant relationships, with commercial and industrial property. Some states like New South Wales, do not have such legislation but have case law/common law in their state, that governs such landlord and tenant relationships, with commercial and industrial property, excluding retail, which has the Retail Leases Act and the mandatory requirement of disclosure statements.

For commercial and industrial landlord and tenant relationships, case law in New South Wales, with government and parliament, see such relationship, are big enough to stand on their own two feet, to look after themselves in disputes, to mediate and have the courts if needed to resolve such issues if needed.  Some relationships are well managed, with a good property manager acting for the landlord, assisting with rent reviews, options, repairs & maintenance, and other property matters.

Some relationships are not that well management, which seems to be, the larger landlord and tenants, have their own in-house legal departments, to battle out any negotiation or hardball tactics.  The smaller landlord and tenants, don’t have this assistance of in-house legal departments, which the property manager representing the landlord, does play the advantage of playing hardball to the disadvantage of the tenant. For example, rent review dispute over a market review, the property manager has the rental comparables and market information, over the tenant, who does not have this benefit at hand.

Solution for such smaller tenant is to consider having funds, provisions, on their own budgets to fork out money in legal, property valuers and rental market experts, to assist them to battle better and leverage up the landlord over the rent review dispute. The lease Contact always has a provision for an independent valuer to be appointed, to assess the rent in arbitration, final and binding. It is up to the tenant to appoint their own valuer/expert acting for them, to provide rental comparable details and market evidence to the independent valuer to be appointed, to assess the rent in arbitration, final and binding, to help battle out and leverage out, against the landlord and their property manager.

The tenant can always invest, engage and use other experts, such as legal, to help battle out and overcome other disputes with the lease tenancy, such as repairs & maintenance, on-site facilities etc.

Should the lease tenancy get too hard for a tenant and nearing the lease expiry, termination by either party can be a blessing for that tenant. For example, a Chinese Restaurant in Castle Hill during the 1990s, given notice to vacant, moved to Blacktown, in a prime position, cheaper rent and better terms. The Chinese Restaurant owner-manager said to me “Mr XXX at Castle Hill did us a big favour, as the new location is much better, growing our income and profile much better”.

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