Incentives not in lease document

I'm about to sign a commercial lease. The Heads of Lease state that there will be an incentive applied to the monthly lease, but the lease agreement itself does not mention the incentive. Is this standard practice? I would have thought that the incentives would be in the lease agreement itself, not just on the Heads of Lease?

Any landlords here with experience on that?

 

What sort of incentives?

Rent free or reduction in rent is always a clause in the lease.

Fitout incentive is generally covered in a side agreement.

 

It's a fixed reduction in rent every month, according to the heads of lease. Is something amiss?

 

That would be a side agreement as they don't want the valuer or bank to see that the rent is unrealistic and propped up by paying you so you can afford the rent. Dodgy at best.

Eg If the lease says $120k pa, market rent is only $100k pa, the owner is giving you $20k to pay the difference. In reality, the property is valued at say 5% cap rate = $2,400,000 vs true value of $2,000,000. That $20k incentive adds $400k to the owner's bottom line but only costs them $100k on a 5 year lease. A good valuer will question why the achieved rent is so high.

 

A tenant asked my solicitor a similar question many years ago ...I will look for the solicitors actual words later .
But from memory one is a obligation of the current landlord but the obligations in the deed of lease carry through to the new owner if the property is sold .
When I find that letter I post the actual words.

 

Hence what I often say.
Focus on the market rentals not the passing rentals.

 

The landlord provided an incentive deed that states the incentives and the conditions attached to it. Thanks for your replies.

 

Have you had your solicitor review both the lease & the deed? (it's a major commitment on your part & may also include personal &/or director's guarantees which may impact your capacity to borrow).