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What to expect to be liable for as a tenant in a commercial small office lease?

Discussion in 'Commercial Property' started by Propagate, 2nd May, 2016.

  1. Propagate

    Propagate Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    282
    Location:
    Melbourne
    Hi all, firstly, let me preface this by saying the lease is currently with our solicitor, so legal advice is of course being sought before I sign.

    I am about to sign my first commercial lease, (as a tenant), for a small office space that was originally built as an apartment over a shop but has been leased as offices for several years.

    The lease first draft has come through from the agent and I have sent it to our solicitor. Mean time though, I have read through it and it seems there is a lot there I am liable for that has surprised me being that it is essentially a residential property leased as an office. I realize there are differences between resi & commercial but just wanted to get an idea from folk on here experienced in commercial property what the general norm is to expect to be liable for in a commercial lease?

    First of all, the agreed weekly rent came back on the lease as 10% higher than we agreed, I guessed this was GST added. The agent has confirmed it is GST but it appears the landlord is not GST registered, so that one is with the solicitor at the moment to check registration. I guess if they are not GST registered then the can't (or rather shouldn't) be charging me GST?

    The rest of it is generally along the lines of I have to pay, or am liable for:-

    Land Tax
    Landlords buildings insurance
    Rates
    Water Rates
    Body Corp fees
    all utilities, (which is fine)
    Responsible for all guttering, pipes, blockages
    Cleaning (which is fine)
    Any and all repairs to landlord equipment, (i.e. there are 3 split system air con units in there)

    Is any or all of the "normal", or do agent/commercial landlords just throw everything in and hope your solicitor doesn't come back on any if it? I assume I can cross anything I don't like out before we send it back then negotiate a compromise?

    Just wondering what it is I should realistically expect to be liable for in small office lease.

    Cheers.
     
  2. Jamie.CommercialPM

    Jamie.CommercialPM Member

    Joined:
    23rd Jun, 2015
    Posts:
    5
    Location:
    North Perth
    Hi,

    Your Lease ideally would read along the lines of,

    The annual rent is $50,000 exclusive of GST

    With this, there should also be a clause here is an extract of one of ours.

    The Lessee must pay to the Lessor the amount of GST the Lessor is liable to pay on a Primary Payment.

    (Primary Payment meaning, the Lease Money payable under this Lease by the Lessee to the Lessor for the supply of goods, services or property by the Lessor to the Lessee)

    In relation to outgoings. Usually the Lessee is liable to reimburse the Lessor for expenditure listed within the Lease. Including repairs and maintenance.

    The only items excluding this are items of a capital nature.

    An example would be if there was an A/C unit within a property that was 30 years old.
    Provided you regularly maintained the unit it would be the Lessors responsibility to replace the motor if it was to blow throughout the tenancy.

    Our leases are very much in favor of the Lessor, as soon as a larger organisation reviews them half of the lease is crossed out or questioned. Just part of the process, anyone signing a legal contract should deeply review every item within and question how it would affect their tenancy and use.
     
  3. Propagate

    Propagate Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    282
    Location:
    Melbourne
    Thanks. This one is a shocker, I think it has come from the RE and has everything in it stitched up. In this one, in your AC example, we would have to repair and/or replace the AC unit regardless of age. We also have to pay for all the landlords insurances, "as he sees fit" including rent cover. I've crossed out a heap of stuff and sent it back to our soli, will see what happens.