It’s Spring – Time to give your leasing documentation a review!

Andrew Grima

We all tend to look at Spring time as an opportunity to have a big cleanup of our homes and gardens. We go through our cupboards, get rid of unwanted goods, trim our hedges, and look at what needs repairing and renewing.

As your lawyer, I suggest that you should see this Spring season as an opportunity to review your legal documentation, if you haven’t done so already - before you get busy in the lead up to Christmas.

So what are some of the items that you need to pay attention to? As part of your business, you will occupy your premises via a Lease, Sub-Lease or Licence Agreement (Lease), so let’s focus on your occupancy documentation. 

Is my Lease expiring in the New Year?

You should be looking at your Lease to see when its term expires. Do you have an option to renew? Is the date for exercise of option imminent?  

If your option is due to be exercised and you know that you want to stay in the premises, you need to consider the basis upon which the rent is to be determined. If it’s by market review, perhaps you should consider doing some homework by talking to valuers and agents to gauge the market so that if you need to negotiate the rent with the landlord you’re in a more informed position.

Have a look at your Lease and other ancillary documentation to see whether you’re entitled to either additional incentives, or obliged to undertake refurbishment of your premises for the further term.

You should also revisit the Disclosure Statement that was provided to you with your Lease to see whether there are any planned redevelopments near your premises. You may also consider contacting your local Council to see whether any plans have been lodged for the redevelopment of the centre you’re operating in or in the immediate vicinity of your premises.

Are you experiencing any difficulties at present?

During the course of your Lease, were there glaring issues that need to be addressed such as structural defects in the premises, works that needed to be carried out or general disturbances which are impacting on the operation of your business? You may be able to have these issues addressed in the context of a negotiation of the Lease for a further term. 

If your Lease is not up for renewal and you are a new tenant, has the landlord delivered on what they promised in terms of tenancy mix and timeframes? From time-to-time I receive complaints from tenants about the landlord not delivering on the type of tenancy mix that they originally promised. This may give you an opportunity to argue with the landlord for rental relief.

My store is just not performing

Some of my clients come to me with a year to 18-months left on the term of the Lease but their business isn’t performing and they need to be able to exit their Lease. If you are planning to have discussions with the landlord about this, you should consider the implications.  

Sometimes Leases do have provisions which allow for early termination rights but this is the exception, rather than the norm. If you are seeking a surrender and the landlord agrees to this, you must realise that it will come at a price. You are likely to be charged the rent for the remainder of the term, make good costs, landlord’s legal costs (as well as your own), reletting cost, etc.  

This strategy usually works where the landlord has a new tenant lined up to take over your Lease but you need to realise that the landlord is not obliged to grant you an early surrender.

Conclusion

I cannot stress enough the importance of regularly reviewing your occupancy documentation so that you are across your obligations on an ongoing basis rather than revisiting the documentation when things go wrong.  

Before you get distracted by the anticipated busy Christmas trade, I highly recommend you carry out a Spring clean in your business including a review of your legal documentation.

If you need assistance with this Spring clean, please don't hesitate to get in contact with: