Clear com­mer­cial lan­guage


This is the sec­ond in­stall­ment from last week’s col­umn. No ac­cess pe­riod – this is to cover a sit­u­a­tion where the prop­erty is to­tally or par­tially de­stroyed or dam­aged, af­ter a nat­u­ral dis­as­ter such as an earth­quake. The Deed of Lease records a pe­riod of time af­ter which ei­ther party has the right to cancel the lease. The de­fault pe­riod is nine months, but that can be amended.

Out­go­ings – ex­penses payable in ad­di­tion to the rent ( or in­cluded, depend­ing on whether it is a gross or net lease). They can in­clude util­i­ties, rates, rub­bish col­lec­tion charges, man­age­ment ex­penses and so on. They are to be agreed in the Agree­ment to Lease.

Per­sonal guar­an­tee or guar­an­tee – when the ten­ant is a com­pany, gen­er­ally a land­lord will re­quire a per­sonal guar­an­tee from its di­rec­tors and/or share­hold­ers.

This is a prom­ise by those in­di­vid­u­als to com­ply with the lease and pay the rent if the com­pany fails to do so.

The rea­son is that the com­pany could be wound up and if it has no as­sets, then it is dif­fi­cult for a land­lord to ob­tain pay­ment for out­stand­ing rent or take any ac­tion against the com­pany.

Guar­an­tees will also some­times be re­quired when there are other en­ti­ties, such as in­cor­po­rated so­ci­eties or char­i­ta­ble trusts, as ten­ants. Some land­lords re­quire bank guar­an­tees, where rental in­cen­tives are to be paid in ad­vance.

Premises con­di­tion re­port – a re­port at­tached to the Deed of Lease that records the con­di­tion of the premises (in­clud­ing car­pets and so on) when the par­ties en­tered into the lease.

Of­ten land­lords and ten­ants will do a walk- through of the premises to­gether to un­der­take it, but some­times it is un­der­taken by a pro­fes­sional or third party. Pho­tos can be at­tached.

Prop­erty Law Act no­tice –a no­tice un­der the Prop­erty Law Act 2007 is­sued from the land­lord to the ten­ant ad­vis­ing of a breach of the lease, such as non-pay­ment of rent (and gen­er­ally ad­vis­ing that they will cancel the lease if those breaches of the lease are not reme­died within a cer­tain time).

Th­ese no­tices are re­quired to validly cancel a com­mer­cial lease in the event of a breach. They are re­quired to in­clude cer­tain in­for­ma­tion in a cer­tain for­mat, so land­lords should al­ways take legal ad­vice be­fore is­su­ing a no­tice.

Rent re­view dates – the dates that the rent will be re­viewed.

There is a process re­quired to be fol­lowed in the Deed of Lease, in which ei­ther party gives no­tice of the new rent and the other party has an op­por­tu­nity to dis­pute it.

Rent re­views can be to mar­ket rent (that gen­er­ally in­volves ar­bi­tra­tion or valuers if agree­ment can’t be reached) or to CPI, (based on a per­cent­age in­crease based on the Con­sumer Price In­dex) or a mix­ture of mar­ket and CPI, depend­ing on what is agreed.

Re­newal dates ( rights of re­newal) – agreed dates when the ten­ant is re­quired to give no­tice to re­new the lease for a fur­ther term.

Sub­let – where a ten­ant lets part of the prop­erty to an­other ten­ant. Gen­er­ally the land­lord is re­quired to con­sent and is en­ti­tled to as­cer­tain the suit­abil­ity of that sub-ten­ant, as with as­sign­ment.

Term – the length of time that the lease will run ( sub­ject to rights of re­newal).

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