THE DEVIL IS IN THE DETAIL
How to ensure your lease delivers what you need.
How to ensure your lease delivers what you need.
Before signing a standard retail lease, carefully consider all aspects in light of your specific business model.
Various issues can be overlooked in the rush to have a document signed and finalised, and because of a landlord’s pressure to have a standard document for a complex or centre. Such omissions may have an adverse impact on the retailer tenant.
Bearing this in mind, it’s ver y important to consider the following issues so that as a tenant your particular business model will work.
THE LEASE AND MOVING STOCK
Is your business the type that needs to receive stock (both large and small shipments) throughout the day?
If you don’t have access to a loading dock direct to your premises, you may need to receive deliveries via the common areas of the centre or complex itself. If that’s the case, consider requesting the following from your landlord:
1. The ability to have access to the building/premises for a period of time before and after trading hours to receive stock deliveries. The landlord may wish to charge you for use of building services outside of trading hours (security, use of airconditioning and electricity, etc) so be prepared to negotiate.
2. If you have certain items or products that need to be received during business hours, what do you do if your lease states that you must not interfere with common areas? Negotiate the ability to receive delivery of stock during business hours in your lease. There may be issues over the size of deliveries that can be brought through during trading hours and you may need to concede that you are not to unreasonably interfere with the quiet enjoyment of other tenants or customers within the centre. You also need to consider indemnities for damage or injury caused during deliveries.
THE LEASE AND AFTER-HOURS TRADE
Sometimes a tenant who occupies a retail shopping centre offers a product reliant on after-hours trade, such as a food retailer more akin to a restaurant than a kiosk, or a medical centre located within a retail shopping centre. In such circumstances you need to consider whether you should be liable for afterhours costs which the landlord may impose upon you for airconditioning, electricity, security, etc.
Initially, what you need to ensure is that you do have the right to occupy and trade outside normal core trading hours (retail leases will contain a clause stating that tenants can only trade within core trading hours).
Secondly, find out what extra costs the landlord will charge you for trading outside these hours and consider if these will be higher than what your normal outgoings proportion will be. Also consider what access your customers or clients may have to sufficient lighting and parking.
THE LEASE AND DISTURBANCE
Leases usually have a clause stating that the tenant must not interfere with the
use and enjoyment of adjoining premises. This may become an issue if, for example, your use creates loud noise, such as a 24-hour gym. If you’re proposing to set up a business in a shopping centre or in a precinct where adjoining tenants could complain about noise, you need to negotiate out of liability for any disturbances emanating from your premises to adjoining tenants because of music or in carrying out your permitted use.
THE LEASE AND A LIQUOR LICENCE
Sometimes tenants need to sell liquor as part of their use, but your usual standard shopping centre lease may not give you the ability to do this or cover off responsibilities for obtaining a liquor licence. T herefore, make sure your lease gives you the ability to sell liquor and governs responsibilities for obtaining and maintaining the liquor licence, including what happens to the
liquor licence when t he lease e nds.
THE LEASE AND SIGNAGE
Leases usually allow a tenant to install signage on the premises with the consent of the landlord and relevant authorities, which will not be unreasonably withheld.
If you have specific signage requirements – for example, advertising your branding in common areas such as escalator walls or signage pods within car parks – you need your lease to specifically cater for these requirements. Otherwise, the usual standard leasing clause may not allow you to install signage in these additional areas.
PROTECTING YOUR BRAND
Leases will usually allow for landlords to install ‘For Let ’ or ‘For Sale’ signs on p remises. A ‘ For S ale’ sign may be required at any time during your tenancy while a ‘For Let’ sign is usually used within the last three to six months of your lease (par ticularly if an option is not exercised or you don’t renew).
If you object to such signage within the premises because of potential damage to your branding, consider negotiating with the landlord for the lease to state that there is to be no such signage. L andlords may not agree to this amendment or may agree to a limited concession such as a ‘For Sale’ sign o nly.
WILL YOUR LEASE REQUIRE YOU
Leases usually have a standard clause that states the tenant must redecorate their premises at the end of the lease. This can bean issue if you’ re
occupying premises over a long period or where there is a series of terms through options to renew.
It can also be problematic if you’re a par ticular franchise or retail operation with a standard fitout aligned with your own regime and timetable for redecoration and upgrade. You r un the risk of spending money at a certain point in time, only to have a landlord require you to carry out a subsequent upgrade or refurbishment which is either inconsistent with your own program or unnecessary.
Look at your refurbishment clauses carefully so you’re not trapped by this. You may also consider d eleting the refurbishment requirement altogether, provided that you maintain the premises in a professional standard and consistent with your corporate image.
THE LEASE AND INSURANCE
Depending on your size and scale, you may have a national or global policy. However, your lease will usually require you to provide insurance in accordance with the landlord’s requirements – including an insurer approved by the landlord and the insurance to be in the joint name of the landlord or such other persons as the landlord require. Check with your broker or insurer to make sure you are able to do t his.
Are you able to instead note the interest of the landlord? Consider carefully what your insurance will cover – for instance, will it cover plate glass or do you self-insure? Are you able to provide a copy of the insurer’s policy or only a Certificate of Currency of insurance? These questions are ver y important for you to consider and you must forward a copy of the insurance provisions to your broker or insurance company for their review to ensure you will not breach your lease, and to ascer tain if any special conditions are required.
Leases usually have a clause stating that the tenant must not interfere with the use and enjoyment of adjoining
AND THE MORAL TO THE STORY IS …?
The upshot to all of this is that you cannot, in an attempt to get a leasing deal over the line, accept standard leases from a landlord if they don’t cater for the specific nuances of your business model. Andrew Grima is a principal at Coleman Greig and head of the firm’s property team. Andrew has significant experience and expertise in retail and commercial leasing, including: assisting and advising both landlords and tenants in their negotiations; drafting leases and other related transactions including major leasing and construction projects.