THE DEVIL IS IN THE DE­TAIL

How to en­sure your lease de­liv­ers what you need.

Inside Franchise Business - - Contents - AN­DREW GRIMA Prin­ci­pal, Cole­man Greig

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

TO REDEC­O­RATE?

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

premises.

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.

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