CHECKLIST WHEN ACTING FOR THE LESSEE
- Pre-lease agreements
- Is there a pre-lease agreement / memorandum of understanding / heads of agreement entered into by the parties or by a real estate agent on behalf of the Lessor?
- If yes, note what needs be reflected in the lease.
- Has the Lessee paid any money to the Lessor or real estate agent?
- If yes, it the deposit refundable or can costs be deducted?
- Is the lease subject to the Retail Leases Act?
- Minimum term 5 years unless s16 Certificate provided
- Is the shop listed on schedule 1?
- Is the shop in a shopping centre?
- Is there an exclusion? Section 5
- Retail Leases Act Applies
- Retail Tenant’s Guide sent to lessee
- Lessor’s disclosure statement
- Lessor cannot have costs of preparing lease paid by Lessee
- Does the lease need to be registered?
- < 3 years (including option)? No
- > 3 years (including option)? Yes
- Is the Lessee in occupation?
- Obtain certified copies of Lessee’s ID. Also:
- Particulars of experience : CV highlighting relevant experience
- Particulars of assets & liabilities: schedule of assets & liabilities, tax returns
- Particulars of financial resources: real estate owned, money to invest?
- Advise on lease, suggest amendments / deletions:
- Parties: title search to determine lessor on the lease is the owner
- bankruptcy search if natural person
- ASIC search if company
- Include appropriate signing provisions i.e. signature required by both directors. Consider Section 127(1) of the Corporations Act 2001
- Real Property Act requirements for signing
- Registrar General’s guidelines – see ‘guide to dealing lodgement’
- Is company seal required? See company constitution.
- Premises
- Confirm street address = folio identifier. Street address search.
- Owned by the Lessor?
- Mortgaged? Y – mortgagee will be required to consent – extra cost for Lessee
- Term of the lease
- When does the term begin?
- Has the term already begun
- Does it begin some time in the future? – recommend registration
- Is the Lessee in occupation?
- When can the Lessee occupy? Date
- Check certificate of currency before occupation
- Option
- Is there an option?
- When can it be exercised?
- Earliest date for exercise? (usually 6 months from end of lease term)
- Latest date for exercise? (usually 3 months from end of lease term)
- Under Retail Leases Act Lessee may request determination of market rent prior to exercising the option. Section 32 Retail Leases Act
- Requesting early determination extends time to exercise option
- Is there more than one option? Advise / confirm instructions
- Rent
- Rent inclusive of GST?
- Advise rent + GST figure in case client overlooked it
- Client registered for GST?
- Rent Reviews
- Rent reviews usually occur annually on the anniversary of the commencement lease.
- Annual rent increases occur on each rent review date.
- A market rent review normally occurs at the end of the term / when the option is exercised.
- GST
- The Lessee is to pay all GST in respect of this lease. Amounts expressed in the lease are exclusive of GST. The Lessee is required to pay a further 10% GST.
- Outgoings
- The Lessee is usually liable to pay outgoings in addition to the rent.
- What percentage or amount?
- Request previous quarter figures from landlord
- Abatement of rent
- Should the building be destroyed, the rent will cease until the building is restored. No lessor should sign a lease without one of these. If its not there ask for it to be included.
- Assignment and sub-letting
- Does the lease allow it?
- No assignment clause? Unlimited right to assign.
- Repairs
- The Lessee is responsible for repairs caused by use of the premises or damage caused by the Lessee, with the exception of fair wear and tear.
- Repainting clause – how often?
- Insurances
- Usually Lessor requires public risk insurance to the extent of $20million.
- Advise client to get other types of insurance also:
- Fire & theft – usually available as a ‘package’. Reminder
- Workers comp. If the client is new to business
- Default and essential terms
- Which are the essential terms? Advise client.
- Bank guarantee
- Usually equivalent of 3 months rent plus outgoings plus GST
- Bank guarantee?
- Security Deposit?
- Retail Leases Act? – bond must go to Retail Tenancies Unit within 21 days
- Guarantee
- Guarantor required? Consider conflict of interest- independent advice
- Duty
- (Stamp) duty is not payable on commercial leases in NSW. Transfers only
- Use of premises and Council’s consent
- The Lessor gives no assurance that the premises may be used for the permitted use named in the lease.
- Any current DA’s?
- Obtain copy of DA file from Local Council if necessary.
- Section 12 Local Government Act (no fee)
- Freedom of Information Act. (usu. $30 fee + disbursements)
- Car parking
- Car parking included?
- Does client expect / require car parking?
- Does client need carpark for other reasons? E.g. trucks, loading
- Parking space levy to be paid by lessee? transport.nsw.gov.au
- Searches – confirm description of property. Does street address correspond with folio identifier? – street address search.
- Title search
- To confirm Lessor is the owner
- Section 149 – zoning. Is the use allowed?
- . Company search if lessor is a company to determine
- Who the directors are
- Any charges that may require consent
- Is the Lessor registered for GST?
- http://www.abr.gov.au – ABR lookup
- Points to negotiate: Get instructions from client regarding amendments to request.
- Consider in particular:
- After hours access – is there an additional charge?
- After hours air-conditioning – is there an additional charge?
- Instructions re amendments / deletions
- When requesting an amendment provide the actual wording of the actual clause you want.
- Letter to Lessor’s solicitor requesting amendments / deletions
- Attend to execution of lease with client, request cheques for registration
- Return executed documents with cheques, request copy of registered lease from Lessor’s solicitor.
- Bill client
