Heads of Agreement

When you find a tenant for your rental property the first thing to do is secure a commitment. Most agents will ask the tenant to sign a Heads of Agreement and pay one month’s rent as a down payment. If the tenant does not proceed, then the landlord’s costs are deducted from the bond before the balance is refunded. This practice confirms the tenant is serious about renting the property and covers the owner’s downside by ensuring costs are paid if the tenant does not proceed.

There is a substantial amount of work in drafting a new commercial lease. As well as drafting the Lease itself, a solicitor will also:

  1. Confirm the legal entity leasing the property. If this is a company then a company search will be obtained to find out who the owners are and the shareholders. This is compared to who you have been talking to – this persons should be at least one of the shareholders.
  2. Confirm ownership of the land and any other registered interests such as a mortgagee (lender or bank), caveats or old commercial leases. Each of these interest if they exist on the title need to be handled in a particular way.
  3. Confirm the GST status of all parties. You need to know whether your tenant is registered for GST. This will impact on the type of invoices you issue and what your GST liability will look like.

One step real estate agents always fail to do is investigate.



Written by Commerial Law Expert.

Eric Kalde:  Kalde Legal Pty Ltd

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