What are the key rights and obligations for commercial tenants in Australia?
As a commercial tenant, you’re required to comply with the terms of your commercial lease. But how do you ensure you don’t miss key points in the fine print, or misunderstand your rights and obligations?
This is key when considering and negotiating the terms of your lease with your future landlord. It’s essential to know what you’re really in for, and on top of all deadlines, clauses and conditions in your lease.
With commercial property, the regulations and laws will vary depending on the type of property, such as office spaces, industrial and retail. Each Australian state and territory also have its own legislation and list of tenant rights which need to be referred to when negotiating your lease or in the event of any disputes.
As a tenant you should have several rights with your lease, including the option to renew when your term expires, or options to sublease or assign. However, both of these are clauses so you will need to specify them in the Agreement to Lease. It’s recommended that commercial tenants strive to include a sublet or assignment clause, which will allow you to make use of unused space in the property or reassign the lease to a different tenant if you wish to leave the property.
Commercial tenants will have full rights to the property space from their lease date, after they have agreed to terms and signed on. This means that neither your landlord or anyone else has the right to use the premises. Once you have specified in your lease the types of activities and operations you’re allowed to undergo, a landlord can also not then try to restrict you from performing these later on.
However, be weary of a refurbishment clause. This clause could see your landlord make improvements or conduct routine repairs on the property at any time during your lease, causing major disruptions to your business and day-to-day operations.
Health and safety
While you are obligated to look after the property and equipment, you also have the right to be provided a safe and hazard free environment. Therefore, repair requests can be made to your landlord for building issues that jeopardise yours and your employees’ safety.
While your landlord does have the right to terminate your lease if you fail to comply with any of the conditions, you still have the right to a notice of eviction, as opposed to simply being forced to vacate on the spot.
Rent is your number one obligation as a tenant. One way or another, you must pay your landlord or risk your lease being terminated or your landlord seeking damages.
The value of your rent, how you pay it and how frequently is up to the discretion of you and your landlord. This is where initial rent negotiations are crucial. You need to ensure you do your market research and seek advice from a property expert to ensure your rent is fair (for both you and your landlord) and within the current market conditions and value of the property.
Your lease may also include rent increases or a rent review by the landlord which occurs annually or over a different period of time. It’s particularly crucial you determine whether a ratchet clause is involved, which ultimately prevents your rent value decreasing despite the market rates at the time of review.
Every tenant will be responsible for the outgoings, or running costs, of their property, such as electricity, phone, and gas bills. You may also be required to cover the landlord’s expenses, such as rates, taxes and levies.
However, it’s vital that you decide specifically who is responsible for which expenses, how these payments are made and when. It is also worth determining the estimated costs beforehand, to avoid any unwanted surprises.
Repairs and maintenance
It’s your basic responsibility to respect the property and equipment, including keeping it clean, well-maintained and free of any damage. Therefore, any repairs or maintenance issues that do occur need to be covered by you as the tenant. However, the landlord is responsible for structural repairs and already existing equipment.
Depending on your agreement, a tenant may also be responsible for taking out and maintaining building insurance and other insurances.
There may be other fees and payments that arise, such as a landlord’s legal fees to prepare your lease or a security bond. Again, the types of fees you’re required to cover and the amount need to be discussed between you and your landlord.
How to ensure a good experience
While your rights and obligations are certainly important, at the end of the day it all comes down to three aspects – having a clear agreement, negotiating in good faith and seeking qualified advice.
Have a clear agreement
Don’t rush into any lease without sorting out all the minor details. Know exactly what you’re signing up for - including any procedures, payment methods, reviews and other requirements - and be mindful of the type of language used in your agreement.
Good faith negotiation
Build a positive and respectful relationship with your landlord from the beginning. Remember that your landlord has their own responsibilities and obligations, and your agreement should be fair for both parties and mutually beneficial. Negotiating in good faith also means being open-minded, amicable and keeping your emotions in check. It also means being reliable, responding quickly and being genuine in your interactions.
Support from a tenant representative
This isn’t something you should go at alone. The best part about a tenant representative is that they work solely and independently with your best interests in mind. They will ensure you’re treated fairly and within your rights, and that you clearly understand what you’re signing up for. A tenant representative can also guide you through the tougher processes, especially negotiations and final lease reviews.
Where to seek help
Reach out to an experienced tenant representative at Broadway Property.
Contact us to discuss your needs. No obligations.
Managing Director, Broadway Property
Director, Broadway Property