It is these particular terms and conditions are the main elements of negotiation which will form part of the heads of agreement, and which will then allow the final lease to be prepared.
The preparation of lease documentation should be reserved and directed to solicitors that are experienced in property of the type that you are handling.
There is a significant difference between the leases that you would use in industrial property, retail property, and office property.
One of the most fundamental differences will be the type of rental to be paid by the tenant and the frequency on which the rental will be reviewed.
Together with this, will be the recovery of building operational costs commonly called outgoings.
The length of a lease is a strategic decision as is the existence of any option for a renewable lease term.
It is the landlord that needs to make these decisions based on the time that they wish to hold the property.
They may also have some focus on property refurbishment or redevelopment.
It is the leases that have to underpin and support the strategy.
So let's look at some key elements of the heads of agreement that can be used in negotiating a new lease occupancy.
- The full details of the landlord have to be defined and clearly set out.
The landlord may have some property ownership structure or company to use in the property ownership and lease.
Property trusts may also be part of this equation. - The tenant detail to be written into the lease must be both legal and substantial from the viewpoint of financial stability.
If something goes wrong when the lease, you will want to pursue the tenant for recovery of outstanding monies and lease performance. - To lease premises, the particular space to be occupied has to be clearly defined.
This can be in a survey plan or some other plan which satisfies the legal obligations of the document to be used.
If the lease is to be registered on the property title, then you will need a plan that has been carefully constructed to comply with title registration requirements. - The commencement and the expiry date of occupancy should be detailed in the heads of agreement together with any incentive or discounted rent to which the parties have agreed.
- The starting rental together with the process of rent review during the lease term should be clearly defined.
- The existence and implementation of any lease options for further terms should be clearly defined.
- The use to which the property is to be put should be described.
In only this way can you prevent the tenant from undertaking alternative uses beyond which that was originally intended.
This is called permitted use, and should be quite clear rather than generic.
It is not appropriate to call premises suitable for office occupancy as this will open property usage up to a variety of potential uses such as solicitor, accountant, engineer, and the list goes on.
The landlord does not probably want this variable to exist as it will impact the tenancy mix and therefore the property overall.
Control of the property and how it is occupied is an essential element of landlord control. - Rental guarantees and default provisions are critical to the lease structure.
Essentially the lease needs to say what will happen when the tenant or the landlord does not do the right thing.
The lease has to provide solid methods of conduct by both parties when defaults occur. - Special conditions relating to the tenant a lease should also be considered.
Many businesses and ongoing occupancy require unique conditions to be written into the lease itself.
Failure to do so creates disagreement at a later time. - Make good provisions will be important at the end of the lease when the tenant has to remove fittings and fixtures, so the negotiation on make good has to be made at the beginning of the lease.
Know what you are doing before you attempt it.