Start Me Up: Leases
In the first of our Start Me Up series we have Tim Lindsay, Associate from AWS Legal. Tim gives us his top tips and things you can consider when looking at a commercial lease.
Six Top Takeaways with Tim.
Be clear on what is actually being leased. What is being leased? The more specific and the better you can describe the premises the better. Draw a diagram or describe it in words, this is particularly important if you are sharing it with other tenants. Include exclusive areas, shared areas and carparks.
Who is actually going to be leasing the area. Look at what obligations there are depending on who is actually leasing it. Are you a sole trader or a company? Find out if directors or shareholders of a company need to give a guarantee and make sure the guarantee obligations are well understood. Look at limiting the guarantee to a shorter time period rather than later.
How much is being paid for the lease. Don’t pluck a figure out of thin air. Do a market valuation, it may be an additional cost but an independent valuation will make sure what you are paying is fair. This should be done right at the beginning.
Commercial vs residential - commercial will need to pay the outgoings for the building, this needs to be taken into account and worked out fairly between tenants. What other costs could you incur such as insurances and services? Work it all out before you sign up.
How long is the lease. If you are only needing the lease for a short time don’t sign it up for a longer time. Landlords want security so you’ll need to find a happy medium. If you do want a long term lease break your term up into smaller terms e.g a 15 year lease sign it up into 3 x 5 year leases.
What are you going to do with the premises. If you want to repaint, add signage or make improvements then this needs to be discussed with the landlord first. Do you want to fit out the interior? Are you going to be required to change the premises back to its original state once you’ve moved out at the end of the tenancy? Make sure you know beforehand and indicate what your intentions are with the space.
What can you do in the premises. Do your homework on the licenses, resource consents, council zoning and business district plan to make sure you can carry out your operations in the area.
A big thank you to Tim and AWS Legal for your tips. You can contact Tim on Tim.Lindsay@awslegal.com
Disclaimer: This isn’t legal advice but information on leases and a general overview about things to think about with commercial leasing. AWS Legal recommends to always get legal advice before you take on a legal arrangement such as a lease.