Renowned as an expert in commercial leasing, Eric Kalde is author of the Leasing Practice Manual NSW which is published by Smokeball for the legal profession. The best, most up to date commercial lease agreements available. We create and publish the legal documents other lawyers use. Acting for landlords and tenants. Get the best advice and representation.
A commercial lease is an agreement to allow the tenant to have exclusive use of a property for a period of time. The right to occupy the property is given to the tenant by the landlord in exchange for rent. The commercial lease agreement protects the rights of the tenant and the landlord by putting the agreement in writing.
Standard commercial lease agreements are long and complex because they need to protect the landlord and the tenant for the duration of the lease. The lease needs to plan for what might happen over that time, because a forward thinking agreement can mitigate potentially serious issues that may come into play in the future.
Commercial Lease agreements are governed by the Real Property Act 1900 (NSW) and the Conveyancing Act 1919 (NSW). Some commercial leasing may also be classified as retail leases under the Retail Leases Act 1994(NSW). The Retail Leases Act 1994 (NSW) imposes a further layer of regulation on top of the Real Property Act 1900 and Conveyancing Act 1919 (NSW). It is important to work out which legilation applies to the type of commercial property you are leasing, as the effects will be profound and far reaching.
Commercial lease terms typically run for three years or more. They often have an option to renew for another lease term. An option is an agreement included in the lease whereby the landlord agrees to give the tenant another lease on the same terms for a further term, if the tenant wants it. Its called an option because it is up to the tenant to say whether they want the extra term or not. That is, they have the option to say whether they want it or not. In order to work, options must be carefully worded. Because options are agreed at the start of a lease term, the parties may change their minds by the time the lease comes up for renewal. The landlord may decide that granting an option was a bad idea. In this type of situation they are likely to look for loopholes to avoid giving the tenant a further term. If you are the tenant, it will be important for you to have a well worded option that does not give the landlord any loopholes to escape should they change their mind at the end of the lease term.
A properly created commercial lease creates an interest in land second only to ownership. The operative words are ‘properly created’. An inexpertly created lease can have unintended effects, or not protect the parties the way they had intended. Ignorance of the law is no excuse. Let’s consider the Commercial Lease document itself. What’s it made up of?
The Commercial Lease document is made up of at least 2 parts. The first two pages of the lease document consist of the ‘dealing’ form entitled ‘Lease’ and can be obtained as a free download from the website of NSW Dept of Land, Land and Property Information or a reputable legal publisher. See the Department of Lands website and Smokeball for downloadable forms www.smokeball.com.au.
Usually a lease will be created by taking the first two pages (being the Department of Lands Form) and adding an ‘Annexure A’ which contains the terms and conditions. Some leases have further annexures called ‘Annexure B’, ‘Annexure C’ and so on. A good legal publisher will usually also have a comprehensive Practice Manual. Smokeball has the Leasing Practice Manual NSW by Kalde, which contains the leasing documents and letters you need to create a lease as well as the ‘how to’ commentary.
Commercial Lease Government Regulation
Commercial Leases are usually registered on the title of a property at the Department of Lands. In order to be registered they must be in registrable form. To be in registrable form they must include the Dept of Lands form for Leases and meet other criteria set by the Dept. Registration of Leases on title is administered by a division of the Dept of Lands called ‘Land and Property Information’. Until April 2011 this department was formerly called the “Land and Property Management Authority” (LPI). As well as complying with LPI requirements, a commerical lease needs to have appropriate clauses so that it ‘works’.