Top Tips for taking on a New Lease 14 Sep 2017

To lease a premises in conjunction with purchasing or starting your own business can be a daunting prospect - often with good reason.

 

What’s my exposure?

 

A good starting point for your likely “exposure” is to simply multiply the annual rent and outgoings you are required to pay by the length of your lease as follows:

 

Assume a five year initial lease term at (say) $50,000 plus GST a year.  Add in other property expenses such as rates, insurance and maintenance totaling (say) $8,000 a year, and you get:

$57,500 x 5 years + $8,000 x 5 years = $327,500.00.

 

This example illustrates that, like buying a house, signing a lease requires care and attention – including asking yourself the basic question: “How am I going to meet these obligations?”

Many tenants also don’t understand that when they sign a seemingly innocuous Agreement to Lease (most commonly in the form published by the Auckland District Law Society (ADLS)) they are usually also agreeing to be bound to the much more fuller terms of the ADLS Deed of Lease – i.e. the terms of the lease are effectively ‘struck’ or finalised as soon as the agreement is signed.

For these reasons, we strongly recommend you consult your lawyer before you sign any lease agreement.

Tips for negotiating a lease

 

Some particular areas you should turn your mind to when negotiating a lease include:

Check the Plan and Car Parks

Final Measurement of Premises

Lease Schedules

Business Use

Don’t forget outgoings

Repairs and Maintenance

“Make Good” at Lease End

Guarantees

In addition to these matters, your lawyer will be able to take you through the standard terms of the ADLS Deed of Lease and fully explain your rights and obligations including rent reviews, assigning your lease and damage to the premises, as well as what happens if you are unable to pay the rent.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Tim Rankin at Parry Field Lawyers (348-8480) timrankin@parryfield.com