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What to Look For in Your Commercial Lease Agreement

Before You Sign

Lease agreements, like any other contractual agreement, are binding documents once signed. As a leasee, it is imperative to understand exactly what you are getting into, and paying for, before you have signed on the dotted line.

That which requires the most careful consideration are the agreement's clauses. Contained within these are the terms of the agreement, or, in other words, what you are agreeing to by signing. Below are some examples of such clauses.

Please not, all references to clause numbers and/or schedules refer to the Auckland District Law Society (ADLS) Agreement to Lease (Fifth Edition 2012) or Deed to Lease (Sixth Edition 2012). 


The Ratchet Clause:

This clause appears in the Second Schedule of the ADLS Deed to Lease, and is number 2.1(d). Despite a legal wording, this clause basically means the rental rate on the property will not fall below that paid last year. If this is to be changed, such a change must happen when the agreement is still being negotiated. 


Fit Out:

When a client leases a building they will often need alterations to accommodate their business. These alterations are referred to as the "fit out" and are an expense. Deciding who is going to bear this is a negotiating point between tenant and landlord. Clause 20 in the Deed of Lease covers this.


Maintenance:

Tenants are responsible for maintaining the premises in good order. This includes breakages of glass, damage to doors, electrical fittings, painting of walls, keeping floor coverings in good order, replacing anything that gets damaged. This does, however, exclude fair wear and tear.

If the tenant leases the whole of the property they are also responsible for the maintenance of any surfaced yards, gardens, fences, drains etc. Clause 8 of the Deed to Lease covers this. 


Property Management Fees:

If a property is managed by a property manager, the landlord is able to recover these costs from the tenant under Clause 12 of the Outgoings Schedule of the Agreement to Lease. When negotiating a lease agreement, it is always wise to ask if such costs form a part of the agreement. 



For more information on Commercial Lease Agreements, please contact our Commercial Team. Their details can be found under Meet the Team.