How can a tenant protect themselves in a commercial property lease?
Most offices are rented. The agreement entered into between tenant and landlord is governed by a lease. Leases are in a standard format and with terms that protect the landlords interests. Landlords are seldom open to negotiating the terms of such leases.
Two things tenants need to do:
- Read the terms and conditions very carefully.
- Challenge anything you feel is unfair or which may cause the tenant to suffer in their lease.
A great broker or brokerage will always ensure that the tenant is solidly protected. The job of the broker is to achieve a lease which protects both tenant and landlord as well.
Dealing with the landlord directly isn’t not a good idea; rely on a reputable broker to manage this process and you will be in safe hands.
A broker worth his / her salt will help a tenant to consider and raise all and any issues or potential challenges in a lease agreement. The broker will also assist in settling these issues before the lease is signed.
Trying to change things once a lease is signed is practically impossible. Make sure everything is clear and understood, and in writing, in the final lease agreement.
Here are some common issues tenants must consider and understand before signing a lease. Remember that a signed lease is a legally binding document.
- Be very clear about ‘renewal options’. The tenant must understand what these are and what the ‘renewal options’ will mean for the tenant when approaching lease expiry. Make sure these are clearly stated and understood.
- Make sure you confirm all the responsibilities required by the landlord with regards to your service supply. This includes electricity management, water services, waste disposal etc. If the landlord does not comply with these requirements and the tenant has no clear agreement stating the landlords responsibility to do so, the tenant has no claim against the landlord should these services not be delivered by the landlord.
- Landlords aim to protect themselves from being held liable for their own wrongdoing. The Landlord indemnifies himself against any wrongful or negligent conduct.
- Pay particular attention to ‘breach clauses’. These do not require the landlord to allow the tenant an opportunity to sort the breach of responsibility out. Breach clauses allow the Landlord to take any steps he/ she requires without notifying the tenant. This could even end in the termination of a lease, without consultation or notice. Breaches are often not intentional and arise due to an admin error. Protect yourself as a tenant from these occurrences.
- A landlord can make changes to a property without prior consultation based on certain clauses in a lease. These clauses may cause the tenant inconvenience in the form of loss of business without compensation.
As a tenant you need to be vigilant, but more importantly, it is relying on the qualities of an outstanding broker to assist you as the tenant. These are only some of the pitfalls affecting tenants.
If you are not assisted by a reputable property broker or brokerage, never sign a lease before taking professional advice.
Reference: Law Article on Leases of Commercial Property from a Tenant’s Perspective, by Frans van Hoogstraten, Bowman Gilfillan Attorneys