The Australian rental market prices are skyrocketing, which is great news for those entering the market as a landlord. Before you start making a profit on your new investment, make sure you understand your obligations first.
Commercial or Retail?
Firstly, identify whether your property will be used as a retail or commercial space. Retail leases in Victoria are governed by the Retail Leases Act 2003 (‘the Act’), whereas commercial leases are not regulated by specific legislation. Identifying the type of lease will also help you identify your obligations.
For example, outgoings are your responsibility under a retail lease, but not necessarily in a commercial lease. You also have additional obligations under the Act such as providing the tenant with a Disclosure Statement within specific timeframes.
What is the permitted use?
Carefully consider the permitted use of your property. This will be captured within the lease agreement between you and the tenant. It is important not to make the permitted use too broad as failure to meet a certain permitted use may be grounds for the tenants to terminate the lease. It should also not be too narrow, as the tenant may not be able to expand their business. For example, if the permitted use is listed as a ‘dine-in restaurant’, the tenant is subsequently restricted from expanding their service offering to include takeaway services. The clause should balance both your and the tenant’s interests and also the permissible use of the premise.
If a prospective tenant wishes to use your premises for a specific use that requires council approval, check that they have obtained the approval before agreeing to it in the lease, such as:
- Trading hours
- Site plans
- Car parking spaces
- Loading facilities
Prepare the property
Anything related to the structure of the property is generally your responsibility. This includes:
- Structural aspects (ie. walls and roof)
- Fixtures (ie. built-in shelving)
- Plant and equipment (ie. air-conditioning system)
- Appliances, fittings fixtures relating to utilities (ie. powerboards, water pipes, hot water system)
You will be required to maintain these items throughout the life of the lease unless the need for repair arises out of the tenant’s misuse of the item. If the premises are damaged, the tenant is not liable to pay some or all of the rent until the damage is rectified. So make sure the property is ready for use.
Are you thinking about leasing out your commercial space? Our property lawyers can help you prepare a lease agreement whilst protecting your rights. Email us at hello@wlegalgroup.com.au to get started!
