Commercial lease and fees questions

[russellpeter]

Hi Guys

I’m trying to get my head around leasing my first Commercial Lease in Brisbane.

So far I have enquired about 10 properties and gotten 2 responded and inspected both properties.

One was for lease at $30K and the other $40K

Both agents dropped 10K from there asking price once I didn’t bite at signing a lease.

My questions are

What portion of the rent do I need to pay in advance to secure a lease?

What Bond is required?

I already know that the lease price is negotiable but what else can I ask for in the current market?

what are the typical agents fees.

Let fee?
Management fee?
Or does it work differently in commercial leases.

Thanks for any help.

 

[RPI]

Hi Russell

A bond is normally by bank guarantee. 3 months is most common.

You will have to pay for lease preparation also

 

[Raddles]

http://www.justice.qld.gov.au/__dat...tail-Leasing-Guidelines-Booklet_Cover_web.pdf

is a good place to start - not sure if you have a retail lease situation - but the above provides good information

 

[RPI]

Half of my message from before did not post sorry.

Lease prep will be $1500-$2500
Be careful regarding land tax clause. I would try and either eliminate the land tax payable by you or limit it so you are only responsible for the amount of land tax payable on this property as if the owners held no other property. You could go from paying no land tax at the start of lease (where it was the only property owned) to paying the same amount in land tax as you do in rent (If bought by an entity whose land holdings pushed it into the top bracket).

Commercial leases are the opposite to what you are dealing with, they are completely towards the land lord. I would suggest seeking legal advice.

 

[Scott No Mates]

If you can negotiate it consider the following items:

• Land tax (as noted above) either payable on a single-holding basis or over a base year amount (ie like a gross rent).

• Make each party responsible for their own lease preparation costs (this is the case for retail leases in most states).

• Are you negotiating a gross or net lease? If it is gross, negotiate for increases over the base year rather than all outgoings.

• Limit the amount of public liability insurance required.

• Exclude lessor's mortgagee's fee for approval of the lease.

The list goes on.....

 

[SB25]

Hi,

A few things in addition to/seconding points above:

• You most likely shouldn't have to pay leasing fees - the Landlord will be covering these, unless you have specifically employed a tenant rep agent.
• Get some clarity on the land tax liability as suggested
• Have a solicitor (or deal prevention officer as we call them ) review the lease for you
• It would be the LL that dropped the rent not the agent
• Everything is negotiable - maybe ask for a fit out contribution if it will help you set up your premises. Either in cash upon presentation of receipts, rent free/abatement or LL works. If the LL dropped their price by $10k then they must be really keen for a tenant, so you can probably get away with asking for more.

Cheers

 

[cu@thetop]

Hi,

A few things in addition to/seconding points above:

• You most likely shouldn't have to pay leasing fees - the Landlord will be covering these, unless you have specifically employed a tenant rep agent.
• Get some clarity on the land tax liability as suggested
• Have a solicitor (or deal prevention officer as we call them ) review the lease for you
• It would be the LL that dropped the rent not the agent
• Everything is negotiable - maybe ask for a fit out contribution if it will help you set up your premises. Either in cash upon presentation of receipts, rent free/abatement or LL works. If the LL dropped their price by $10k then they must be really keen for a tenant, so you can probably get away with asking for more.

Cheers

Best larf I've had all day.

 

[russellpeter]

thanks fro the advise been really helpful.

a bit more info. the offices i am looking at are already done just move in and furnish.
looking at something like this.

http://www.realcommercial.com.au/property-offices-qld-south+brisbane-500632479

most owners only want a one year lease and im guessing this is why they are offering cheaper rent. and are hoping the market improves on a years time

the lease would be including including all out goings. from what i have been told.

 

[SB25]

CU@thetop - DPO is one of the nicer terms for solicitors! Sometimes they forget that you can both be working for the same client. Even worse when 2 of them get into a "see who can find the most errors in a contract/agreement and look like the better solicitor" battle.

To the op - if this owner only wants a 1 year lease then they are likely either hoping for the market to improve or considering redeveloping and don't want to be locked in. If it includes all outgoings then it's a gross lease - make sure it's clearly spelt out as such plus who's responsibility things like cleaning common areas/toilets are. Also if it's under 3 years it will be on a CTA and doesn't need to be registered.

 

[Dazedmw]

If you can negotiate it consider the following items:

• Are you negotiating a gross or net lease? If it is gross, negotiate for increases over the base year rather than all outgoings.

I have never really understood this and as far as I know it's not common in the markets I deal in in Victoria.

If it's a gross lease won't the rental just increase by say CPI each year which covers the increase in outgoings anyway? Why does he need to negotiates for increases over a base year?

 

[RPI]

Best larf I've had all day.

Yep got me going too. I am surprised some of them are willing to go to the toilet in the morning, that's a bit of risk.

I had one on the other side recently who had never heard of off the plan or proposed lot sales for land. Told his client that the client must dodgy and they should run.

 

[cu@thetop]

Yep got me going too. I am surprised some of them are willing to go to the toilet in the morning, that's a bit of risk.

I had one on the other side recently who had never heard of off the plan or proposed lot sales for land. Told his client that the client must dodgy and they should run.

2nd best larf I've had today. Wasn't an Inala based solicitor was it?

 

[murph14]

I had one on the other side recently who had never heard of off the plan or proposed lot sales for land. Told his client that the client must dodgy and they should run.

Not bad advice imo

 

[SB25]

RPI - Sounds like you encountered a case of SSS (Suburban Solicitor Syndrome)!

Sorry for the thread hijack. Although I have to say when you deal with a professional lawyer who knows their stuff and isn't trying to shaft you it's a very refreshing experience.

To the OP - did you take the premises? And hopefully you've heeded these comments and gotten sound legal advice!

 

[John M]

Ask for a rent free period "to help you fit out the premises and get set up". You usually won't get this for a 1 year lease, but if there are high vacancy rates then owners may consider it.

I would also be looking to build options into your lease. ie 1 + 2 + 2 or something to that effect. This gives you an option to renew the lease, it allows for the owner to do a market review when you take up the option, and it shows them that you have some sort of intention of staying longer.

In NSW, agents can draw up a commercial lease if it does not exceed 3 years (including options). This can save $1000+ on legal fees plus time and the headache of dealing with lawyers. Some agents try to charge you for this though, so ask if there is a lease preparation fee applicable. Not sure if QLD rules are somewhat different.

Also ask for proof that the air conditioning system (if applicable) has been serviced recently, and make sure you do regular services as this will cover you if the a/c system breaks (ie you can show you have sufficiently maintained the system rather than neglecting it and causing it to break).

Make sure you read through the lease properly. Some agents/lawyers/landlords try to sneak in clauses that really shouldn't be there.

I hope this helps!
Good luck.

 

[blw101]

Check if there are any make good provisions at the end of your tenancy should you leave. (Stripping out any works you have done etc). Though if there is an existing fitout, which is owned by the LL, there shouldnt be anything too onerous.

And look out for anything that says " 'insert any item here' to be done at the tenants cost to the landlords satisfaction" or things along those lines...

Cheers,
BLW