My commercial lease

Never thought of that one before GoAnna. Would still like to avoid sub-letting if possible. I think I mentioned, we still use it occasionally one morning a week for a couple hours, so would make that awkward.

I do have one of my suppliers who is interested in renting it out by the hour for a couple of days here and there. Have 2 days booked in over the next couple months - not much, but better than nothing.
 
Still waiting for a reply on my offer.

Was growing concerned last week as it had been a month since I sent the letter off to the agent. Called her and she just said to me 'hmmm yeah you're right, it has been a while. We sent the offer to the LL and haven't heard back. I guess it's been long enough for us to give him a call.'

So we left it at, she'll call me once she's spoken to the LL. So again I go back to waiting. Think I'll call her again if I haven't heard by the end of next week.

An added stress I don't need right now whilst also trying to get a property deal off the ground.
 
Hey Steve, feeling your pain! Our LL has just put up our lease by 45%! :eek: that thud you just heard was me feinting!

Picking ourselves up off the floor now. :rolleyes: Yes, I was expecting a hefty increase but OUCH!
So, if I can"t beat them, I think I better join them. Hey, Dazzling, how does one get in on this commercial gig?!!! Strike that, thats right, I can't afford to now!
 
Hey, Dazzling, how does one get in on this commercial gig?!!!

Hello silversands,

It's a shocking gig, with massive risk and no capital growth, with very lengthy (up to 12 months) vacancies that can send you broke quicker than a cricket ball hitting Grannies window.

Stick to the houses mate. Nice and safe.

As the Owners of this site and other noted property experts continually write.....they won't recommend it as it's volatile and there is far better money to be made in residential. I agree with all of those experts.....you should definitely stick to the gig you know.


Hey Steve - I think your wily ol' LL is giving you a good sweating, like Rockefeller used to do.....ouch, grab a handful of jelly ol' son.
 
Thanks Daz! :p

It's ok, I've prepared myself for the process. Just want to get it over with so I can pick myself up and move on! Well, that is until it happens again ;)
 
Steve,

That brings to mind one of those blow up boxing dolls that the kids play with. No matter how hard or how many times you punch it flat, it just pops right back up, all ready for you to smack it down again and again. Great stuff.

Commercial tenants - I love 'em. :p
 
I'm glad you used the Boxing doll analogy as opposed to some other inflatable devices that could represent me, and what would be done! :D

Problem is, once your established in a location, it makes it much harder for commercial tenants to move. Especially when the area becomes 'up market' around you and demand for premises increases exponentially, as in my case.
 
Hello silversands,

It's a shocking gig, with massive risk and no capital growth, with very lengthy (up to 12 months) vacancies that can send you broke quicker than a cricket ball hitting Grannies window.

Stick to the houses mate. Nice and safe.

As the Owners of this site and other noted property experts continually write.....they won't recommend it as it's volatile and there is far better money to be made in residential. I agree with all of those experts.....you should definitely stick to the gig you know.


yeh and my resi IPs are just spinning off so much free cash flow and going up in value so much!! a good thing those expets have given a personal garuantee that they will double in value in 7 years,tho I think TIC have changed their garuantee to 10 years
 
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Update

Finally received the LL's response to my offer!

He originally sought a 21% increase. I counter offered with 10%. He has now come back with 17%.

Not as great as I'd hoped, but I'm still happy with this, and will accept it.

Took a while, but a pretty nice saving for writing a few letters. Also eases the compunding effect further down the lease.
 
Well done Steve, 17% is very tame compared to others for a market review.

Consider it a job well done. No luck involved. Onya. :)
 
Had a read through my lease. Most of it is stipulating what I can and can't do, and what is required of me - no wonder you love the commercial leases Daz! ;)

In the lease it has:

Item 62. Extension.

The the Lessor shall upon written request of the Lessee made not later than three months before the expiration of the said term or terms and if there shall not at the time of such request be any existing breach or non-observance of any of the covenants and stipulations on the part of the Lessee hereinbefore contained at the expense of the Lessee grant to the Lessee a new Lease of the said premises for the further term or terms specificed in Part VII of the Schedule at a rent to be mutually agreed and which new Lessee shall contain the like covenants and stipulations as are herein contained excluding this option for renewal PROVIDED FURTHER that if the due observance or performance by the Lessee of the Lessee's duties and obligations hereunder shall have been guranteed by any person or firm or corporation then the execution of such guarantor of such documents or assurances as the Lessor may require for the purpose of affirming or renewing such guarantee for the said extended term shall be a condition precedent to the exercise by the Lessee of the Lessee's rights to request an extension hereunder. The extension of this Lease shall be conditional upon the rent being mutually agreed for the first year of the extended term of the lease.


That must be one of the longest sentenced in the English language! :p I've underlined the important parts as to negotaion of the new lease.

The Part VII referred to is a 5yr extension of lease.

It doesn't say anywhere about market valuation, or remedies for disagreement etc. Just a rent 'mutually agreed to.'

Hi Steve

I assume you've confirmed agreement with the landlords agent by now.

A few points for future reference (I caveat my advice with the fact that i'm a Chartered Surveyor from the UK market which is similar but not identical to oz!)

1. Whichever solicitor represented you when this original lease was completed needs shooting. It has full conditionality which means that any breach of your covenants at the end of your lease would render the option inoperable (e.g. a simple covenant to paint at the end of the term). It also doesn't refer to a market rent nor have any process for a third party to settle a dispute of rent. In short its very poor and landlord friendly.

2. The clause states that you have to give 3 months notice to the landlord to operate your option. Why did the landlord's agent contact you then? He could have let you miss your option date and used that to threaten you with eviction at the end of the term and demand a more bullish rent increase. Perhaps the market isn't as bouyant as you thought and he wanted the security of knowing you wanted to stay?

3. It is ALWAYS worth getting professional advice as to market value. You seem to have a grasp of market rents but there are numerous factors including clauses within your lease that can add or detract from market value (particularly as there appear to be numerous landlords and so different leases). You could pay for an initial valuation report and use that to negotiate yourself if you wanted to keep costs down. Leases aren't the easiest documents to interpret and its always worth an agent / solicitor casting an eye over the document at renewal time. It may be that there are other clauses within the document that relate to the option that aren't necessarily next to it!

4. Landlords will always come in high. Its the nature of the beast - particularly if there is a time of the essence counter notice needed. You "feel" as though you've got a good deal because you've managed to knock him down but the agent will have gone in maybe 10 - 20% above his assessment of rental value to give negotiation space. Never accept the initial offer even if you think its reasonable.

In short, I don't know if you've got a good deal or not (I'd suspect not - sorry but as someone who works in the business I rub my hands together if the tenant is unrepresented). One thing is for sure - your option wasn't worth the paper it was written on so make sure your solicitor gets it right next time! (If my solicitor signed me up for a clause like that without consulting me and explaining the full implications I'd sue him).

Anyway good luck with it and as long as the rents affordable no harm done.
 
Thanks for that insight Pom, I'll definitely keep that in mind for next time when a new lease needs to be drawn up.

I do see what you mean about the option. Next time I'll try and get something in the lease about market review etc. - but again, the balls is still firmly in his court. He always has the perogative to say, "no, don't like it, leave." Which he can easily do, especially since the area has now become one of the premium shopping districts in Adelaide with people clamoring to get a location.

As far as the actual rent goes, I do believe it's about right for the area. He used to charge well over market - but regardless of whether you were represented by an agent, and had market analysis done etc - this guy gets what he wants. As I said, he's more than happy to leave a shop vacant (he left the shop next door to me vacant for about 9 months a few years back despite multiple people being interested), and he's aware that he charges much more than neighbours. Doesn't phase him. Which is why this time I was actually surprised that his demand was actually reasonably in line with current market rates.

I've also seen other businesses in premises he owns go bust, which also doesn't phase him - the last one had to sub-let the store for 2yrs until their lease was up and foot the difference in cost. He didn't come down.
 
Pretty much Daz. It's the same lease as last time (as stipulated in that lease - no changes to be made with the exception of market increase).

His PM sent me out the paper work with the details to forward on to the LL's solicitor to finalise. Still waiting on his solicitor to send me a copy of the new lease. Planning to call them today when I get a chance.

Been really hectic last couple weeks getting ready for settlement of the monster tomorrow. Don't you love it when everyone has known about the deal and had the details for ages, yet there always seems to be something that goes wrong which requires me to race around signing forms, including yesterday which was at such a late point I wasn't willing to trust it in the mail anymore, so had to drive over and deliver in person. :rolleyes:

I think people just like to see me running all over the place signing forms. "hmmmm let's see how long we can hold onto this piece of paper before we tell him about it!" :p

It's all part of the game though, this is the easy part! :D
 
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