Renewing Commercial Lease without Solicitor/Lawyer

[Phylactik]

Hi, my dad owns a property that he has been leasing to very a good tenant for the past 5 years. The contract has expired (31st Jan) and there is an [OPTION FOR RENEWAL], so were wondering if we could renew the lease (for another 5 years - the lessee has happily agreed to this over phone) without having to pay for a lawyer/solicitor and do it privately. The terms haven't changed at all as the current arrangement is pretty much perfect.

Any help or guidance on this subject matter would be greatly appreciated.
I've called the Land and Property Management Authority and was told that we have to lodge a new lease, have it signed and registered.
We've never done this before because my Dad bought the property while it was already being leased to the current lessee, the previous owners simply just transferred everything to my dad's name. I've been looking online for template commercial property leases but to no avail.

I've been contemplating the option of just photocopying the current [well, expired] contract, edit a few dates, keep the T & C as it is and then have it signed and registered. Is this a feasible way of handling this situation? My dad just spoke to another solicitor who told him to bring in the old contract and that all they had to do was just update a few things - couldn't we just do this our selves? Or do we have to go to a solicitor and have a completely new contract drawn up?

We're basically doing this to try and save some money for the tenant because his been a good person, we know that if we go through and pay to get this done we can easily just transfer the cost to the tenant.

The other matter that I'm trying to look into now is exactly how to calculate the amount of stamp duty, a specific question that my dad was asked by the tenant to check out.

I apologize in advance if I have said something completely stupid or irrelevant, I know pretty much nothing about leasing/investment and my mum just thought I could be useful if I could find out anything online. Sorry for typing so much! Will try to re-clarify any point if asked, I know I probably don't make sense on something

Thanks

 

[The Y-man]

Do a search on Dazz's posts - pretty sure he discusses this somewhere....

The Y-man

 

[chilliblue]

Hi, my dad owns a property that he has been leasing to very a good tenant for the past 5 years. The contract has expired (31st Jan) and there is an [OPTION FOR RENEWAL], so were wondering if we could renew the lease without having to pay for a lawyer/solicitor and do it privately. The terms haven't changed at all as the current arrangement is pretty much perfect.

Suggest that you do use a solicitor as the option needs to be correctly registered so that the tenant appears as a vested interest on the title.

Shop around as the costs can vary from $600 - $2,000+ depending on the company and/or work involved. Read the expired lease as it may be billable to the tenant.

Personally, I would use the opportunity to see if you could lengthen the option term if your father is happy with the tenant. This would be done as a new lease to clean up the documentation.

I've been contemplating the option of just photocopying the current [well, expired] contract, edit a few dates, keep the T & C as it is and then have it signed and registered. Is this a feasible way of handling this situation? My dad just spoke to another solicitor who told him to bring in the old contract and that all they had to do was just update a few things - couldn't we just do this our selves? Or do we have to go to a solicitor and have a completely new contract drawn up?

New option must be drawn up as the current lease has expired and the new one is to take precedence.

The other matter that I'm trying to look into now is exactly how to calculate the amount of stamp duty, a specific question that my dad was asked by the tenant to check out.

VIC: Duty on leases and agreements for lease has been abolished from 26 April 2001. As a result, duty will no longer be required to be paid on:

Leases executed on or after 26 April 2001;
Assignments of leases executed on or after 26 April 2001;
A variation to a lease where the variation is executed on or after 26 April 2001;
A rental increase under the terms of the lease due to take effect on or after 26 April 2001.

Same in NSW.

There would be a cost of registering the lease.


I apologize in advance if I have said something completely stupid or irrelevant, I know pretty much nothing about leasing/investment and my mum just thought I could be useful if I could find out anything online. Sorry for typing so much! Will try to re-clarify any point if asked, I know I probably don't make sense on something

Thanks

It is great to see that you have at least taken time to try and learn about the situation.

If you have any questions, just ask.

 

[Phylactik]

It is great to see that you have at least taken time to try and learn about the situation.

If you have any questions, just ask.

Thanks for the in depth reply! Much appreciated.

So it looks like we shouldn't try to create our own lease/contract by copying/modifying our current one [i.e. scan the huge booklet and just edit the first couple of pages (the pages that require writing input) with new dates etc and print]? We were hoping we could that properly do that and get it registered ourselves. We were also looking into the commercial lease agreement packages you can buy online http://www.rpemery.com.au/online/commercial-property-lease-agreement.html - should we even consider this?

That's great to hear about the stamp duty costs, would you mind linking me to a website where I can read up further on that?

And finally it looks like to register a lease we have to take it to the Sydney office, so I don't think I need to ask much about that.

Thanks again for the responses! Will try look into Dazz's posts to see if his covered this already. Thanks again.

 

[Dazz]

We're basically doing this to try and save some money for the tenant because his been a good person, we know that if we go through and pay to get this done we can easily just transfer the cost to the tenant.

G'day Franga,


From where I sit, I would strongly suggest you do the right thing by both your father and his long standing Tenant, and get the paperwork super correct and doucmented up the wazoo.


Spend the $ 1,200 / $ 1,500 whatever it is to formally activate and register the option period for the protection of both your father and his Tenant.


As you say, the Tenant needs to pay for it, so get it done and bill them. Stop trying to reduce their cost and simultaneously expose yourself to untold risk.


As suggested, if your Tenants cracks a wobbly, then spend the same amount of money writing up a brand spanking new 10 year Lease, and tell them to amortise the tiny cost over the 10 year period and stop moaning about it.


Go to it.

 

[chilliblue]

Dazz is right.

Find a solicitor you like who you know does commercial leases and get to it.

Whilst talking to solicitors, have a chat with the tenant and see if they want to extend their option lease i.e 7 years instead of 5.

I personally would steer away from offering the tenant any options with a new lease.

PM me if you need any help.

 

[Macca]

I find it hard not to say "you are kidding" so I will

Please, stop being pennywise/pound foolish and go to a competent solicitor asap.

Usually the tenant has to pay anyway, but you are exposing your father to all sorts of potential problems by allowing the lease to expire without written "desire to exercise option" already.

I am not in Dazzas class, and never will be, but I have had and heard of some weird things happening with tenants, almost all ways the ones without a good legal lease.

Just do it IMO

 

[eggnog]

hi chilliblue. Why in your view is it not good to offer lease options, or did I read your post incorrectly.

 

[chilliblue]

hi chilliblue. Why in your view is it not good to offer lease options, or did I read your post incorrectly.

As a landlord, why would you tie your property up for a maybe which is exactly what an option is.

It allows the tenant every right for an additional term, but no guarantee for the landlord.

If (and that is a big if) I accept an option, then the following conditions are made clear in the Heads of Agreement and in the Lease:

1. A refurbishment of the premises must be undertaken in the final year of the first term as well as a detailed make good upon termination.

2. The tenant must advise the landlord in writing of their right not to take up the option a minimum 12 months in advance (for the long termers this becomes 24 months) otherwise the option will be deemed as taken up.

3. Any nominated option period becomes null and void should at any time during the inital term the tenant breaches one of the essential clauses of the lease.

 

[Compropmanager]

Chilliblue and Dazz are right don't do it yourself.

Also you need to know that the Retail Leases act has come into effect (sounds like prior to you father buying it) plus has changed. If you have a retail tenant you best get someone to draw up a disclosure statment as well.

I understand that you what to look after a good tenant however when it all goes pear shaped (and it could) that old lease that you "edited" may have conditions that are void.

On the topic of options once again chilli you have been talking to my landlord's just the other day I had a tenant offer a 7 year lease with two 7 year options and the landlord said no!!! funny she gave the same reasons you did. Though I do agree with the point you make that is now a 5 year lease with no option

 

[PrimeCommercial]

If you have a retail tenant you best get someone to draw up a disclosure statment as well.

And if you have a retail tenant you can no longer pass the Lessor's legal costs onto the Lessee. Bloody Retail Leases Act!

Funny I should stumble onto this thread as we have just had several discussions about this exact thing. Tenants not wanting to fork out for legal costs to exercise thier options. I spoke to 3 commercial property solicitors and the REINSW and got 4 different answers as to whether you need a new lease drawn up to reflect the option or if a letter exercisig the option is sufficient.

My opinion has been that an option is a right but not an obligation to enter into a new lease on the same terms and conditions.

I was informed that the option period is registered against the title as well as the original term.

 

[dammit]

this is a commercial asset, do not penny pinch and get the job done properly. esp, the tenant should be footing the bill anyway.

ask yourself this: if the tenant can terminate their lease in a year's time due to a technicality or minor error, and walk free leaving you with a vacant tenancy and no rental until the next tenant comes along, the cost of the solicitor seems very cheap compared to that!

 

[chilliblue]

And if you have a retail tenant you can no longer pass the Lessor's legal costs onto the Lessee. Bloody Retail Leases Act!

Funny I should stumble onto this thread as we have just had several discussions about this exact thing. Tenants not wanting to fork out for legal costs to exercise thier options. I spoke to 3 commercial property solicitors and the REINSW and got 4 different answers as to whether you need a new lease drawn up to reflect the option or if a letter exercisig the option is sufficient.

My opinion has been that an option is a right but not an obligation to enter into a new lease on the same terms and conditions.

I was informed that the option period is registered against the title as well as the original term.

You should have a new lease drawn up for all option lease terms taken up. No ifs or buts on this one.