FAQs

Absolutely, not all lawyers undertake commercial lease work and we are happy to take instructions from any lawyer on a landlord’s behalf. We undertake not to contact the lawyer’s client or in any way solicit any other business from that client. Similarly, accountants and other financial planners and advisers may also instruct us to prepare lease documents between related or other entities as required.

One of the biggest and most obvious errors that we see in leases prepared by estate agents or landlords themselves is that the lease is prepared in the name of one person whereas in fact the property is registered in the name of another. For example, often one party provides instructions to the estate agent to draw up a lease in joint names whereas in fact the property is registered only in one spouse’s name.

In addition either the landlord or the tenant may be a company under external administration such as receivership or liquidation and accordingly the person providing instructions is not entitled to do so. Sometimes the business name provided by the tenant does not exist and therefore should the landlord wish to commence recovery proceedings against the tenant, it has no one to pursue. These are just a few examples of errors which could be eliminated with correct searches and the ability to understand them.

Many landlords and estate agents underestimate the value of the guarantee and indemnity until such time as the tenant defaults under the lease. In our view, a landlord should rarely accept only one individual as a tenant, and should always insist on one or two other individuals as guarantors, preferably someone who owns real estate in Victoria. If a company is a tenant, then at least the company’s directors should provide written guarantees, and if the sole director has no real estate registered in his or her name in Victoria as is often the case, then a personal guarantee from that director’s spouse should be obtained.

In most cases a tenant should provide not only additional personal or company guarantees, but also a security deposit such as cash or a bank guarantee which is held by the landlord or representative for the duration of the lease. If a tenant vacates the premises due to poor business performance or as a consequence of the deteriorating relationship with the landlord, it is likely that pursuing the tenant or guarantor for unpaid rent or outgoings may take considerable time and expense.

As long as a security deposit is dealt with in accordance with provisions of the legislation, the funds or bank guarantee can be applied towards the reduction or elimination of the significant amount outstanding. If a bank guarantee is provided it should have no expiry date so it lasts if the Tenant remains beyond the term or options periods in the lease.

Tenants often think this is the case however this is not correct. When a tenant signs a lease or they validly exercise their option, they remain responsible for the payment of rent and outgoings until the expiry date of the lease, or until they source another suitable tenant who has been approved by the landlord.

If the tenant leaves the premises before this time then it will be responsible for the payment of rent and outgoings until a substitute tenant is found by the landlord and that tenant commences to pay rent and outgoings. In the event that a tenant vacates under these circumstances, the landlord has an obligation to mitigate its loss and this means that they must do everything possible to locate another suitable tenant as quickly as possible, if the tenant does not offer a suitable replacement.

Most estate agents, when showing prospective tenants the premises, will compile a condition report setting out the state of the property when the tenant first occupies the premises. If prepared carefully, and in some detail, this can be quite useful in eliminating later disputes by the tenant as to the level of quality and cleanliness of the premises at the commencement of the lease.

We believe however that dated photographs are a better tool in preventing these disputes as these will show such things as the positioning of office partitioning, the existence of any inbuilt shelving, wall units and desks etc. and the general quality and appearance of the carpet, painted walls and landlords fixtures and fittings when the lease commenced.

Generally yes. However if the premises are covered by the Retail Leases Act 2003, then there are some outgoings such as land tax or the costs of the Lease which cannot be claimed by the Landlord. In such a Lease, the Disclosure Statement must accurately list each of the outgoings payable by the Tenant and a dollar estimate.