Understanding the Law

How to Negotiate a Commercial Lease in Your Best Interests

Entrepreneurs are often on the lookout for retail opportunities and a gap in a particular market that they may be able to fill. Often, they will need to rent a space in an existing development to take advantage of the infrastructure and footfall, but they will need to negotiate the terms very carefully with the owner or landlord on every occasion. If you've found what you believe to be a killer opportunity at a shopping centre near you, what do you need to think about before you sign a lease on the dotted line?

Everything Is Negotiable

Rule number one in any situation like this is: negotiate! After all, Australians may be used to paying what it says on the pricetag during their normal everyday life and, unlike some nationalities around the world, tend to accept a requested price and move on. In this case, you'd be well-advised to negotiate with the landlord, especially due to the volatile nature of retail in the current era. Remember, you may need to negotiate the actual terms of the lease in addition to the price to make sure that both parties are as happy as possible before they can move forward.

Lease Length

Some people think it is always a good idea to get a lease that lasts as long as possible. In an ideal world this may be the case, but it's very difficult to predict what will happen in 10 years or so. In this case, try to negotiate a lease that is shorter but that fits in with your initial goals, while making sure that the price you pay is always acceptable.

Break Clause

Some landlords or owners may push back on this and insist that a good price is only available if it is accompanied by a long tenure. If that's the case, you may be able to insert a break clause into the lease that will allow you to exit early in certain circumstances. Once again, these terms should be negotiable, but always ensure that you have a get-out clause, just in case.

Uncover Costs

Look very carefully through the terms of the lease and uncover any hidden costs. For example, are there any fees payable to the owner/operator of the shopping centre that would be over and above your rent?

Repairs and Maintenance

Furthermore, determine who is responsible for repairs, and make sure that every potential problem area is covered. Again, if you're not too happy with the terms of the lease in this area, offer an alternative, and aim to make the deal more favourable.

Getting Advice

If you're not used to negotiating the terms of a commercial lease, bring in a lawyer with experience in this area. They may help you to achieve a better deal and ensure that all potential legal loopholes are addressed.