Whether you’re a commercial landlord leasing premises to a business, or the tenant who is renting a new property to begin a flourishing trade, you will need to have an understanding of the common clauses which appear to set out the obligations and liabilities of each party.
If you are the Landlord…
Quiet enjoyment of premises is crucial. A lease will not only require you to ensure that the tenant has the right to use and occupy the premises, but also to enjoy that right without substantial interference.
Insurance must be taken out and maintained for the life of the lease. This should account for any risk of damages and ensure you won’t be out-of-pocket should something go wrong.
Obligations of repairs and maintenance is another essential. For retail premises, section 52 of the Retail Leases Act 2003 (Vic) requires the landlord to maintain certain things such as the structure of the premises, fixtures, plant and equipment in the same condition as when the lease was entered.
Tenant’s default and landlord’s rights
You may have a right to terminate the lease if the tenant breaches any essential term of the lease, for example: tenant does not pay the rent, tenant does not fulfil its obligations or other events in respect of tenant’s non-payment, unpermitted use of the premises and failure of insurance obligations.
Damage to premises or building should be repaired quickly and if the premises or building becomes damaged and unfit for the permitted use, rent may be reduced in proportion to the extent of the damage until repairs are undertaken or, if the damage cannot be repaired, the parties may have rights to terminate the lease.
Landlord’s works is absolutely possible during the lease but needs to be carried out in consultation with the tenant. No works should disrupt the tenant’s business or affect their trade – and rightly so! They need to make that money to pay the rent on time!
If you are the Tenant…
Tenant’s payment should be made in full and on time and without deduction. This means you must pay rent in full even though you may other claims against the landlord.
Insurance should also be taken out by the tenant, especially public liability insurance. This is a very common requirement.
Lease transfers and subletting can only occur if the landlord consents to it.
Tenant’s use of the premises is restricted to the permitted use. It should go without saying that engaging in any illegal, noxious, offensive, or hazardous behaviours which affect the safety of the premises is a big no no. You may expose yourself to claims by occupiers of the neighbouring properties.
Tenant’s work can be undertaken with landlord’s consent. If you intend to make any alteration (including exterior signage), seek permission – not forgiveness! The landlord is entitled to impose some conditions for works, and even if consent is given, make sure you engage suitably qualified tradesperson to ensure the work is carried out properly.
Obligations of repairs and maintenance exist for the tenant to keep the premises clean and tidy for the duration of the lease, and to return the premises in the required condition by the end of the lease.
Tenants are responsible for the risks associated with the use and occupation of the premises. The landlord is not liable for any damages caused by the tenant, and tenants must indemnify the landlord against any claim relating to damages.
These are some of the common clauses found in most leases and they outline the essential obligations and responsibilities of each party undertaking the lease – and give the lease it’s effect. If you are leasing or renting a premises for businesses, or you are considering it, please do not hesitate to contact Nevile & Co Lawyers.
Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.
