By Samuel McMahon

17 November 2017

At the start of a commercial or retail lease, things can often seem to a landlord to be on the up. The tenant may have a sound business and trading history, or you may just be relieved to have found someone keen to take over a property that has been sitting vacant.

By the end of the lease (whether by expiry, abandonment or eviction) things may look different. And you may need to chase up rent arrears or outgoings not covered by the security deposit. The steps taken before the lease commences can have a huge impact on whether you have much likelihood of recovering these arrears, or whether they are little better than numbers on paper.

  1. Have a lease in writing before you hand over the keys. Put the other way round, do not hand over the keys until you have a lease in writing signed. By law, if there is not already a written lease, then the lease commences when you hand over the keys, and not when you finally sign the tenant up. This can spell disaster for working out basic things like whose responsibility it is to pay for what, or even what rent increases will take place over the life of the lease. Once a lease has commenced, you no longer have the power to refuse to enter into the lease in the case that a tenant will not agree to what, for you, is an important or essential provision.
  2. Have a personal guarantor (normally the director or directors of the tenant company). Equally importantly, have the guarantor fill in a comprehensive form setting out his or her personal assets. As a last resort, you may need to liquidate these assets in order to cover any unpaid arrears. So if no guarantor owns real estate with adequate equity, it could be a wise move to request a personal guarantee from a person who does. Or, if the real estate is jointly owned, seek a guarantee from the other owner.
  3. Catalogue carefully, and with photographs, the condition of the premises prior to handing over the keys. Ensure that the lease clearly includes details about the condition that the tenant is required to hand the premises back to you.
  4. During the lease, keep an eye on the arrears balance. Act early if there is a breach to prevent the situation becoming unmanageable. It may seem that you are facing a choice between continuing to receive rent or having several months of no rent while a new tenant is sought. If the current tenant is not actually paying you the rent required under the lease, the growing balance payable may turn out to be worth virtually nothing and it may be better for you to cut your losses and look for a new tenant now.

We strongly advise all commercial and retail landlords seek legal advice prior to entering into any new lease, when seeking to terminate a lease, and when seeking to enforce payment of arrears.

 

If you need assistance in this area, please do not hesitate to contact Samuel McMahon or a member of our Property or Litigation Team.

Related Articles

View All
Commercial Law / Commercial Contracts & Agreements / Franchising & Licensing

Spend the time to get it right – The pitfalls of short cutting a sale or purchase of a business

You’ve agreed on some basic terms of sale, such as purchase price, what you’re buying and the settlement date –...
Read More
Leasing & Lease Disputes / Litigation & Dispute Resolution

We Won a Billboard!

Tisher Liner FC Law has won a brilliant new billboard, owing to achieving recent success for our client in the County...
Read More
Commercial Contracts & Agreements / Leasing & Lease Disputes / Property & Development

Exercising Options

If a lease is a retail lease, the provisions of the Retail Leases Act (Vic) (2003) will govern the exercise of option...
Read More
Leasing & Lease Disputes / Real Estate Agents / Small to Medium Enterprises

Is your retail tenant continuously in breach of your retail lease but still wants to renew the lease for another term?

A tenant can be in breach of a lease in a multitude of ways depending on each lease, be it late rent and outgoings...
Read More
Adverse Possession / Commercial Law / Family Law

2024 Best Lawyers list out now

Tisher Liner FC Law are proud to announce that this year three of our Principals have been selected by their peers for...
Read More
Property & Development / Leasing & Lease Disputes / Real Estate Agents

CTRS protections has ended. What do you do now when a tenant defaults?

What can landlords do if a tenant breaches the lease If a tenant is in breach of a lease, the landlord may charge...
Read More
Commercial Contracts & Agreements / Commercial Law / Leasing & Lease Disputes

The 2022 Commercial Tenancy Relief Scheme Regulations are now in effect

The 2022 Regulations were foreshadowed in a press release issued by the Victorian Government on 15 January 2022 Click...
Read More
Leasing & Lease Disputes / Property & Development / Real Estate Agents

COVID-19 and the new Commercial Tenancy Relief Scheme

A global pandemic, an economy forced into hibernation, and repeated, extended, and somewhat unpredictable lockdowns…...
Read More
Property & Development / Leasing & Lease Disputes / Owners Corporations & Strata

Head leases and the Retail Leases Act 2003

In the recent case of Izett St Pty Ltd v Applgold Pty Ltd (Building and Property) [2021] VCAT 174 (3 March 2021, Senior...
Read More
Leasing & Lease Disputes / Real Estate Agents / Retail Clients & Chains

Need extra time on your retail lease? This may help you.

We have observed that tenants are not just being put under financial distress to pay the rent because of the government...
Read More
Leasing & Lease Disputes / Real Estate Agents / Commercial Law

COVID-19 – Commercial Tenancy Relief Scheme to be extended (again)

The CTRS was initially expected to end on 29 September 2020 under the COVID-19 Omnibus (Emergency Measures)(Commercial...
Read More
Franchising & Licensing / Leasing & Lease Disputes / Property & Development

Amendments to the Commercial Tenancy Relief Scheme

In this blog, we have referred to the original regulations[1] as the “Principal Regulations” and the amending...
Read More