WHEN DO I NEED TO USE A SOLICITOR FOR A COMMERCIAL LEASE?

When do you need to use a solicitor for a commercial lease? This is a very common question from both new and experienced landlords. When is it appropriate to prepare the lease yourself? Should you get your property manager to do it? And when do you need to use a solicitor?

In this article we’ll answer all these questions and more.

Should I prepare a Commercial Lease Myself?

In short, NO!

You should never attempt to prepare a commercial lease yourself. Even the smallest of commercial leases, say $20,000 per year and less, carry substantial risk.

A professionally prepared lease has clauses to cover you in a worst-case scenario. It will require your tenant to have adequate insurance; it lays the rules for rent payment, and for what happens when rent is late; it indemnifies you against any injury or death that might occur at the property; and much more. Commercial leases are serious business. Don’t leave yourself exposed by attempting to craft a lease yourself.

Property Manager / Agent’s Lease

Your second option is to use a lease prepared by your property manager or real estate agent. For commercial leases under three years in length, this is a good option.

In fact, the lease will not actually be written by your property manager. Instead, they will be using template-style leases prepared by organisations like the Real Estate Institute of NSW (REI) or the Estate Agents Cooperative (EAC). These leases are constantly updated by the respective authors to align with new laws and best practices.

One of the main upsides to using one of these leases is the cost. Rather than paying $2,000 or more for a solicitors lease, your property manager should only charge you around $400 – $500.

REI and EAC leases prepared by your property manager are no less valid than a solicitors lease, however they are usually shorter and may not cover every single eventuality.

Using a Solicitors Lease

Any lease exceeding three years in length will have to be registered on title and prepared by a solicitor. This goes for standard commercial leases and retail leases. So remember: Longer than three years? Get a solicitor.

Retail leases are tricky, so here at Nutshell we recommend that all retail leases, regardless of length, be prepared by a solicitor.

Bonus Question: Who Pays for the Lease?

For commercial leases, it’s standard for the tenant to pay the legal costs associated with the lease preparation. This applies whether it’s a $2000 fee from a solicitor, or a few hundred dollars from your property manager. There is no law that provides for this, so you must make sure that it’s written into the heads of agreement (sometimes called a terms sheet) during the negotiation stages of the deal. This is the kind of thing that can easily get missed by trying to negotiate a lease without the advice of a property manager or real estate agent.

Now, what about retail leases? Does the tenant still pay the legal fees? The Retail Leases Act (2003) has a ruling on this:

“A landlord under a retail premises lease is not able to claim from any person (including the tenant) the landlord’s legal or other expenses”

Property Management Marrickville

So there you have it. Armed with this information you should always have the correct lease. To make matters easy, why not get a property manager or real estate agent to handle your lease for you? Nutshell specialise in Property Management in Marrickville, The Inner West, South Sydney, and the surrounding areas. Click here to view our pricing.



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