Rent & Outgoings Package

The Retail Tenancy Acts in most States require first tenants to be given leases of a minimum of 5 years duration.

In addition, try to obtain from the Landlord a further option period of at least another 5 years. Some Landlords particularly in the major centres are reluctant to grant such an option, while others extend such option rights to tenants.

This may be of value to you even if it is not your long-term intention to exercise such option particularly if you are intending to sell your business in the short term.

If you are not a first time tenant, you should not consider a lease of less than 5 years as you require at least such a period to amortise your set up costs.

Fit-out of the store

Ensure that all parties are clear as to the date of the hand over of your store to your shopfitter, the date of practical completion, and the date of commencement of your lease.

You can be caught up in a situation whereby the lease commencement date is specified as the date of completion of the centre, however your fit-out might take another 4 weeks. This means your first rent review may be much sooner than you anticipated. i.e after 11 months trading and not 1 year later which you anticipated.

If you have negotiated an incentive deal with the landlord who may have contributed to your fit-out, make sure you are aware of which fittings will remain the property of the landlord and which you will be entitled to remove.

The taxation implications of these types of incentives are very complicated and you should consult your tax adviser before entering into any incentive agreements with your landlord.

 
Option renewals

Remember that an option in a lease is the tenant’s right and not the landlord’s.

The tenant alone can decide whether he will exercise the option to renew the lease or not.

Until the tenant formally exercises the option, the landlord may be vulnerable. He won’t know whether you intend to continue your occupation or whether he needs to secure a new tenant. In this situation you may be able to negotiate a reduced rental.

Providing you ensure that you do not miss the deadline date, you may use the opportunity to improve conditions in the lease by requesting that the landlord as part of the option exercising process varies certain of your lease conditions.

If you are able to negotiate options to renew the lease make sure that they are not restrictive.

Do not accept a clause that grants an option that provides that the owners could cancel such option if they want to redevelop or refurbish that part of the centre.

You should retain the right to exercise your option to take up premises in an alternate site in the centre.

Avoid any clauses which landlords try to put into leases that provide for" due and punctual performance” of all of the terms and conditions of the lease throughout the term, as a pre-condition to the exercise of an option.

 
Ask your solicitor to water down such a clause so as to ensure that you may exercise such option if you not in breach of the lease" at the time of the notice” but when exercising the option at the expiration of the term of the lease". This will allow you to sort out any breaches before you exercise your option.

 
This is an excerpt from the Retailer's Survival Kit by Hymie Zawatzky