General questions you should ask about a lease
| Question | Advice |
|---|---|
| Has the landlord given me all the documents which are legally required by the Retail Leases Act 2003? | The landlord must provide the tenant with:
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| What is the duration of the lease and have I got an option to renew? | This needs to be clearly stated – it's usually much cheaper to extend a lease than to terminate early. |
| What will be my arrangements for rental payments? | The most convenient arrangement is to set up periodic payments through your bank. This also protects you from late payment charges. |
| Will any other fees apply to the lease agreement? | Although it's uncommon, fees can be charged for things like monthly billing so it's worth asking this question before signing. |
| Will the cost of your rental payments be tax deductible? | Before you sign, check the deductibility of rent and your tax liabilities with your financial adviser. |
| Who is responsible for rates, taxes, insurance and other outgoings, such as contents insurance or council and water rates? | Outgoings and who will pay for what should be an essential part of the negotiation process, and made clear before anything is signed. |
| Who is responsible for maintaining the premises, fixtures, fittings and equipment? | Responsibilities for the building and any equipment are often shared between landlord and tenant. The agreement should make this clear. |
| Who will pay for creating the lease? | As the tenant, you're not responsible for the landlord's legal costs, but there could be other lease set-up costs you will be asked to pay. |
| Does the agreement have an option to buy any leased goods or equipment? | Be careful. Any agreement for you to purchase leased goods or equipment will invalidate your right to claim rent as a tax deduction. |
| How will the lease be documented? | Ask the landlord if they can offer a 'Master Lease' which means there is no need to sign an individual document for each item being leased. |
| How will the depreciation limit affect rental payments? | If buying a luxury car, this could affect the depreciation limit on your rental payments and be made clear before you sign. |
| When and how could the rent be reviewed and varied? | This could be based on your turnover or profit, the Consumer Price Index; or a flat percentage increase. It needs to be made clear. |
| Does the agreement allow the lease to be terminated early? | Be very clear about this. Leases are usually non-cancellable and an early termination can be costly for the person who is leasing. |
| Will the lease have a Permitted Use clause outlining how the premises can be used? | If the lease has a Permitted Use clause, make sure it's not relevant to your operations or won't stop you from any future business development. |
| Will the lease have a Right of Assignment clause? | If you think you may need to sell the business, a Right of Assignment clause gives you the option of transferring the lease to a new tenant. |
| Does the landlord have a mortgage on the premises and has the lending authority (for example, bank) given approval for the lease? | If the lending authority hasn't given their approval for the lease to go ahead, they're not legally bound by it and may be able to evict you. |
| Are there permits, registrations or other licences which could affect lease negotiations? | As an example, if your business set-up depends on getting a planning permit and a liquor licence, the lease agreement should refer to this. |
| When the lease expires, what are my options? | Options are: renewing the lease; trading leased equipment for new equipment; and returning or offering to purchase leased goods. |
Questions you may have to answer
| Question | Advice |
|---|---|
| What do you want to use as your name on the lease? | The name required is that of the actual applicant, individual(s) or company. An incorrect name will delay final settlement of the lease. |
| What is the address of your business or company? | This should be the registered address of your business or company and give both your operating and postal addresses if they're different. |
| Do you have partners or directors? | Landlords can ask for names, private addresses and dates of birth of partners or directors in order to complete credit investigations. |
| Are there other names and addresses you may need to provide? | You may need to give contact details for your accountant, bank and references. References should be from suppliers providing credit. |
| What is the nature of your business? | This is simply a brief summary of your business operations which will help both parties achieve the right leasing and rental agreement. |
| Will the purchase of equipment be part of your set up? | As part of the lease agreement, you could be asked for a detailed description of equipment purchased, complete with serial numbers. |
| Are you aware that ownership of some fixtures or equipment will be included in the terms of the lease agreement? | A written acknowledgement of the landlord's ownership of fixtures or equipment may need to be included as part of the lease agreement. |
| Can you provide an estimate of your leasing requirements for the next twelve months? | Estimating your leasing requirements for the next twelve months means lease agreement negotiations can be limited to once a year. |
| How long have you been operating as a business? | Landlords are not keen on tenants with little experience. If you're in this category you'll need to provide evidence of a strong cash flow. |
| If you're negotiating for lease credit, what financial statements can you provide to support your case? | You need to show the net worth of your business, a profit and loss statement, evidence of cash flow surplus and an estimated cash forecast. |
| Are you aware that by signing the lease, you are legally bound to pay rent and outgoings for the full term of the lease? | This financial commitment should be spelt-out in your business plan. An early termination of the lease could be financially devastating. |
Questions you should ask about shopping-centre leases
| Question | Advice |
|---|---|
| What will be my level of competition in the shopping centre? | Larger centres often have an over-supply of similar businesses. An accurate picture of your level of competition is necessary for survival. |
| Is there clear identification of the space I'm leasing and all the associated facilities? | You need clear identification of your leased area, parking and delivery facilities, and common areas like walkways. Ask for a site plan. |
| What are the centre's core trading hours? | This may sound obvious but make sure the trading hours match your business and if they don't, ask if there is any room for negotiation. |
| When I'm fitting out the premises, will I have to conform to any fit out rules the centre may have? | Fit outs are generally more restrictive for shopping centres. You need to know exactly what is required and what the cost will be. |
| Will I be required to contribute financially to the centre's marketing and promotional activities? | If the answer is yes, try to negotiate a reasonable figure. If the answer is no, make sure this is not a hidden addition to the rent. |
| Does the ownership have plans to redevelop or expand the centre, and could my business be impacted? | You're entitled to know how the centre's long-term plans could affect your business; for example, relocation to a less desirable position. |