Beginner’s guide to buying a commercial property for investment - Part 5: Lease agreements, permissible activities and use of common areas
Commercial property
lease agreements
A commercial property lease agreement is the key document
where all of the conditions and responsibilities are set out. Cease agreements
for commercial real estate are not usually standard templated documents and can
be lengthy and complex. Typically a solicitor will be engaged by the owner to
draw up the lease agreement according to their specifications. A good solicitor
with experience in commercial property lease agreements will be invaluable. However,
do not just rely on your solicitor, you should also read the lease agreement to
ensure that you know the conditions of the lease. If you do not understand any
of it you can ask your solicitor to explain it to you.
Some things to consider in the lease agreement include:
Permissible
activities
You may not want certain types of activities to be carried
out on your commercial property this may be because they are not allowed by the
zoning or body corporate in a strata title property or it may just because some
types of activities due to their noise or other reasons are undesirable and may
decrease the value of the property or cause issues with neighbouring properties
/ businesses. Tenants may want to have exclusivity for their business type to
avoid further leases to their competitors which could decrease their business.
By limiting the activities it can allow a broader range of potential other
tenant types.
Use of common areas
Where multiple tenants use a property and there are common
areas the activities allowed in these areas should be clearly specified. If not
specified some tenants may use the common areas for storage or other activities
that could block access or have other undesirable consequences.
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