Think HBR

How to lease a building

It’s come to that point in your business, you have out grown your premises and whether the business is yours or the boss taps you on the shoulder. The job ends up in your lap to find and negotiate a lease on a new premises. What do you do next? After 29 years of leasing property I’m still amazed at how little is known or understood.
First and foremost communicate with your staff, take on board their needs and desires – they are about to come on this journey too. Don't forget these guys and gals hold your IP so be inclusive.
After finding your property, at Raine and Horne Commercial the process is this;
1. We'll talk you through the zoning (Local Councils requirements) may be even refer you to a Town Planner if your businesses usage is ambiguous (doesn’t quite fit the zoning). Sometimes you should avoid the Council unless you've engaged a planner as semantics can trip you up. What's the difference between a business undertaking rehabilitation of injured people and a business offering strength and conditioning gym sessions for injured people? Nothing they are the same but one was rejected and the other approved in a light industrial zone.
2. We'll talk to you about the owner’s expectations on rent, and lease length.
3. If (Points 1 and 2) are satisfactory we'll ask you to complete a tenancy application form where you'll be asked:
a. To provide business references
b. Full details of the company or person whose name will be on the lease
c. Details of your solicitor
d. Your intended use
4. Based on this we will prepare a Heads of Agreement (sometimes called a Letter of Offer). This will form the instructions to the owners solicitor on how to prepare the lease and will include;
a. The owners details (known as the lessor or landlord) and their solicitor
b. Your details (you’ll be known as the lessee or tenant) and your solicitor
c. The address and title of the property
d. The area in square metres being leased
e. The rent which has been agreed to
f. The outgoings to be paid by the tenant such as:
i. Council and water rates
ii. Building insurance
iii. Land Tax
iv. Management
v. Maintenance
vi. Body Corporate fees and charges
g. Rental Increases – how will the rent increase each year such as:
i. Consumer Price Index (CPI)
ii. Fixed percentage increases
iii. Market increases
h. Lease Term – How long are you intending to stay
i. Commencement date of the lease
j. Option Period – After the first term of the lease is completed do you want to ask for an extension of the lease?
k. Hours of Trade
l. Car parking if any
m. Special Conditions e.g. Approval to do fit out works or
if the owner is going to do something for you then that
is spelled out here
n. Rent free period or rental abatement if any o. Details of your Public Liability Insurance
p. Details of the Guarantees such as;
i. Directors
ii. Security Bond
iii. Bank Guarantee
q. Lease Deposit – This is an amount usually equivalent to two months’ rent, outgoings and GST paid as a show of good will to the landlord.
i. A lease will not be prepared until this has been paid
ii. It is usual that if pull out you will be at risk of losing this deposit
iii. However once you sign the lease it then goes to your rental account
r. Lease preparation cost – whose paying for the lease to be prepared – usually the tenant
5. Once the Heads of Agreement is signed off by both the lessor and the lessee and the lease deposit paid the lessors solicitor is instructed to prepare a lease in the terms agreed.
After the lease is prepared and it takes varying times to do so depending on the urgency the two solicitors usually to and fro making sure each of their clients’ interests are being served.
The process is a little more complicated than just finding a building and deciding it’s time to move. The move as I found out last month is a whole new ball game of costs. Just remember put someone in charge and be inclusive with your senior staff.
For further information contact Steve Dick on 0425 302 771, email or visit
Steven Dick Steven Dick
has had a varied background with experiences in geotechnical engineering to hospitality and catering. He also represented at NBL Level Basketball. His expertise, experience and analytical skills have seen him involved with a number of companies at board level. He has also attained the highest level of recognition in the LJ Hooker and Raine & Horne Commercial Organisations.