Think HBR

Stop! Don’t do it!

Steve Dick
Raine & Horne Commercial Newcastle
 
It’s a typical scenario and the pressure is on. You’ve been searching for a while, spent money marketing, reduced your rent, probably even given away some rent free holiday and now you have a potential tenant. The same goes for those looking for property, you’ve made the decision to move, prepared your business case, completed your budgeting and visited countless buildings, listened to countless agents provide their views for what’s best for your business.
 
At this stage the negotiation begins, and usually if you are dealing through an agent you end up trading “letters of intent” or “heads of agreements” trying to put on paper what has been discussed and agreed so the solicitors can convert them into legal terms for your lease.
 
Whether you’re the landlord or the tenant there’s a sense of relief, but, in our time poor society we are usually working just in time. We leave the move to the last minute, we grab that tenant that wants to move quicker than most because time is money.
 
Then, as the solicitor is still doing their thing, the words that commercial agents dread spring forth; “Can we move in early - Its just some furniture - we have to move out and we don’t want to double handle it - we’ve paid the security and provided our insurances”. At this time both parties are usually still bathing in the after glow of a successful coupling and it is hard to deny this innocent little request.
 
STOP - just because you’ve danced the dance, with euphoric endorphins still pumping through, would you give a relative stranger the keys to your house so they can store some stuff? No! Well STOP - and don’t do it! In the commercial world either. The precedents are many and the commercial dangers severe if it goes wrong. Take for instance;
 
A cafe, that had been for lease for a while;
- the landlord accepts an offer from a tenant and instructs a solicitor to prepare a lease.
- The tenant has to de-fit his other premises quickly - The landlord (unbeknownst to the agent) lets the tenant have access by giving a key just to store the equipment.
- Subsequently another tenant makes an offer which is far more attractive.
- As there was no lease signed the owner wants to change tenants.
- The owner instructs the first tenant to remove the equipment he had just stored in there.
 
Luckily for this owner the tenant despite some initial anger was persuaded to move on, however Section 8 of the Retail Leases Act 1994 says that on entering into possession or starts to pay rent irrespective of whether the lease has been signed a lease is deemed to exist.
 
In another similar circumstance the tenant after moving in early had a change of heart sighting solicitor advice. The owner could have held the tenant to the lease and without a lease in place the tenant could have been held to a default term of 5 years.
 
Whether you are a tenant or a landlord cool your heels and have a properly executed lease in place prior to allowing any form of occupancy. In fact the three must haves are:
1. A signed lease
2. The security whether bond or bank guarantee
3. The Certificate of Currency for Public Liability Insurance and Plate Glass
 
For further information contact Steve Dick on 0425 302 771, email steve@rhplus.com.au or visit www.rhplus.com.au
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.