For most business owners, the most important factors in the success of their business includes:
- the location of their shop/factory;
- the amount of rent and other overheads; and
- knowing they are able to stay at that location for a reasonable time and that the terms for your use of the premises will not change.
Making sure your lease secures these things for you is, therefore, important. There are, of course, other factors in running a business, such as building up a good client base. Many of these other factors also rely on your lease. For example, it could be wasteful spending money on advertising your business if you had to move suddenly to another location.
Protecting your rights
Unless your Lease has been registered it is possible that if the current landlord/owner sells the property that the new owner can evict you, even if you have a written Lease document and you are not in breach of that Lease.
On the other hand, if you buy a business, unless the Transfer of the Lease has been done in the correct way the landlord may be able to increase the rent or change the terms without warning.
Often the landlord attempts to force the tenant to pay the landlord’s legal costs in regard to the Lease. In many situations, however, the law says that the landlord cannot do this. We can advise you of your rights and make sure you receive all the benefits or protections you are entitled to.
Personal Properties Securities Act
The Personal Properties Securities Act (PPSA) commenced on the 30th of January, 2012. It set up the Personal Properties Securities Register (PPSR) which is an online Australia wide register of “security interests”. A commercial/retail Lease of premises (such as a shop or a factory) often includes items such as shop fittings, office fit-out, shelving/racks, air conditioning, phones, kitchen equipment, etc. These commercial inclusions are treated as “personal property” by this new law and so are controlled by the PPSA. If these items are the property of the landlord then if the landlord fails to register these “security interests” on the Register (PPSR) the landlord is exposed to the risk that either the tenant can sell the goods to someone and that buyer has a stronger claim to the items, or that the tenant could use the items as security to raise a loan from a bank/financier and the financier then has priority over the landlord in regard to the items. If the landlord registers these “interests/items” on the Register, the landlord will be able to defeat any such claim to the items in question. Additionally you may avoid the argument in the first place, as a conscientious financier or buyer may search the register and refuse to proceed with the transaction with the dishonest lessee. At Coode & Corry we can help landlords maximize their protection and rights in this regard.
Selling your business
If you sell your business without the necessary documents and procedures, you may be required to pay more money in the future if the purchaser of your business fails to pay the rent or other monies owing under the Lease, or if they fail to pay staff or default on their insurance.
It is important to make sure your rights are protected. We at Coode & Corry can help you with these things.
Regardless of whether you are the landlord or the proposed tenant, you should obtain legal advice before entering into a lease. We see it as part of our normal service to you not only to deal with the lease documents but to help you in the negotiating stage. We can alert you to issues that you were not aware of, so as to make sure that the lease deals with all relevant things in your individual circumstances.
If you would like some more information about Leases, then click on our link to the right that says 'Articles on Leases'.