Who fixes the Aircon? 3 things a Commercial tenant must do
In our last newsletter, we outlined why a landlord should follow the “3 KEY STEPS to Safeguard Your Commercial Property”. The key element was to ensure that the tenant for the property signed a lease.
Let’s now put the shoe on the other foot. What happens if you are that tenant? What do you need to look out for when it comes to signing the lease?
1) Have an appropriate structure
While it is important for both parties to have a clear lease in place, it is equally important for the tenant to ensure that it signs the lease using the best structure it can. To do this, advice should be sought by the tenant from their lawyer and accountant, so that legal and tax implications can be understood from the outset.
For example, if a prospective tenant is starting a business and securing a property is required, if they sign the expression of interest in their personal name and then seek legal and accounting advice for their business structure - which recommends a company - it may be too late to change.
So, getting early professional advice is crucial. While this will cost money, it will save a great deal of money and time in the long run as an early and clear path will be set.
2) Check the rent
Understanding what the rent will be at the start, then when and how much it can change by is important for any tenant to ensure that they can afford the property.
Change mechanisms and timeframes can vary - for example, a landlord may require increases by CPI every year, but then a market review every three years. The lease terms must be read carefully so that the way in which these mechanisms and timeframes work is clearly understood.
3) Who fixes the air-conditioning?
This is a very important one here in the Northern Territory, especially as we work our way through a heat-wave!
Right at the beginning when negotiations are occurring, a prospective tenant should understand very clearly who is responsible for looking after and fixing the air-conditioning - and any other similar machinery - if it is not working properly or if it fails completely.
Given how expensive such systems are, it is natural for any landlord to seek to pass on associated costs to a tenant. It is usual for a tenant to be required to arrange for regular servicing of an air-conditioning system to occur, and to pay for that. However, disputes can arise when it comes to general maintenance and repair of that system, or in fact replacement if it fails completely.
As a general rule, a tenant will pay for all outgoings, as well as general repairs and maintenance. The landlord is responsible for all infrastructure issues relating to the building itself. When it comes to the air-conditioning then, the tenant should ensure it is serviced but any repairs, maintenance or complete replacement should be the responsibility of the landlord.
If negotiations ultimately result in a tenant agreeing to something different, the parties must ensure that this is reflected clearly in the lease itself.
So, to ensure that your commercial tenancy experience is as good as it possibly can be from the start, get early legal and accounting advice so that you apply for and sign a lease through the correct structure; understand what the rent is and how it can change; and be very careful what you agree to when it comes to air-conditioning systems!
If you are a commercial property tenant or about to become one, and would like advice regarding a lease, please feel free to call Peter Walker or Samantha Hansen on (08) 8941 6355 or email peter@bowden-mccormack.com.au or sam@bowden-mccormack.com.au.
If you are about to purchase a commercial property and need a conveyancer, then give us a call or send us an email! We can handle your commercial transaction. We can also give you recommendations when it comes to mortgage brokers.
Please feel free to call us on (08) 8941 6355 or email conveyancer@bowden-mccormack.com.au or hannah@bowden-mccormack.com.au should you wish to discuss your property transaction needs.