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Preparing for the end of a commercial tenancy is critical to ensure mistakes are avoided which can cost organisations and agents dearly.

Often organisations become so focussed on getting into a property they don’t plan for their exit. Only when the tenancy is coming to an end will they look at their rights and obligations under a lease.

Barry Johnston, Principal of Balmoral Partners, and Gary Newton, Partner in TressCox Lawyers, recently ran an REINSW webinar on this issue. This article summarises some of their main points: to watch the recording of the webinar please click here. 

Barry Johnston, Principal of Balmoral Partners explained: “The biggest mistake most people make when entering a commercial lease is becoming so focused on the rent, incentives and benefits that they lose sight of the importance of getting everything lined up for their eventual exit.”

Make good provisions

One of the most essential parts of a commercial lease which can affect the end of a tenancy is the make good provision.

Gary Newton, Partner in TressCox Lawyers said it was important to consider the fine details in a lease document, which can often run to over 100 pages long.

Barry added: “It is imperative to get clarity on the lease because a lot of tenants have no idea what their obligations are.

“I have been in situations where I have got a legal opinion and it is important agents get the right advice and are aware when to ask for it.”

Gary gave an example of how one tenant took the fixtures and fittings at the end of their tenancy when there was no make good clause.

However, they didn’t fill in the holes to the walls which were damaged as a result, and unless there are clauses to cover damage, the landlord leaves themselves open to extra costs.

Adding value and negotiation

Barry added how it was important for agents to negotiate for a better deal early on.

“Most things are negotiable in a lease and you are better off to negotiate upfront so everyone knows what the deal is. It can be done later but you have to make sure there is a win for both parties at a later date.”

He added that agents can add value to their clients by finding out what their plans are and making them aware of alternative solutions.

“If you have offered other options, at least they will be making an informed decision and are demonstrating you are trying to add value.”

Bank guarantee and security deposit

Gary said that it was important for clients not to hand back the bank guarantee or security deposit at the end of the lease until every obligation has been completed.

Barry also added how some bank guarantees have expiry dates and it is important to make a note of them and try to negotiate a lease three months after it expires in case there is a delay on the make good.