The Advantage of a High Quality Lease in an Investment Property

retail shopping mall

So many landlords today in Brisbane and in Queensland negotiate a lease agreement with a tenant and do not think deeply about the elements of any lease to be created.  They just leave the lease to their property solicitor to formulate. 

Certainly solicitors know what to do in creating a lease, it’s just that they do not always know much about the property in question.  More often than not, the solicitors working on the lease documentation will have not seen the property at all.  That then leaves the opportunity wide open for a lease document to be prepared that does not specifically match the uniqueness of the property.

woman checking fruit in shop

Retail Properties are Different

When leasing office or industrial property the terms of a lease can be fairly standard, but when it comes to retail property the lease should be specially structured for the investment plans of the landlord and the function of the property. 

Retail property is very much a vibrant and active type of investment.  Things can happen at any time involving tenants, landlord, or customers.  That is where a good property solicitor will review the lease, match it to the needs of the property, and then balance that with the investment plans of the landlord.  Proof of this fact is that most large properties will have a special lease formulated by the solicitor acting on behalf of the landlord.

Tenant Mix Review Strategies for Retail Property Investors

shopping centre mall

When purchasing a commercial property it pays to set some realistic and achievable lease plans and targets.  This is fundamental to the future of the property and the cash flow.  It can also protect tenant mix and tenant stability.

man standing outside of office building

When looking at a commercial property for the first time, review the leases and occupancy documentation for issues involving:

  1. Type of rent
  2. Payment of rent
  3. Growth of rent
  4. Rent review processes
  5. Rent review timings
  6. Make good requirements for the tenancy
  7. Obligations on the landlord and the tenant during the lease
  8. Obligations on the landlord and the tenant at the end of the lease
  9. Seek out details of lease incentives that may be still current
  10. Review the outgoings paid under the lease by the tenant and by the landlord
  11. Look for recoveries of outgoings paid under the lease and how the landlord can get back money for that
  12. Look for refurbishment or renovation provisions imposed in the lease and how they can impact the tenant or the landlord

Remember the rules as you consider property purchase.  When in doubt seek out a good property solicitor before any decisions are made.  The critical thing to know when purchasing a commercial property is that you are not just buying the improvements but also the structure of the leases and the cash flow.