Many businesses are built on commitments, and a crucial one is the lease for your premises. While it might not be the most exciting document, having a well-drafted lease agreement can be critical during unforeseen circumstances.
Why your lease matters
Commercial leases often follow standardised formats, typically the “ADLS” version, but the specific details can vary significantly and there are many different types of non-ADLS lease documentation. The exact provisions of your lease can have a major impact on your business during unexpected disruptions.
Key considerations when reviewing your lease
Comprehensiveness: Do you fully understand the terms of your lease, including what is and isn’t covered?
Adaptability: Can your business operate effectively in the premises if regulations or your needs change? For example, can you modify the space to accommodate different sales or service approaches?
Safety and Compliance: Does the space meet all safety and legal requirements for your business operations?
Maintenance: Are there any existing issues with the condition of the premises that need to be addressed, especially if they could affect your business operations?
Contingency Plans: Consider how the lease terms would impact your business if you’re unable to operate in the usual way. Are there provisions that could help you adapt, such as rent adjustments or modifications to the space?
The power of written agreements
Verbal agreements, email correspondence or informal understandings can be unreliable, especially during challenging times. A formal, written lease protects both your business and the landlord. Make sure both parties sign the lease documentation and that each party has a copy of the fully signed lease.
Finding balance
Ideally, a lease agreement should be fair to both the tenant and the landlord, providing certainty to each party. The terms should reflect the nature of your business while providing the landlord with reasonable protection for their investment.
Taking action
While renegotiating existing leases may be limited, reviewing your current lease and discussing potential adjustments with your landlord can be beneficial. If you’re signing a new lease, use this opportunity to address these key considerations.
Taking the time to understand and potentially revise your lease agreement can save you significant stress and financial hardship during difficult times. Seek professional legal guidance to ensure your lease is well-drafted and protects your business interests.
This article was first published in June 2024 in the Mangawhai Focus. Our thanks to Jared Cains, Rebecca Pavis and Samuel Bickers for writing this article.
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