Understanding commercial property lease jargon
Whether you’re a Mount Isa commercial property tenant or landlord, it’s important to understand the terms and conditions of your lease agreement. After all, it’s a legal document. Unfortunately, that means it will also contain legal jargon. Here’s our layman’s guide to understanding it.
The most common commercial lease jargon
The below list is in alphabetical order. Some leases will contain all of these terms, others will likely contain at least some of them.
- Amenities: Commercial property facilities that are for general use, such as kitchens, toilets and parking spaces.
Anchor tenant: The main tenant in commercial premises where there are multiple tenants. For example, a supermarket in a retail shopping centre.
- Commercial property manager: A professional hired by a landlord to manage their property. A commercial property manager does tasks like sourcing tenants, preparing lease agreements, collecting rent, and organising any necessary repairs and maintenance (after gaining landlord approval).
- Common areas: Areas of the commercial property that can be used by the public or multiple tenants (like lifts, stairwells and toilets).
- Covenant: A condition in a lease agreement that restricts how the property may be used.
- Due diligence: Researching and analysing all relevant information before signing a commercial lease agreement.
- Effective rent: The average rent over the term of the lease after taking into account any special incentives (such as rent-free periods or temporary discounts).
- Façade: The exterior of the commercial premises.
- Fit-out: Any work done to customise commercial premises to suit a tenant’s or owner’s needs. Tenants usually pay for fit-outs, but landlords may make a contribution. Either way, landlords need to approve fit-outs before they can be done.
- Fixtures: Items that come with a commercial property like light fittings and carpet.
- Lessee: Another name for the commercial property tenant.
- Lessor: Another name for the commercial property landlord.
- Make good: An end-of-lease provision that requires a commercial property tenant to return the premises to the same condition they were in when the lease commenced.
- Market rent review: A process that allows the landlord to review the rent rate for the premises to ensure it is in line with current market rates for similar premises.
- Net lettable area: The floor area of the commercial premises, excluding common areas like stairwells, toilets and lifts.
- Outgoings: Ongoing building expenses like council rates, insurance, cleaning and repairs/maintenance. Tenants usually pay for outgoings, though some may be paid for by the landlord.
- Public liability insurance: Insurance that covers both commercial property tenants and landlords against people suffering an injury or being killed on the premises.
- Utilities: Services like water, electricity and gas.
- Wear and tear: Depreciation in the commercial premises over time due to normal usage.
- Zoning: Council regulations that specify how the commercial land can be used.
The bottom line.
If you’re unsure about any of the terms and conditions in your Mount Isa commercial lease agreement, it’s best to get professional and independent legal advice. Ideally, you should do this before you sign the agreement to make sure you understand both your legal rights and your obligations.
In addition, some terms and conditions in a commercial lease agreement may be negotiable. It can be worthwhile negotiating as a Mount Isa commercial tenant to try and get what you want. It can also be worthwhile negotiating as a Mount Isa commercial landlord to secure or retain high quality tenants.
Jays Real Estate has been Mount Isa’s premier commercial and residential real estate agency since 1981.
If you’re thinking about buying, selling, leasing or renting any Mt Isa property, then contact our team today for an obligation-free chat! You should also contact us if you need your property professionally managed.
We’d be happy to provide you with advice and to answer any questions you have.