QLS Accredited Specialist in Property Law, Simon Bennett specialises in Commercial Leasing and Commercial Law including providing structuring advice, drafting all forms of contracts and agreements.
Here he shares the top mistakes made in commercial sales and leasing
1. GET THE DETAILS RIGHT.
“In commercial sales, it is of vital importance to make sure any contract states the correct buying entity. There are only three types of entities: (a) an individual; (b) a company; (c) a combination of either individual or company as trustee for either a trust or a superannuation fund.
“It is common to see ‘Smith Family Trust’ written as a purchasing entity, however this does not constitute a valid and binding contract as Smith Family Trust is not capable of entering into a contract – it must do so through its trustee.”
2. FULL DISCLOSURE (OR LACK THEREOF).
“Whether it is in relation to a sale or lease, failure to full disclose all elements in respect of the property including any easements or encumbrances together with full particulars of any tenancy or outgoings in respect of the premises will inevitably cause problems later in the process.
“Full disclosure is vital at the time of contract to avoid future termination.”
3. IN SO MANY WORDS.
“Many people comment on how wordy legal speak can be in both sales and leasing, but there is a vitally important reason for this. The conditions of the contract and the specific wording of those conditions must be exact and correct to avoid uncertainty, arguments over meaning or intended meaning of those clauses, and ultimately possible future termination of the contract.”
4. CHECK THE APPROVALS
“It might seem like an obvious point as part of a commercial sale, but you would be surprised how many people miss it, and the problems it causes later on in the process. It is essential to ensure that the Seller has obtained all necessary approvals for the use associated with the premises, particularly from any local authority.”
5. DOUBLE CHECK THE PAPERWORK
“When it comes to commercial leasing, you must ensure all commercial lease documents supporting any tenancies in the premises are valid, enforceable and up to date including any bonds, guarantees and the like. Failure to do so presents problems at a later stage.
6. WHICH LEASE IS WHICH?
“Define what constitutes a Retail Shop Lease as opposed to a commercial lease. It is imperative that a Retail Lease is covered under the relevant Retail Shop Leases Act as there are very strict rules and regulations regarding leasing disclosure and items contained within the Lease under this type of legislation.”
7. BINDING AGGREEMENTS
“It must be clarified if the execution of an Agreement to Lease is binding on the parties or not. This should be specifically stated as either being binding on the parties upon execution or alternatively not being binding until such time as a formal and final lease is executed between the parties.”
“In commercial leasing, ensure it is clear whether there are incentives contained within the lease or in a separate agreement. The form of the incentives and the ability of the landlord to recover the incentives, should the lessee default or breach the lease also needs to be clearly defined and stated.”
9. MORE DISCLOSURE
“For a retail lease you are required to complete as part of the disclosure obligations to a tenant a lessor disclosure statement which sets out many of the important terms in the lease. You must be sure that the terms of this disclosure match the terms of the lease and accurately reflect the deal being offered to the tenant. Failure to disclose information or incorrect information may have important consequences.”
END NOTE: For any information on commercial sales and leasing contact Simon and the team at OMB on (07) 5555 0000. Visit www.omb.com.au
Simon was admitted as a Solicitor in 1993 after obtaining an Honours Degree in Law from Bond University. Simon joined OMB Solicitors in 1996 as an Associate and then became a Partner of the firm in 1999.
He is a QLS Accredited Specialist in Property Law and also specialises in Commercial Leasing and Commercial Law including providing structuring advice, drafting all forms of contracts and agreements.
Simon was elected as the Gold Coast Ambassador from 2002 to 2004, is the chairman of the Gold Coast Community Fund and the TSS Audit and Risk Committee. A keen athlete, Simon is married with two beautiful children.
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