Does Your Lease Have An Option?

Resulting from several recent retail leasing tragedies related to Lease Options being missed, it is time to revisit some basics with Lease Options 101.

Just like a current lease term – an option for a further term is YOUR RIGHT over someone else’s land- and needs to be preserved and treated like an Asset of the business, hence set out below is a checklist for All Retailers/Lessees to follow:

  1. checklist-2023731_1280.png Does your lease include an option for a further term (s)?
  2. IF so, check the lease clauses that related to this and review.
  3. Identify clearly the Notice Period to Exercise your rights for a further term? (i.e. “No sooner than 6 months but no later than 3 months prior to the lease expiry…”)
  4. Now refer to associated lease clauses such as “Notices” which set out how and to whom your Notice to Exercise is to be communicated? (i.e. “… via registered mail to the registered office of….”)
  5. Check your relevant State Lease Legislation to see if you have the right to seek Early Determination of Market Rent (where the rental review at the option is a “Market Review”)
  6. If you do have the right to Early Determination, (that is the rental review can be sorted out prior to you actually having to Exercise your Option), then add this time line and further notice period to item 3 above (i.e. “notice for early determination maybe issued 6 months prior to the last day the Lessee may exercise the option”. Now you are out to 9 months prior to the lease expiry).
  7. Once you have identified these very specific dates where “time is of the essence” for you to take action, grab a large Black marker and write them on the back of your office door (these dates should never be missed!)
  8. From here go back to Item 3 above and create a “Lease Event Critical Path”.

For example:

lease1_lease-option01.png

  1. Start planning & researching at least 18 months prior to the major lease event.
  2. If your Notice Dates in item 3 are different- i.e. 9 months + 6 months etc. then adjust the critical path to suit and again post them to the back of the office door.

Now we know “when”, next week we will step through the “How” to actually exercise your option- which is not as straight forward as you might imagine!

Most important of all, check your lease(s) TODAY and let’s not have any more Retailers lose their business/livelihood.

 

If in doubt contact the ARA Member Support on 1300 368 041 for advice with your Lease Option.

Need leasing advice or management services? The ARA has partnered with Lease1 to save retail tenants time, money and stress in their lease negotiations. To learn more about ARA Leasing Services contact http://lease1.pages.ontraport.net/enquiry or email membership@retail.org.au.

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FURTHER READING

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