Before You Sign a Commercial Lease

It is an exciting time, you have a sensational new business idea and have found the perfect location in the City of Vincent. But before you get those doors open, start paying rent and sign on the dotted line of any commercial leasing agreement, there are a few questions you might want to consider that may save you time, money and energy in the long run.

Never sign a lease unless you completely understand and agree with all the clauses and you started your approval process.

Ensure you seek financial and legal advice before you sign anything.

The tips and tools provided here are intended for general information only. It is important to get professional financial and legal advice before you sign a lease.

FAQ for small businesses

What is a lease?

A lease is a legally binding contractual arrangement between a tenant (lessee) and a landowner (lessor). The purpose of this agreement is to set out the rights and obligations of both parties.

A commercial lease is an agreement for the leasing of commercial property with a specific business purpose. Commercial leases have negotiable terms and vary from one lease to another.

Is my proposed land use a permitted use?

A lease usually includes a clause that outlines the permitted use of the premises.

This may be different from the land use/s that are permitted or have been previously approved to operate at the premises under the City of Vincent Local Planning Scheme.

Not all premises will be suitable for your business, and before signing a lease it is important to contact the Planning team at the City of Vincent first.

They can let you know whether your business would be classified as a permitted or approved land use, whether any conditions apply that could affect your business, or whether you would need to apply for development approval to change the use of the premises before opening your business.

You’ll need to consider how you may use the premises in future, all types of goods and services you want to provide, and the permitted or approved land use in terms of future buyers or sub lessors of your business.

It is important to ensure that both the permitted use specified in the lease, and the permitted or previously approved land use under the City of Vincent Local Planning Scheme, is broad enough to allow changes or expansion, and doesn’t restrict how you may operate your business in future.

What approvals/licences/permits do I need to run my business?

Applying for development approval, building permit, occupancy permit and health approval are separate processes, controlled under different legislation.

  • A development approval, also known as a planning approval, is a legal document that gives permission for development to occur on a particular piece of land. Development includes the use of a premises to operate a business, completing internal and external works such as fit outs, and adding or changing signage.
  • A building permit is a legal approval from the City of Vincent to carry out building work including internal fit-outs, and additions and alterations to the building. The building permit ensures that the building work complies with current building standards so that the building is safe and fit for use.
    When there is a change of use, for e.g. office to small bar, an occupancy permit is required from the City of Vincent before occupying and using the building.
  • A health approval may be required for matters such as food and liquor premises, beauty therapy as well as noise generating premises such as gyms.
    Local governments are responsible for administering appropriate planning controls for development; and making sure businesses and residents comply with the Public Health Act 2016, and Building Act 2011 and Building Code of Australia. Being unware of local government application and approval requirements can be a costly mistake as it could lead to delays in opening your business.

Before you sign the lease, make enquiries with the City of Vincent in relation to the licence, permit and approval requirements to run your business from the leased premises. This can include car parking requirements, opening hours, regulations (e.g. fire, health, OHS), advertising conditions and building compliance.

It should not be assumed because a licence has been granted or a regulation has been complied with previously, that this is still necessarily the current position. You should ensure that all required approvals, licences and permits have been obtained, may be transferrable to you and could be renewed in the future.

You can also make enquiries at the Business Information Centre at the Small Business Development Corporation, which can help you with your business licence requirements.

If you require development approval, then you should check your lease documentation to ensure the lease is conditional upon the approval being received. Then, if your development approval is not approved, you will not be required to enter into the lease. Similarly, some leases have clauses that only require rental payment once development approval has been received, this may be a good avenue to explore to ensure you are not paying rent while waiting for development approval.

Please note, you may require approval from other government departments such as a liquor licence from the Department of Local Government, Sport and Cultural Industries.

Do the clauses of the lease work for my business?

Signing a lease is a legally binding and serious financial commitment. Take the time to look over the lease closely and ask questions about any clause that you do not understand before you sign on the dotted line.

Terms in the lease you might like to look closely at include:

  • The length of your lease, options to renew or extend the lease and how/when those options must be exercised (i.e. how long do you need to be there to recover costs and make a profit?).
  • Early termination of the lease and under what circumstances this can be arranged e.g. redevelopment of the property.
  • Exclusivity (i.e. no other businesses can sell the same goods/services that you do within the same retail precinct). Ideally the mix of businesses should complement rather than compete with your business.
  • Sub-lease terms if any.
  • Clauses that require you to take out insurance (e.g. public liability, workers compensation, building insurance) if any.
  • Amount of rent you are required to pay and if there are any rent free periods (e.g. during the fit-out).
  • The type and frequency of your rent reviews and whether this type of rent review is best for your business (i.e. flexibility vs certainty).

What other costs may there be?

When considering the costs your business can afford, remember that this will be more than the rent payable under the lease. Commercial landlords may seek to recover costs and expenses/outgoings from you, so the lease agreement should clearly itemise those assigned to you.

Other costs to consider include:

  • Utility bills, such as water, gas, electricity and internet;
  • ‘Make good’ terms for the end of the lease;
  • Strata and property levies;
  • Property maintenance, such as landscaping;
  • Property and real estate taxes, including stamp duty, etc.
  • Required bond monies;
  • Cleaning costs;
  • Maintenance of fire safety systems, e.g. portable fire extinguishers, fire hose reels (if any), fire blanket (if any) and fire sprinklers (if any) within the tenancy;
  • Registration fees; and/or
  • Costs in relation to requests for the landlord’s consent to any works or signage etc.

Need further help?

City of Vincent:

You can contact the City in a number of ways:

  • Email and provide the address of the property you are enquiring about
  • Phone 9273 6000 Monday to Friday between 8.30am – 5.00pm
  • Visit the Administration counter at 244 Vincent Street (corner of Loftus Street), Leederville between 8.30am – 5.00pm.

Small Business Development Corporation (SBDC):

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