Having a good lease in place is vital to the security and value of your business. While negotiating certain terms (such as a lower rent) is important to making sure the business is profitable while in the property, a tenant also needs to consider if the lease should be registered.
So, why register a lease and is it necessary for your business? Read on to learn more, and if you have any questions about commercial leases in the meantime, our team of commercial lease lawyers are here to help.
Overview:
- Why register a lease?
- How to register a commercial lease
- How much does it cost to register a lease?
- What to consider in a commercial lease
Why register a lease?
The primary benefit of lease registration is statutory protection from purchasers of the property under the Real Property Act.
If the landlord sells the property, and you have an unregistered lease, then the purchaser of the property could refuse to recognise your lease and either require you to vacate or to enter into a new lease on much less favourable terms.
Technically, the registration of a lease is not required and in some situations, it is not recommended (such as with short term leases or where the landlord and tenant are the same but have different company structures). However, registering a lease is highly desirable. So unless you are very confident that it is not necessary, we recommend having your lease registered on the title.
How to register a commercial lease
Lease registration is the process of registering the lease on the title to the property. It is a process that is carried out pursuant to the Real Property Act and is managed by the Land Titles Office. Practically speaking, a conveyancer or commercial property lawyer would arrange lease registration via the PEXA (electronic conveyancing) system.
Commercial lease registration cost
Cost of lease registration can vary, but at its most basic it will be $173 for the Land Titles Office registration fee and $114 for the PEXA (electronic conveyancing fee). It is likely that the solicitor or conveyancer may want something for their troubles as well (estimate $200).
If the premises are located on only a part of the land, it may be necessary to have a plan prepared by a surveyor and lodged at the Land Titles Office. Including further registration fees, this may add another $1,000 to the equation.
What else to consider in a commercial lease
Now you know the answer to the question “why register a lease?”, it’s important to consider factors that constitute a good lease. Before agreeing to the terms of the lease, look out for the following:
- A low rental and rent reviews (a lease with a high rent and high fixed rent reviews may not only affect profitability but could also put off prospective purchasers of the business). Ideally, rent reviews would be to CPI but capped so that they cannot be higher than say 3%;
- The absence of certain clauses (such as the landlord taking a mortgage over all of the tenant’s property – including the tenant’s home and clauses which allow the landlord to move the tenant to another part of the shopping complex);
- An appropriate lease term. A 10 year lease at the beginning of a significant and prolonged economic downturn would almost certainly spell disaster for many operators. It’s better to have a shorter lease term or even better still, to have a long lease term with the lessee having ‘rights of termination’ every few years; and
- As many options to renew the lease as possible.
If you have any other questions about commercial and retail leases, or why registering a lease is important, talk to the experienced property lawyers at Beger & Co. You can also join our mailing list to receive updates and legal advice on current issues.
