What is the process when I find the right premises?
- Contact South East Real Estate at our Clyde office 03 5999 0608
- Confirm the address of premises, your interest and request a Heads of Agreement (HOA);
- Provide your contact details (name, phone number and email);
- A HOA will be provided and you need to fill in the gaps (tenant’s details) and check all other information;
- If satisfied with the content please return and a fully typed version will be provided for your approval and signature;
- We therefore require:
- Signed HOA returned to our office
- Deposit paid as per HOA
- Credit references provided as per HOA
- This HOA, if accepted by the owner and signed, we then arrange the Lease (and Disclosure Statement) to be prepared by the owners’ solicitor;
- Once the Lease is prepared in triplicate you are required to review and sign and return all copies to our office as soon as possible with the security bond;
- The owner then signs;
- Access to the premises will only occur if:
- Lease documentation is signed by both parties
- First months’ rent and GST is paid
- Security bond is paid
When do I get a key?
You will receive your set of keys and/or swipe cards on the lease commencement date that is stated in the Lease and when everything is signed by both the owner and tenant.
When can I start trading from the premises?
As the tenant, you can start trading on the Lease Commencement date stated in the HOA and lease documents.
Who do I ring when there is a repair required?
You can ring our property management department or the property manager of the building (if appropriate) to discuss the issue and they will be able to assist you with the correct procedure.
When do I pay my rent?
The rent is normally due to be paid on the first day of each month. The first month’s rent is paid in advance to South East Real Estate at time of signing the Heads of Agreement (HOA).
You will receive a tax invoice from South East Real Estate which will state the amount payable, the due date and the period for which the charge relates.
What does “re-instatement” mean?
Upon lease termination, the premises must be in the same condition as the commencement of the tenancy. However, reasonable wear and tear is accepted. If we manage your property, we ensure the tenant(s) are aware of their obligations and we will conduct routine inspections to ensure the upkeep of the property.
What is the security bond?
This is a cash amount which is paid by the tenant and held in an interest bearing account. As required under the Retail Leases Act, the security bond secures against non-performance of the lease obligations by the tenant. The security bond is usually between one and three months rent inclusive of the GST or more, subject to the level of security required.
What is a bank guarantee?
Under the Retail Leases Act, tenants have the opportunity to pay a cash security deposit or a bank guarantee. A bank guarantee is an unconditional undertaking given by the bank on behalf of the customer to pay the recipient of the guarantee, the amount on the written demand.
Please note that we require an unconditional bank guarantee or a nil expiry date bank guarantee.
What is an Owners Corporation fee and what does it include?
Owners Corporation is the new term for Body Corporate.
An Owners Corporation is a company appointed to manage the shared areas of a building or a number of adjoining premises. The owners corporation will collect charges for utilities, cleaning etc. for the common areas and will charge a portion to each premises as defined by the deed of incorporation. The Owners Corporation charges will in most cases be
chargeable to the tenant as part of the lease obligations.
Refer to the Owners Corporation Act 2006 www.legislation.vic.gov.au
What legal costs are involved in leasing a property?
The owner needs to have a lease prepared by their solicitor. There are no legal costs for the tenant unless they hire a solicitor to verify that the lease document reflects the agreements made between both parties.
Why do I need to provide credit / business references?
Credit references provide some indication to the owner and South East Real Estate that a potential tenant is reliable, timely, honest and trustworthy with regards to the payment of invoices and bills. The references could include, past landlord(s), regular business suppliers, audited financials and estate agents who you have leased premises from previously.
Once I have moved in who do I contact if I need to talk to someone?
Your property manager (the name and details will be provided in the welcome letter) is always available to assist.
If your query relates to any common property matters then it is best to contact the owners corporation (the company name and details will be provided in the welcome letter) directly.
When do I pay my first rent payment if I have paid my initial deposit?
The first tax invoice will be sent midway through the first month of the tenancy. Rent is payable in advance (not arrears). Late fees may apply so setting up a direct deposit system is advisable.
When do I get a tax invoice ?
You receive a tax invoice for your rent, outgoings and the GST before the coming months bills are due. If at any time you are unsure about the detail, please do not hesitate to contact your Property Manager as soon as possible.
What is an outgoing?
Outgoings are the expenses attributable to and necessary to maintain a functional property. The majority of commercial leases require the tenant to reimburse the owners outgoings, which are paid by the tenant in addition to the agreed rental.
In the case of a ‘gross lease’, outgoings are included within the rental as a single payment. Other than electricity, phone and water consumption, there are no further outgoings for the tenant to pay.
What do outgoings consist of?
Property charges such as:
- Statutory charges (council rates, water rates, drainage charges);
- Building operating costs;
- Insurance costs;
- Owners corporation fees if a strata title property.
Why do I pay outgoings?
Most commercial and industrial leases are based on the tenant paying a net rental plus outgoings and GST. The outgoings are paid for by the tenant as they are essentially the “running costs” of the premises.
Do tenants pay land tax?
Under the Retail Leases Act some properties as defined, are not required to pay land tax. South East Real Estate or your solicitor can provide more professional advice on land tax based on a single holding basis.
What is included under the term ‘insurance’?
This includes the lessor’s building, public liability and plate glass insurances.
Additionally, the tenant is required to take out their own contents insurance. For more specific information regarding insurance, contact your insurance provider.
What is maintenance?
The aspects of the premises that will fall under the category of maintenance will include:
- Air conditioning
- Fire services (Fire extinguisher)
- Gardens & Courtyard
- Amenities (Kitchenettes & Toilets)
- ‘General’ maintenance – Gutter cleaning, rubbish removal, window cleaning
Refer to the lease or to the Owners Corporation for maintenance responsibilities regarding individual properties.
Goods and Services Tax (GST)
Goods and Services Tax is added to charges relating to all commercial property. Once registered, GST can be claimed back as part of the quarterly BAS Statement, depending on the business ownership and reporting structure. If you need specific information regarding GST on leased premises, speak to your accountant.
Where does GST come into it?
South East Real Estate issues Tax Invoices and collects “consideration plus GST” from tenants on the behalf of owners. Monthly statements serve as Tax Invoices and it provides necessary information to complete BAS statements. Monthly statements also provide details on management fees and GST levied as well as other fees collected or deducted.
What about GST on Outgoings?
Under the current tax law, any amount which becomes payable according to the terms of an agreement (lease) is to be considered “consideration for supply”.
Under a lease, if a tenant is required to make a payment (e.g. council rates), that amount paid is deemed to be “consideration for supply”.
As soon as a payment becomes due by the tenant, it changes it’s nature under tax law interpretation. Reimbursement of rates becomes “consideration of supply” and is legally indistinguishable from rent.
The tax law deems that the payment has been received by the landlord and 1/11th of the amount received is payable by the landlord as GST.
Essential Safety Measures & Fire Safety
Under the Building Regulations 2006, owners are required to provide premises that complies with the Essential Safety Measures legislation. Premises are required to be inspected annually (some bi-annually) to ensure the premises remains compliant. The owner is required to pay for the cost of these inspections in accordance with lease obligations.
Significant fines could be imposed, should the premises be found to be non-compliant.
When and why do I have to provide directors guarantees?
Director’s guarantees provide additional security to the owner.
If the lease of a premise is under a company’s name, then the director(s) who signed the lease is/are personally liable for the company’s obligations under the lease.
Do all directors need to sign the Heads of Agreement (HOA) and Lease?
If the lease is under the company’s name, all directors of the company must sign the HOA and lease agreement.
What is the Retail Leases Act?
The Retail Leases Act was put into legislation in 2003, it is designed to enhance;
- a) the certainty and fairness of retail leasing arrangements between landlords and tenants; and
- b) the mechanisms available to resolve disputes concerning leases of retail premises.
In the Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for;
(a) the sale or hire of goods by retail or the retail provision of services.
Retail leases legislation applies to a retail premises lease used for the sale or hire of goods by retail or the retail provision of services and where the occupancy cost is less than $1 million per year.
Do I need a solicitor?
As a tenant, you legally do not a need a solicitor to lease a property. However for the purposes of understanding the legal documentation contained within the lease, we highly recommend you do have a solicitor review the documentation involved.
What is the minimum lease term allowed?
The minimum lease term is determined by the owner.
However under the Retail Leases Act, the minimum of 5 years is allowed on the lease. For example, it can come in the form of a 2 + 2 + 1 year lease or a 3 + 2 year lease.
Short-term leases (e.g. 12 month lease) are acceptable but a waiver needs to be obtained and accepted by the Small Business Commissioner. For further information look up www.sbc.vic.gov.au
What is a Disclosure Statement?
The disclosure statement forms part of the lease and is a statement that is required to be completed by the landlord under the Retail Leases Act 2003. The disclosure statement outlines aspects such as:
- The landlords details
- The tenants details
- The details of the premises
- The retail shopping centre (if applicable)
- The terms of the lease
- The permitted use of the premises
- The occupancy costs
- The rent payable
- The outgoings and what they are
- Tenants fit out and/or refurbishment works
- Relocation/Demolition clause (if applicable)
- Additional Representatives (if applicable)
- The declaration by the landlord or landlords agent
How is the rent determined?
The rent is based on the comparable rents of other properties within the area that are of the similar size and structure. The rent is ultimately set by the owner on the basis of these facts and on the advice of the agent.
How do rent reviews work?
On most occasions there is a fixed annual increase during the lease term. However, upon your lease renewal (if any) the rent is determined at market levels.
Can I request the owners to carry out works during my lease term?
Yes you can but the details of the actual works including what needs to be done, time period, costs etc. needs to be correctly stipulated via a written request to the landlord which can then either be accepted or denied by them.
What are the steps involved if I want to renew my lease?
The lease will define if there is any option to renew at the end of the initial term. The tenant must advise in writing their intention to exercise the option at least three months, but no more than six months before the date of expiry.
Once notice of exercise is reassured a new lease will be prepared and once again both owner and tenant will be required to show their acceptance by signing off as appropriate. At renewal any variation to additional option terms can be included in the new lease. Generally the new rental will be determined by a market review.
Disclaimer: Particulars herein are for information only and do not constitute any representation by South East Real Estate. Interested parties should make their own enquiries.