The main difference between a commercial lease (or "tenancy") and a residential lease is that the RESIDENTIAL TENANCIES ACT 1986 does not apply to commercial leases. Commercial leases are instead governed by the PROPERTY LAW ACT 1952. (For information on residential tenancies, see How to enter into a residential tenancy.)
With a lease the landlord is referred to as the "lessor" and the tenant is referred to as the "lessee".
In order to be valid, a commercial lease must include the following elements:
A lease will ordinarily be in writing, although this is not necessary for the lease to be valid. A written lease ensures that the parties know exactly what their rights and obligations are.
The parties are at liberty to negotiate specific terms in the lease agreement that suit their particular requirements. Because of the nature of commercial property and its uses, the parties may wish to provide in the agreement for issues such as ownership of fixtures and fittings and the intended uses of the property.
An important distinction is between periodic and fixed-term leases. With a periodic lease there is no requirement for the beginning and end of the lease to be certain; instead, the lease ends on notice being given by either party. A fixed-term lease, on the other hand, requires a certain duration for the lease â€“ that is, a certain starting and ending time.
If the lease agreement does not specify otherwise, a lease will be a monthly periodic lease, which means that either party can terminate it by one month's notice in writing.
Frequently one, if not both, of the parties to the lease will be a company. A landlord (lessor) may require a personal guarantee from a representative of the company, usually a director or major shareholder. The effect of this is that the guarantor will be personally liable for any amount owed by the company in the future.
The rights and obligations of the landlord and tenant are provided for in the PROPERTY LAW ACT 1952, and are implied by the law into all commercial leases. These include the following:
The parties have the option of protecting their interests by registering the lease on the Certificate of Title for the property.