Leasing Premises & Equipment
What is a lease?
A lease is an agreement that allows you or your business (called "the lessee") to use property or an asset owned by another ("the lessor") for a specified period of time, in return for regular payments. The legal ownership remains with the lessor.
Lease or purchase?
It depends on cash flow. There may also be lease incentives on offer, eg; a rent free period for leasing premises. It is also important to understand the tax advantages/ disadvantages of each option.
Motor vehicle leasing
This usually raises substantially the same issues as other equipment. There is a set amount that can be claimed as depreciation, depending on the use of the vehicle (eg; hire cars might allow greater depreciation value).
Leasing premises
Most businesses will choose to rent premises. The relationship between the landlord and tenant will be regulated by the lease and, in certain circumstances, State or Territory legislation may also apply. In the lease there will be clauses dealing with rights and duties. Make sure you get legal advice before you sign a lease, the solicitor will be able to explain the obligations in the lease and negotiate some of the terms of the lease.
Rent
It's important that a solicitor looks at the rental clause eg; commercial rents in shopping centres are often calculated on the basis of a percentage of sales or the business income, together with a base rental that does not vary. There are a number of formula that are used to calculate rent, and you should understand the consequences. Also, increases in rent may be calculated in different ways (eg; CPI increases).
Repairs
Tenants usually have an obligation to repair, although the landlord may be liable for structural repairs and for inherent defects. Generally the tenant is required to maintain the premises in the same condition as at the start of the lease, but should not be responsible for fair wear and tear.
Costs
The sorts of costs associated with the lease include:
- legal fees for preparing the lease
- stamp duty
- registration at the Titles Office, this is optional, but gives a tenant security;
- other costs, such as survey plan, searches, office services, etc.