A year in the life of a retail lease

BY Phillip Chapman
08 June 2018

With the end of the financial year close by naturally comes the beginning of the new financial year, so what about your lease year?

The Lease is an asset of your business, and should never be treated as just a set and forget contract as there are numerous activities and events that take place each year.

The lease is a living contract.

With the ever growing sophistication of Landlords, even in small shopping centres, here is an example of a typical a year in the life of your lease:

                Monthly- sales data provided to Landlord

                                -MAT (moving annual turnover) is collated and updated

                                -OCR (occupancy cost ratio) is collated and updated

                 (Centres can track your performance better than a you do.)

30 days before end of financial year

  • Outgoings budget/estimate for next financial year is sent to Lessee advising new charges

30 days before lease anniversary

  • Annual rent review is forwarded to Lessee (this may vary depending on review type i.e. CPI)

Beginning of financial year

  • Rent Invoice is updated with new outgoings charges

Beginning of new lease year

  • Rent invoice is updated with new rental from annual review
  • Request sent to Lessee to top up bank guarantee/security from rent + outgoings increases
  • Request sent to Lessee for new Certificate of Currency for insurances and indemnities
  • Request annual Sales Audit/Statement (depending on turnover rent clauses)

90 days after financial year

  • Outgoings Audit is providedARA_retail-lease-year
  • Outgoings recovery and adjustment provided (up or down)

120 days after financial year

  • Rent invoice reflects outgoings adjustment from previous financial year

Other activities: (depending on premises, use and lease terms)

  • Quarterly air conditioning service provide to Landlord
  • Annual pest and vermin inspection and service provided to Landlord
  • Annual premises maintenance and fit-out inspection report
  • Monthly  (i) extended trading hours charges

(ii) Electricity meters read and billed

(iii) Water meter read and billed

And the list goes on.

Along with all this, the Landlord is constantly reviewing comparable rents and performances (your sales), not to mention the critical path of your lease (time to lease end).

Now imagine what the Landlord is doing when your lease term is nearing the end of its critical path?

With all this data and resources even the small shopping centre Landlords are planning what your next lease will look like, quite often up to 2 years before its due!

Proactive rather than reactive (end of lease) management of your current lease as well as strategic planning for your next lease has become more important than ever.

Bankers are constantly learning to understand how to continue lending (including current credit facilities) to Retailers with the risks associated under a retail shop lease becoming more prevalent.

About Lease 1

Lease1 is the leader in its specialist field and is committed to providing personal, timely and cost-effective services to save tenants time, money and stress in their lease negotiations. Visit  www.lease1.com.au

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ABOUT THE AUTHOR

Phillip Chapman

Lease 1 Retail Leasing Do You Want A Better Deal On Your Lease? "Retailers don't get what they deserve... they get what they negotiate." Lease1 is the leader in its specialist field and is committed to providing personal, timely and cost-effective services to save tenants time, money and stress in their lease negotiations. Securing and protecting the commercial terms of our clients’ leases is our core business, supported by wide-ranging tenant consultancy services, encompassing lease information and research, site sourcing and selection, dispute resolution, retail franchising and portfolio administration. Our industry-leading Lease1 service adds security and value to a retailer’s business through professional lease negotiation and tenant representation on: • New Leases • Lease Renewal • Lease Options • Rental Research • Site Selection • Dispute Resolution • Crisis Management

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