Does Your Lease Have an Option?- Part 3

BY Phillip Chapman
27 October 2017

This is the final part of this mini-series relating to exercising your Retail Shop Lease.

In part 1 we established the timelines and how to create a critical path to deal with “time being of the essence” when managing your lease option.

Part 2 set out some recommendations and the best practices for ensuring your Notice to Exercise your option is delivered/served: (i) to the correct person and (ii) via the correct method (electronic/post etc.)

The last section deals with the actual Notice itself including the contents and in particular to identify a “qualified “Notice as opposed to an “unqualified” Notice.

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A “Qualified” Notice is one that seeks to exercise your right over someone else’s land for a further lease term but includes certain conditions other than to inform the lessor you are exercising your right.

Sounds confusing? Perhaps an example best sets out what I refer to:

Dear Lord of the Land,

We the Lessee of the above mentioned premises seek to exercise our right to a further term as set out in lease clause (?) so long as the rent is reasonable…..

By adding the last few words makes the Notice conditional upon the “rent being reasonable” and therefore the Notice maybe deemed “qualified” and hence rejected or ignored as if the Notice was not sent.

Now it may not be reserved to conditions about rent, some actual examples:

  • “… if the Landlord fixes the A/C…”
  • “…if the rent is reduced…”
  • “…conditional upon granting a further option…”

The list goes on!

To effectively Exercise Your Lease Option, the Notice must be “unqualified” which means that there is no subsequent conditions, terms or requests included with the Notice.

Remember the lease option is for a further lease term on the same terms and conditions as set out in the lease and nothing more.

However once, as set out in Part 2, you receive acknowledgement that you have exercised your option from the Landlord (or their authorised representative) then there is nothing stopping you seeking to negotiate something further as you can always defer to your legal right to have another term as described above.

This then highlights the vital importance set out in Part 1- putting time on your side well before the Notice Period.

The months before the Notice Period begins is the right time to seek to negotiate the terms and conditions you seek as you are leveraged by your right to exercise the option (or not)!

Handled professionally, leveraging the critical path and the appropriate research prior to your option can achieve beneficial commercial outcomes.

If it is left to the Notice period to spell out changes you have left it too late – don’t fall into the trap of over playing your rights – you run the risk of losing the lot!

Need leasing advice or management services? The ARA has partnered with Lease1 to save retail tenants time, money and stress in their lease negotiations. To learn more about ARA Leasing Services contact http://lease1.pages.ontraport.net/enquiry or email membership@retail.org.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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