Vital factors to consider when entering into a new Lease

It is of paramount importance to look at the factors to consider when entering into a new lease agreement for industrial property. Once the lease contract has been signed, it’s hard to change or re-negotiate.

The following aspects of a property lease transaction are fundamental:

· Exactly what is being rented? Factory/ Warehouse, offices, yard areas, etc
· Also, are there any areas shared with other users? (e.g., Shared yard areas).
· Rentable area of premises. The most commonly used formula is the SAPOA Method of Measuring Floor Areas.
· Exact use of the premises and facilities.
· Date of Occupation of the Premises.
· Lease start date.
· The period of Lease.
· Lease End Date.
· Annual rental escalation.
· Deposit required. (Deposits are non-vatable).
· Renewal period and terms & date to be complied with for Renewal to be Valid.
· Initial Rental. (Excl. Vat)
· What other initial costs are to be paid by the Tenant?. (e.g., Security, Operating Costs).
· How/ when do these costs escalate?.
· How are consumption charges (e.g., Electricity, Water, Sewerage, etc.) calculated and billed?.

Additional items no less critical:

· Suretyships (if applicable).
· Any special/other requirements requested by the Tenant?.
· Tenant’s legal entity to prepare all FICA documentation required by Landlord.
· Tenant will likely be needed to consent to a credit check by the agent or the landlord.
· Resolutions when companies or trust are the legal entities.
· What are the Lease/ Administration costs charged for drawing up the contract?.

Practical aspects

· Power requirements?
· Height/ stacking and racking requirements.
· Fire regulation compliance (e.g., Sprinkler systems, etc.).
· Insurances.
· Loading, parking, paving, turning circle requirements.
· Flooring and lighting.
· Staff facilities.
· The timing of a move from previous premises.
· Finally, cleaning up of former facilities.

Should you ever have any questions or are unsure of any aspect of a transaction, please contact Epping Property for a confidential discussion. It pays to use an experienced industrial property broker to negotiate the best deal possible. It is far better to clarify aspects before a lease is signed. There are too many instances where parties, years later, try to decipher what intentions were when a rental agreement was signed.