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.
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For further information and detail, please contact Epping Property.
+27 (0)21-531-0026