Lease Terminations and Transfers – Tips for Landlords and Tenants

The global market downturn has increased the vacancy rates of commercial and industrial property around Australia. With lease transfers and terminations now a common reality, there are a number of key tactics landlords and tenants should employ to reduce risk and manage costs says Chris Barker, Washington Brown’s Senior Building Consultant.

Tips for Landlords

• Understand the multiplication impact of an increase in rent to the capital value of your investment
• Use rent reviews to offer cost certainty to long-term tenants
• Consider establishing sub-letting agreements in order to keep good tenants should there be a need to downsize
• Look to upgrading your property to fit in with current demands – smaller office spaces, multi-tenant, etc
• Keep a very close eye on Make Good. Lease terminations should always be managed by specialist chartered building consultants/surveyors to ensure tenants make good on their legal and financial responsibilities

Tips for Tenants

• Use rent reviews to think about break-clauses and sub-letting agreements if downsizing is a possibility
• Lock in the rental term as a way of managing costs
• Get professional advice on any make good claim by the landlord
• Reduce the risk of any future make good claim and get an ingoing schedule of condition on any new lease
• Do a full cost analysis of re-leasing versus relocating. It might make more financial sense to renegotiate the lease terms than pay out make good claims and moving costs

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