You may have heard someone refer to an ‘Agreement to Lease’ when talking about commercial leasing. An Agreement to Lease is commonly used prior to the Property Owner (commonly referred to as the Landlord or Lessor) and Tenant (also referred to as the Lessee) entering into a Commercial Lease where there are conditions to be met before the Landlord can grant the Tenant a lease of the premises.
An Agreement to Lease outlines the requirements that are to be met prior to the Lease coming into existence.
When should an Agreement to Lease be used?
The most common situation where Agreements to Lease are used is where the premises are being constructed for the Tenant to lease. Other common circumstances are:
What issues are normally dealt with in an Agreement to Lease?
The main issues dealt with in an Agreement to Lease are:
Completion of works, fit out, or the granting of consent by a third party usually triggers the start of the Lease.
As noted above, the Lease is normally annexed to the Agreement to Lease and normally the Agreement to Lease will contain a provision that the parties agree to be bound by the lease once the conditions in the Agreement to Lease have been met. Accordingly, in addition to asking your lawyer to review the Agreement to Lease, you should also ask them to review the terms of the Lease before the Agreement to Lease is signed.
Lease provisions which may require special attention include:
What are the benefits of an Agreement to Lease?
An Agreement to Lease binds both parties to enter into a Lease on the satisfaction of certain conditions. The benefit being that it creates certainty for the parties in situations where money is to be spent before the Lease commences.
If you would like more information on Agreements to Lease and Leases, whether your Tasmanian property is retail, non-retail, commercial or industrial, please contact us on 03 6332 9353.
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