Protect your premises – when to have your lease reviewed

Your lease is one of your most valuable business assets, especially for pharmacies where location rules can restrict the opportunity to secure premises in prime positions. It is important you do not put your premises at risk when signing documents relating to your lease. You can minimise this risk by obtaining legal advice about your lease documentation at certain key times.

Prior to signing any documents

You should obtain legal advice prior to signing any document relating to the lease of a premises (including an Offer to Lease or a Heads of Agreement). A lawyer experienced in leasing will be able to advise on whether:

• the local planning scheme will allow you to operate a pharmacy at the premises.
• commencement of the lease is subject to and conditional on you obtaining the required approvals to operate a pharmacy at the premises (such as PBS approval from the Department of Health and Aged Care and approval from the State pharmacy authority).
• the lease contains appropriate terms that allow you to carry out your fit-out works.
• the terms of the lease comply with the relevant State’s legislation for retail leases.
• the terms relating to key terms like rent, rent reviews and outgoings are reasonable.

Before the lease is renewed

There are certain processes to be followed when a lease is renewed. Under most standard leases, the parties agree whether the tenant can exercise an option for a further term (or multiple further terms). You should obtain legal advice when you intend to exercise an option for a further term to ensure:

• the landlord has provided you with the required notifications and disclosure material for the renewal.
• the option is validly exercised in accordance with the lease terms and relevant legislation.
• formal renewal documents are prepared to properly record the renewal and confirm the ongoing lease terms.
• you can request and negotiate any variations to the lease and have these included in the renewal documents (e.g. a further term added).

When the lease is being transferred/assigned

If you are purchasing a business that operates at a physical premises, in most circumstances the lease you are taking over is as important as the business and assets you are purchasing. It is important for a you to obtain legal advice when taking assignment of a lease to ensure:

• the landlord’s consent to the transfer has been formally obtained in accordance with the lease terms.
• the lease terms permit you to legally operate the business at the premises as and from date of transfer.
• if required, the transfer is subject to certain conditions being satisfied such as the settlement of your business purchase.
• you can request for the landlord’s agreement to any variations of the lease as and from the transfer date.

If you obtain legal advice before signing lease documentation, you will minimise the risk of serious issues arising later. We have often found problems in leases where clients did not obtain legal advice before signing. It is much easier and less costly to prevent these issues (which can threaten your tenancy) prior to you signing your lease than trying to resolve them later after the lease has been signed.

If you would like assistance with any leasing matters, please contact us on (07) 2140 0522 or [email protected].

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George Hanger is a Senior Associate at Vitality Law Australia, an award winning commercial law firm servicing pharmacy businesses and healthcare professionals across Australia.? For further information, email?[email protected]?or visit?www.vitalitylawaustralia.com