Before you sign the lease

Two people inspecting office with real estate agent

Found a property to rent for your new business? What you need to do before you sign the lease

Entering into a lease is a serious financial commitment.

Make sure that you’ve done your research, checked out the available, suitable properties in the area where you want to operate and that you’re satisfied you’ve found the right premises in the right location for your business.

Before you sign the lease, revisit your business plan and make sure it’s realistic and covers all contingencies.

Consult a solicitor before entering into the lease – it might save you a lot of time, money and anxiety in the future. A solicitor can advise you about what the lease requires of both you and the landlord.

It’s extremely important that you understand your lease and the commitments you’re making, including paying the rent.

Paying the rent

A lease is a contract that you probably won’t be able to get out of early.

The duty to pay rent regularly is a key term in a leasing contract. When you sign the lease you are agreeing to pay the rent for the full term of the lease.

Depending on the length of the lease, the rent can add up to hundreds of thousands of dollars each year.

If you’re late with your rent, the landlord is able to take possession of the building, lock you out (without written notice) and still claim rent until another tenant is found, which can sometimes take months.

The landlord does not have to reduce your rent if your business is not doing well. Nor does the landlord have to let you out of the lease if you are losing money, having family problems or you’re sick.

Because paying the rent is a major financial commitment, it’s a good idea to get legal advice about the lease and your obligations and the landlord’s.

Check with the local council

Check with the local council where the rental property is located. You may need written consent from the council for the type of business you want to run.

If you are planning a fit-out or any other building work, check with the council’s 'duty planner' to find out if you need to lodge an application for development consent. Don’t rely on what the landlord says about council regulations because zoning and planning regulations can change.

If you need council approval to do building work, think about how much time it will take to get the development approval and then have the work done. This preparation time can see costs mount up without any money coming in. You might be able to negotiate with the landlord for a rent-free period at the start of the lease.

You should also consider what you will do if there are problems or delays, because your duty to pay rent might start before the building work is finished and you can start trading.

Get advice

The prospect of running your own business and being your own boss can be exciting – the start of a whole new way of life.

Before you sign the lease, think about how much time and money is required to make your business a success. Running a business generates a lot of costs which can impact on your ability to pay the rent.

Make sure your business has sound financial backing. Speak to your lawyer, business advisor or accountant. Get them to review your business plan.

Advice on a wide range of business issues is also available from Business Connect, a NSW Government-funded service that provides business advice and business skills training. Business Connect is delivered by independent service providers based across NSW, including specialist and multicultural service providers.

For more information read our Guide to commercial, industrial and retail leasing.