What to check before signing an industrial lease

By the time a lease reaches signature, rent and deposit have usually been negotiated hard. The clauses below receive less attention, yet they decide what the building costs you over the lease, and what you can do if your business changes.

Term, lock-in and renewal

• Is the lock-in period aligned with the contracts or plans that justify the facility?
• What happens if you leave during the lock-in? Is the liability capped?
• Do you have the right to renew, on what notice and on what basis for rent?

Escalation

• How often does rent increase, by how much, and on what base?
• Does escalation also apply to maintenance charges or other payments?

Maintenance and repairs

• Which repairs are the landlord's responsibility (structure, roof, external services) and which are yours?
• How are common area charges calculated, and can you see the basis for them?
• What happens if the landlord does not carry out a repair it is responsible for?

Use, alterations and fit-out

• Does the permitted use in the lease cover everything you plan to do, including future changes?
• Which alterations need consent, and is consent not to be unreasonably withheld?
• Who owns improvements you make, such as mezzanines, racking anchors or electrical upgrades?

Reinstatement and exit

• What must you restore at the end of the lease, and to what standard?
• Is the condition at handover recorded, so that reinstatement is measured against it?
• How and when is the security deposit refunded, and on what deductions?

Sub-letting, assignment and change of control

• Can you share or sub-let part of the space, for example to a client or a group company?
• Does a change in your shareholding count as an assignment that needs consent?

Insurance, compliance and approvals

• Who insures the building and who insures your stock and fit-out?
• Who is responsible for keeping the fire NOC and other building approvals current?
• If an approval lapses because of the landlord, what remedies do you have?

Registration and stamp duty

Longer leases generally need to be stamped and registered under state law, and the cost and process differ by state. Agree in the term sheet who bears these costs, and confirm the requirements with your counsel before signing.

This guide is general information for occupiers. It is not legal, tax or engineering advice. Requirements differ by state, authority and building, so confirm specifics with your counsel and technical advisers.

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