In commercial property management and leasing you frequently come across the problem of the tenant delaying the signing of the lease. It can be for a number of reasons such as:
- The complete terms of the lease are still being negotiated
- The tenant is still finalizing their fitout design
- The various partnership members are not all available for signature
- The documentation is still with the tenants solicitor
- The business or government department is taking time to process the document
- The decision makers are away
- Approvals for permitted use are delayed at local council
So the list goes on and you will see many variations of the problem. Tenants will give you so many different reasons why the lease is still outstanding. Frequently the delay process is not as it seems and there are other alternatives that the tenant is adopting for their own reasons. Tenants will not tell you the whole truth; that is a fact.
The signature on a lease is then a critical element of making the tenancy available for occupancy. In almost all lease situations, you would want the tenant to satisfy the following criteria before the keys to the tenancy are handed over:
- The lease is totally and correctly signed
- The plans and drawings associated with the tenants fitout have been submitted to the landlord and are approved
- The plans and drawings associated with the tenants fitout have been submitted to the building control board or local council and are approved
- The first months rental is paid in advance in accordance with the lease documentation
- The appropriate personal or bank guarantees are provided to the landlord in accordance with the agreement to lease
- All associated documentation and disclosures tied to the lease implementation are correctly served and satisfied
- The deposit required under the lease agreement or lease arrangement is paid
The golden rule in the leasing a property to a tenant is that all lease requirements are satisfied in accordance with the property managers instructions and the landlord’s requirements before any keys and tenancy access are given.
It should also be said that any incentive to be made available to the tenant as part of the new lease structure should not be released or made available until all the six points above are satisfied.
In most instances with commercial property, the tenants you work with are very experienced in business and negotiation. They are likely to be more experienced than the property manager or the landlord. The tenants will set up the leasing situation to their own advantage during the lease negotiation.
So the clear message here is that the premises should not be handed over to the tenant until all lease documentation requirements have been satisfied correctly and legally.