Commercial Lease – Making an Offer to Lease
If you intend on leasing a premises from which to run your business, you may be encouraged by either the Landlord or the Leasing Agent when making an offer to lease the premises, or to sign a letter of intent. Before signing a letter of intent or an offer to a commercial lease, it is important that you understand the effect of signing such a document.
What is included in an offer to lease?
The offer to lease or letter of intent may be presented to you as a simple form, containing any or all of the following:
- a statement that you want the leasing agent or the Landlord to hold the property until you finish your investigations or until a formal lease is signed;
- a requirement that you pay a deposit to secure the property;
- state the terms that you want the lease to include, or that the Leasing Agent tells you will be included, such as the rent, what you can use the premises for, the term, and other details such as your insurance requirements or fit out requirements;
- in some instances, it may include a full draft copy of the lease.
While it is not unusual for prospective tenants to sign a letter of intent, it is important that the letter or offer is clear and contains your terms and conditions for entering into a formal lease. Depending on the terms of the document signed, you may be held to have entered a legally binding agreement to lease. This means that if you have not conducted your enquiries into the property and you determine that it does not suit your needs, you may be otherwise obliged to lease the premises.
When will an offer to lease be binding?
The offer must be sufficiently certain and contain the essential terms agreed upon by the parties.
As a general rule, to be an enforceable agreement a letter of intent or offer to lease would specify:
- a commencement date for the lease and the duration of the commercial lease;
- the amount of rent payable at the commencement date;
- the amount of outgoings payable and, if applicable, the method for calculating those outgoings;
- the name of the parties to the lease and a description of the premises being leased;
- particular terms of the lease, such as what the tenant is required to do at the end of the lease or what works they can do to the property.
It is also important to note that an offer to lease may be binding where it contains the sufficient detail above, but is ultimately subject to:
- such terms and conditions as the Landlord may require, or terms standard for the type of lease being entered;
- in the form prepared by the Landlord’s solicitors with the Landlord’s standard terms.
In such instances, courts may imply the required terms into the commercial lease, however sufficient detail must be provided in the bulk of the agreement to settle the terms.
Each individual offer to lease or letter of intent will be considered on its own merits and will take into account the surrounding circumstances, with the important consideration being whether the offer to lease or letter of intent is sufficiently certain.
What to do if you are asked to sign an offer to lease?
Prior to signing any offers or letters of intent, prospective tenants should conduct their enquiries into the property to confirm if it is suitable to their needs and obtain legal advice on the offer to confirm that it will not create a legally binding agreement to lease.
Miller Sockhill Lawyers, located in Maroochydore on the Sunshine Coast, can assist with reviewing any offers to lease or letters of intent and provide advice on whether your offer will be binding.