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Industrial Property Leasing Checklist

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Industrial Property Leasing Checklist

Our Industrial Property Leasing Checklist is comprehensive but there will always be a unique checklist item for every new industrial lease that you enter into. Our checklist is designed to be a starting point from which you can take the necessary points when entering into the process of leasing any industrial property. Over-analysis could also lead to you not concluding a transaction. Remember no leasing transaction is perfect.

We encourage all Industrial tenants to carefully evaluate their industrial property requirements prior to leasing a new factory or warehouse.

  • When do you need to occupy the new premises?
  • What is the preferred location/s in terms of your staff and customers?
  • When do you need to hand over your existing premises to the previous landlord?
  • How long will it take to transfer telephones and communications?
  • What size office component do you require?
  • What size factory or warehouse component do you require?
  • What size (how many) ablutions and changerooms do you require
  • What parking do you require?
  • Power requirements?
  • Water supply?
  • Effluent handling facilities?
  • Outside storage areas?
  • Spray booths?
  • Flammable storage?
  • Overnight accommodation for drivers?
  • Covered or raised loading?
  • Dock Levellers?
  • Number & height of roller shutter doors?
  • Floor loading capacity?
  • Lighting?
  • Fire regulation and protection requirements?
  • Turning circles for trucks?
  • Yards space and yard surface?
  • Height, stacking & column spacing?
  • Facilities for the disabled?

LEASE AGREEMENT

  • Area of the leased premises?
  • What is the actual rentable area of the premises in square metres?
  • Verify the rentable area of the premises in square metres by the landlord.
  • Permitted use of the premises?
  • Is the permitted use clause broad enough for possible changes in the business?
  • Is the permitted use clause broad enough for potential lease assignments or subleases?
  • Can uses be changed with landlord’s consent, which consent can’t be unreasonably withheld or delayed?
  • Lease Period?
  • What is the commencement date of the lease?
  • What is the termination date of the lease?

RENTALS

  • What is the rental for the initial period?
  • When, how and where is the rental payable?
  • What is the annual rental escalation rate and when does it escalate?
  • Is there a penalty for late payment?
  • Operating costs?
  • Is this a gross lease where the Landlord pays the rates, insurance and exterior maintenance, tenant pays for annual increases in rates and maintains the interior?
  • Is this a net lease where the Tenant pays the rates, insurance and the interior/exterior maintenance?
  • Is this a gross lease with a base rental being charged plus an amount in addition charged for operating costs? How do the base rental and operating costs escalate? These leases usually allow for the base rental to escalate annually and there is an amount budgeted for operating costs annual increases, then adjusted by the actual amount they increase?
  • What detailed reports does the landlord have to provide the tenant of the actual expenses?
  • What is the base year for rates increases and when do these get passed onto the tenant?
  • Are there security costs?
  • Is the tenant responsible for the cost of drafting the lease? How much is it?
  • Any other costs?
  • Tenant Improvements – is there a Tenant Installation Allowance (TIA)?
  • TIA – What is the cost? Who pays and how?
  • TIA – How much time will it take to complete the tenant installation?

REPAIRS & MAINTENANCE

  • What responsibility does the tenant have for repairs or replacements?
  • What responsibility does the landlord have for repairs or replacements? 
  • At the end of the tenancy, is it the tenant’s obligation to return the premises in the same condition that it was in at the beginning of tenancy, excluding ordinary wear and tear? If so, there needs to be a checklist with photographs showing any defects and the condition of the premises at the beginning of the lease. This is then sent to the landlord with proof of delivery retained by the tenant.

UTILITIES

  • Direct supply or individually metered?
  • Method of computing and billing payment?

ASSIGNMENT OR SUBLETTING 

  • Is the landlord’s written approval required to sublet or assign the lease?
  • Does the clause say the landlord cannot unreasonably withhold consent?
  • Can the lease be assigned to affiliates of the tenant without landlord approval?

SALE & REDEVELOP CLAUSE

  • Is there a clause allowing the landlord to cancel the lease if it elects to sell or substantially rebuild the premises?
  • If this clause is present, what is the notice period the landlord needs to give the tenant?

DESTRUCTION

  • Is there a right of cancellation for the tenant in the event of destruction?
  • What obligation does the landlord have to rebuild?
  • Does the tenant share in any proceeds from insurance?

INDEMNITY & DISCLAIMER 

  • Is the Indemnity mutual or tenant only?
  • Waiver of claims mutual or tenant only?

BREACH

  • Does the tenant have a remedy period after notice of a breach?
  • What remedies are available for breach?

OPTION TO RENEW

  • Does the tenant have the option to renew the lease?
  • How long is the renewal option?
  • How far in advance must the option be exercised?
  • How is rent determined for the renewal period?
  • Right of first refusal or option for additional space in the building?
  • What is the scope of any right of first refusal or option? How long does the tenant have before exercising the right?

SECURITY DEPOSIT

  • What is the amount of the deposit?
  • Can it be in the form of a bank guarantee?
  • Will the deposit be held in a trust account or an interest bearing account?
  • Does the lease provide for the return of the tenant’s deposit within a set period after termination of the lease?

SURETY

  • Is a personal surety required?
  • If so, is there a limit on the amount of the surety?
  • When does the surety terminate?

RENT FREE PERIOD & INCENTIVES

  • Will the landlord grant a free rent period?
  • Does this reduce the total rental over the period or is it recouped later?

LEGAL COMPLIANCE

  • Does the landlord warrant that the premises is in compliance with applicable law? If the tenant is obligated to comply with applicable law, does it exclude matters that should more properly be the responsibility of the landlord e.g. asbestos problems, disability access etc.
  • Is the landlord obligated to comply with all laws applicable to its control of the building?
  • Does the landlord give the tenant electrical & plumbing compliance certificates upon occupation and expect the same from the tenant when they vacate the property?
  • Does the landlord give the tenant an occupancy certificate?

INSURANCE

  • What insurance is the tenant required to maintain?
  • What insurance is the landlord required to maintain?
  • Has the tenant’s insurance agent reviewed the insurance requirements in the lease?

BUILDING RULES & REGULATIONS

  • Are there specific rules and regulations in existence?
  • Can the rules be changed without the tenant’s approval?
  • Is the landlord required to enforce the rules and regulations against other tenants?
  • Are there any rules that interfere with the expected operations of the tenant?

FICA DOCUMENTATION & CREDIT CHECKS

  • Landlords require copies of all Company Director’s Identity Documents and proof of address for FICA purposes.
  • Landlords require the tenant’s consent to do credit checks.
  • Landlords require company or trust resolutions, this proves that the signatory of the lease is duly authorised to do so.