FAQs for Tenants

 What is the process when I find the right premises?

 

1.    Contact Nixon Industrial on (03) 9570 1300;

2.     Confirm the address of premises, your interest and request a Heads of
        Agreement (HOA);

3.     Provide your contact details (name, phone number and email);

4.     A HOA will be provided and you need to fill in the gaps (tenant’s details)
        and check all other information;

5.     If satisfied with the content please return and a fully typed version will  
        be provided for your approval and signature;

6.     We therefore require:

            Signed HOA returned to our office

            Deposit paid as per HOA

            Credit references provided as per HOA

7.     This HOA, if accepted by the owner and signed, we then arrange   
         the Lease (and Disclosure Statement) to be prepared by the    
         owners’ solicitor;

8.     Once the Lease is prepared in triplicate you are required to review     
         and sign and return all copies to our office as soon as possible with   
         the security bond;

9.     The owner then signs;

10.  Access to the premises will only occur if:

            Lease documentation is signed by both parties

            First months’ rent and GST is paid

            Security bond is paid

 

When do I get a key?

 

 
You will receive your set of keys and/or swipe cards on the lease commencement date that is stated in the Lease and when everything is signed by both the owner and tenant.

 

When can I start trading from the premises?

 

As the tenant, you can start trading on the Lease Commencement date stated in the HOA and lease documents.

 

Who do I ring when there is a repair required?

 

You can ring our property management department or the property manager of the building (if appropriate) to discuss the issue and they will be able to assist you with the correct procedure.

 

When do I pay my rent?

 

The rent is normally due to be paid on the first day of each month.  The first month's rent is paid in advance to Nixon Industrial at time of signing the Heads of Agreement (HOA).

You will receive a tax invoice from Nixon Industrial which will state the amount payable, the due date and the period for which the charge relates.

 

What does "re-instatement" mean?

 

This refers to the tenant removing all of the fixtures and fittings that they installed from the property and restoring it back to the initial condition as at the original lease date. However some aspects, like fair wear of a carpet is considered reasonable except in cases where leases specify replacement at certain times eg: exercising an option to extend the lease for a further term. 

 

What is the security bond?

 

This is a monetary amount which is held to secure the performance of the lease obligations by the tenant. This will usually be one to three month’s rent inclusive of GST or subject to the level of security provided. The money is held in an interest bearing account as required under the Retail Leases Act.

 

What is a bank guarantee?

 

The Retail Leases Act requires landlords to offer tenants the opportunity to pay a security deposit in cash or by bank guarantee. A bank guarantee is an irrevocable undertaking by an Australian Bank to pay upon demand.

A bank guarantee can be provided as an alternative to a security deposit but only if it is unconditional (Nil Expiry Date). Your bank can provide an unconditional bank guarantee.  If a bank guarantee is provided with an expiry date, Nixon Industrial will require it to be returned to the bank to provide a nil expiry date bank guarantee.

 

What is an Owners Corporation fee and what does it include?

 

Owners Corporation is the new term for Body Corporate.   

An Owners Corporation is a company appointed to manage the shared areas of a building or a number of adjoining premises. The owners corporation will collect charges for utilities, cleaning etc. for the common areas and will charge a portion to each premises as defined by the deed of incorporation.  The Owners Corporation charges will in most cases be 
chargeable to the tenant as part of the lease obligations.

Refer to the Owners Corporation Act 2006  www.legislation.vic.gov.au

 

What legal costs are involved in leasing a property?

 

The owner will have a lease prepared by their solicitor.  There are no legal costs related to the preparation of the lease for the tenant unless they hire a solicitor to review the lease document to verify the agreement being put in place between both parties is appropriate.

 

Why do I need to provide credit / business references?

 

Credit references provide some indication to the owner and Nixon Industrial that a potential tenant is reliable, timely, honest and trustworthy with regards to the payment of invoices and bills. The references could include, past landlord(s), regular business suppliers, audited financials and estate agents who you have leased premises from previously.

Once I have moved in who do I contact if I need to talk to someone?

 

Your property manager (the name and details will be provided in the welcome letter) is always available to assist.

If your query relates to any common property matters then it is best to contact the owners corporation (the company name and details will be provided in the welcome letter) directly.  

 

When do I pay my first rent payment if I have paid my initial deposit?

 

The first tax invoice will be sent midway through the first month of the tenancy.  Rent is payable in advance (not arrears).   Late fees may apply so setting up a direct deposit system is advisable.

 

When do I get a tax invoice ?

 

You receive a tax invoice for your rent, outgoings and the GST before the coming months bills are due.  If at any time you are unsure about the detail, please do not hesitate to contact your Property Manager as soon as possible.

 

What is an outgoing?

 

Outgoings are the expenses attributable to and necessary to maintain a functional property.  Most commercial leases require the tenant to reimburse the owner's outgoings. These are paid by the tenant in addition to the agreed rental.

For a 'gross lease', outgoings are included within the rental as a single payment.   There are no further outgoings for the tenant to pay as they are settled by the owner of the property other than such things as phone, electricity and water consumption.

 

What do outgoings consist of?

 

Property charges such as:

  •   Statutory charges (council rates, water rates, drainage charges); 
  •   Building operating costs;
  •   Insurance costs;
  •   Owners corporation fees if a strata title property.

 

Why do I pay outgoings?

 

Most commercial and industrial leases are based on the tenant paying a net rental plus outgoings and GST. The outgoings are paid for by the tenant as they are essentially the "running costs" of the premises.

 

Do tenants pay land tax?

 

Under the Retail Leases Act some properties as defined, are not required to pay land tax.  Nixon Industrial or your solicitor can provide more professional advice on land tax based on a single holding basis.

 

What is included under the term 'insurance'?

 

This includes the lessor's building insurance, public liability and plate glass insurances.

Additionally, the tenant is required to take out public liability and contents insurance as provided in the lease agreement.  For more specific information regarding insurance, contact your insurance provider.

 

What is maintenance?

 

The aspects of the premises that will fall under the category of maintenance will include:

         Air conditioning

         Fire services (Fire extinguisher)

         Gardens & Courtyard

         Amenities (Kitchenettes & Toilets)

         'General' maintenance - Gutter cleaning, rubbish removal, window cleaning

Refer to the lease or to the Owners Corporation for maintenance responsibilities regarding individual properties.

 

Goods and Services Tax (GST)

 

Goods and Services Tax is added to charges relating to all commercial property. Once registered, GST can be claimed back as part of the quarterly BAS Statement, depending on the business ownership and reporting structure. If you need specific information regarding GST on leased premises, speak to your accountant.

 

Where does GST come into it?

 

Nixon Industrial issues Tax Invoices and collects "consideration plus GST" from tenants on the behalf of owners.  Monthly statements are provided with the information necessary to complete BAS statements.  Monthly statements also serve as a Tax Invoice and set out the management fees and GST levied and collected/deducted from the income collected.

 

What about GST on Outgoings?

 

Current tax law has a special interpretation of leases and considers that any amount which becomes payable according to the terms of an agreement (lease) is to be considered "consideration for supply".

If under a lease a tenant is required to reimburse or pay an amount eg: council rates, then as soon as that payment is made by the tenant, that amount paid is deemed to be "consideration for supply".

As soon as payment becomes due by the tenant, under a lease it changes its nature under tax law interpretation. Accordingly technically, reimbursement of rates becomes "consideration of supply" and is legally indistinguishable from rent.

The tax law deems that the payment has been received by the landlord and 1/11th of the amount received is payable by the landlord as GST.

 

Essential Safety Measures & Fire Safety

 

Under the Building Regulations 2006, owners are required to provide a premises that complies with the Essential Safety Measures Legislation.   Premises are required to be inspected annually (some bi-annually) to ensure the premises remains compliant.

Should the premises be found to be non-compliant then significant fines may be imposed.

 

When and why do I have to provide directors guarantees?

 

Director's guarantees are there to provide additional security to the owner. In the event that the lease of a premises is under a company name and these are in place, then the directors who signed the lease are personally liable for all payments that are outstanding.

 

Do all directors need to sign the Heads of Agreement (HOA) and Lease?

 

In a technical sense, yes they have to.  If the lease in under a company name then the directors of that company must sign the lease agreement. This will depend upon the company's articles of association (does one director have the right to sign on behalf of the other directors?)

 

What is the Retail Leases Act?

 

The Retail Leases Act was put into legislation in 2003, it is designed to enhance;

a)     the certainty and fairness of retail leasing arrangements between landlords and tenants; and

b)     the mechanisms available to resolve disputes concerning leases of retail premises.

In the Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for;

(a)     the sale or hire of goods by retail or the retail provision of services.

Retail leases legislation applies to a retail premises lease used for the sale or hire of goods by retail or the retail provision of services and where the occupancy cost is less than $1 million per year.

Do I need a solicitor?

 

As a tenant, you legally do not a need a solicitor to lease a property. However for the purposes of understanding the legal documentation contained within the lease, we highly recommend you do have a solicitor review the documentation involved.

 

What is the minimum lease term allowed?

 

This will be determined by the owner, however under the Retail Leases Act, the minimum lease term allowed is five years. This can come in the form of a 2 x 2 x 1 year lease or a 3 x 2 year lease as examples. Short term leases (eg. 12 month lease) are acceptable but a waiver needs to be obtained and accepted by the Small Business Commissioner.  For further information visit 
www.sbc.vic.gov.au.

What is a Disclosure Statement?

 

The disclosure statement forms part of the lease and is a statement that is required to be completed by the landlord under the Retail Leases Act 2003. The disclosure statement outlines aspects such as:

            The landlords details

            The tenants details

            The details of the premises

            The retail shopping centre (if applicable)

            The terms of the lease

            The permitted use of the premises

            The occupancy costs

            The rent payable

            The outgoings and what they are

            Tenants fit out and/or refurbishment works

            Relocation/Demolition clause (if applicable)

            Additional Representatives (if applicable)

            The declaration by the landlord or landlords agent

How is the rent determined?

 

The rent is based on the comparable rents of other properties within the area that are of the similar size and structure. The rent is ultimately set by the owner on the basis of these facts and on the advice of the agent.

 

How do rent reviews work?  

 

Normally there is a fixed, CPI annual increase or market review at the end of the term.  However upon lease renewal (if any) the rent is determined at market levels.

 

Can I request the owners to carry out works during my lease term?

 

Yes you can but the details of the actual works including what needs to be done, time period, costs etc. needs to be correctly stipulated via a written request to the landlord which can then either be accepted or denied by them.

What are the steps involved if I want to renew my lease?

 

The lease will define if there is any option to renew at the end of the initial term.  The tenant must advise in writing their intention to exercise the option at least three months, but no more than six months before the date of expiry.

Once notice of exercise is reassured a new lease will be prepared and once again both owner and tenant will be required to show their acceptance by signing off as appropriate.  At renewal any variation to additional option terms can be included in the new lease.   Generally the new rental will be determined by a market review.

 

Disclaimer: Particulars herein are for information only and do not constitute any representation by Nichols Crowder.  Interested parties should make their own enquiries.