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Give your retail lease a new year 'health check'

We’re already one-twelfth of the way through 2018! How are those new year’s resolutions going?

In our last article, “Five New Year’s Resolutions for your retail lease”, we recommended the following resolutions we believe would ensure your lease is healthier and more financially secure in 2018:

  • Complete a retail lease health check
  • Monthly lease performance analysis
  • Establish an 18-month critical path for your lease
  • Know time-frames and processes for each lease event
  • Speak with a tenant side retail leasing specialist.

You can read a full copy of our previous article here.

If you haven’t started on any of these yet, we’d like to help you get started with a step-by-step action plan to complete the first, and what we believe is the most important, resolution on the list ‘Complete a retail lease health check’.

Set aside just 30 minutes of your day to complete the following five-point health check on your retail lease. It will help you to identify what opportunities and risks exist with your current lease as well as set out the steps you need to take to address these and potentially save your business money and make it more profitable.

Five-point health check

1. Locate your lease documents including the lessor’s (landlord’s) disclosure statement and any other lease documents that have been provided since you entered the lease e.g. Fit-out Incentive Deed, Amendments, etc.

2. Review each document. Jot down the key commercial and operational terms and make sure you are aware of the following items at a minimum:

  • Lease commencement and end dates, and length of term
  • Base rent at commencement
  • Annual rent increase method and amount for each year remaining on the lease
  • Is there an option of an additional term?
  • Other charges such as outgoings, promotional levy, etc.

3. Once you have reviewed these documents, create a critical path of lease events with dates identified on a timeline. Include dates for the next rent increase, when your lease ends, etc. and include the date windows of when events need to be actioned e.g. Notice to exercise option, when a market rent review can commence etc.

4. From this list, identify any opportunities to engage the landlord in negotiations around the terms of the lease e.g. market rent review or lease renewal, and ensure you familiarise yourself with the process for each event under both the lease, and the relevant retail lease legislation for your state or territory.

5. Record the critical dates in your diary for follow-up at the right times to give you the best opportunity to achieve a desirable outcome for your business.

By completing the above ‘health check’, you will have a clear picture of what can be done and when, and be well on your way to putting your business in the best possible position for 2018.

Armed with this document, we would also recommend contacting a tenant side leasing specialist. They will have the knowledge and expertise to advise you on the best ways to leverage the opportunities identified through your health check and provide the additional detailed analysis required to form the basis for negotiations with your landlord when the opportunities arise.

This article written by The Leasing Department was published in the weekly newsletter of the National Retail Association, National Retail Review, on Tuesday, 23 January 2018.

The Leasing Department is the leasing and tenancy consultant to the National Retail Association. NRA members can contact The Leasing Department by calling the National Retail Association hotline on 1800 RETAIL (1800 738 245) for a complimentary 20-minute consultation to discuss their retail lease.

Kyle Swain