How does an equipment lease operate?
Who will assist me in negotiating the terms of the lease of premises?
Who pays for the preparation/assignment of the lease?
What does the lessor need to provide?
What do I need to know as the lessee?
Does the lease need to be registered?
What information do I need before signing the lease?
Do I need a solicitor?
How do I choose a solicitor?
How do I get the best from my solicitor?
A lease is a means of financing the purchase of cars, plant and office equipment. Lease terms can be for up to 5 years. The leased equipment is still owned by the bank or finance company, until the expiry of the lease term, at which stage you may be able to purchase the asset by payment of the residual value, decided on in the terms of the lease agreement. Lease payments are normally tax deductible.
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The terms of the lease are generally negotiated between the landlord and the lessee, or in some instances the solicitors of the two parties. Some of the main issues that need to be addressed in the lease are the term of the lease, the amount and frequency of the rent, details of the tenants responsibility for the property outgoings, permitted uses of the property, the option if applicable and the bond or bank guarantee if applicable. It is advisable to consult with a solicitor to assist you in negotiating the terms of your lease. If you need help in finding a solicitor you can get assistance from the Law Society.
In NSW the lessee pays for his own and also the lessor's reasonable legal costs for the preparation and assignment of the lease, this may also include the cost of any necessary special conditions. The exception to this is, that under the Retail Leases Act, it is illegal for a lessor to seek or accept payment for lease preparation expenses in connection with granting of a retail shop lease.
The lessor is responsible for checking that there has been sufficient information provided to enable the lessee to make a sound commercial decision. If the lease is for retail premises then the lessor needs to make sure the lease complies with the guidelines set out in the Retail Leases Act.
Most leases hold the lessee responsible for keeping the premises, fixtures and fittings in good repair. Many leases provide for payment of all or a portion of costs of rates, insurance, maintenance and so on. Make sure these are clearly stated and obtain an estimate of your share, as they are additional to your base rent. If you vacate premises before the lease expires you may still be liable for payment of rent and ongoing costs. The lessee should make the same inquiries he would make if he were purchasing the property.
In NSW if the lease period exceeds three years including any options, a memorandum of the lease needs to be prepared and registered with the Land Titles Office.
The lessor must provide the lessee with a signed copy of the lease. The lessor is also required to provide a Disclosure Statement to the lessee, at least 7 days before the lease is entered into. The statement should be read carefully as it contains important information such as the location and area of the premises, the lease term, outgoings and the permitted use of the premises. Both parties should make sure that they speak to their solicitor, accountant or business adviser before they sign the lease.
Most people know they need a solicitor to check through the lease on their business premises, but a good solicitor is aware of the economic, legal and financial environment affecting your business.
There is no single way of choosing a solicitor, but you may want to ask for recommendations from friends or business contacts or from your bank manager. The Law Society also can help you by recommending solicitors with particular areas of expertise or in a particular suburb. At the initial meeting you should establish their experience with businesses similar to yours, what special skills they can offer you, how you will be charged and who your point of contact will be. (Refer to Law Society website www.lawsociety.com.au.)