Commercial property offers higher returns on investment and longer leases compared to residential property, making it an attractive asset for many investors to add to their portfolios. But when it comes to managing the property and tenants, commercial landlords have more responsibilities and likely to find they need to invest more time in considering their rights and obligations before entering into a lease agreement. Here’s a brief guide to your rights and responsibilities as an industrial property landlord.

Your responsibilities

Your key responsibilities as an industrial landlord include:

- Maintaining the property in a safe and leasable condition

The legal obligations of both the landlord and tenant with regards to maintenance and repairs will be set out in the lease. In most cases, the tenant is required to maintain and repair the premises for the term of the lease and is responsible for the fit-out. However, any maintenance and repairs of major structural aspects of the building are the landlord’s responsibility.

- Making sure the use of the premises is legal

It is your responsibility as a landlord to ensure that your tenant’s use of the premises as allowed under the lease is permitted by law. You will need to get in contact with local council to get a clear understanding of the council planning and zoning requirements relevant for your building. Permitted use can have far-reaching implications so it is important to consider this clause carefully during the drafting of the lease documentation and negotiations with the tenant.

- Complying with the conditions set out in the lease and relevant legislation

There is state-specific legislation which governs retail leases, however industrial and other types of commercial leases are regulated by state-specific property and conveyancing Acts. It is important to note that industrial leases (being a type of non-retail lease) can be contracted outside of the property and conveyancing Acts, in which case the law does not interfere with the agreements between the landlord and tenant.

- Attaining appropriate insurance coverage

While tenants are usually responsible for paying insurance, it is important as a landlord that you select the policy so that you can make sure that it covers your assets and interests adequately.

- Ensuring fire safety and other certifications are obtained

You will need to ensure all certifications are in place such as fire safety, and may need to cover the cost of annual (or even bi-annual) inspections to ensure the premises is compliant with essential safety measures legislation.

Your rights

As an industrial landlord, it’s also important to know your rights. These need to be firmly established in the lease agreement in order to avoid any confusion and conflict during the tenancy. You should always seek legal advice from experienced industrial property leasing practitioners before taking out any legal action against a tenant. All industrial landlords have the right to:

- Receive the rent on time

- Hold a bank guarantee as security over the property

- Take steps to ensure the tenant complies with the conditions of the lease

Landlords generally have the right to inspect the premises (you can only enter the premises during the times set out in the lease) upon giving the relevant notice. In the case of an emergency you are not required to give notice.

Landlords have the right to forfeit a lease if a tenant has breached a condition of the lease. For example, if a tenant has demonstrated ongoing failure to pay rent you are likely to want to action to mitigate the damage to your bottom line. However, before taking steps that may permanently sever your relationship with the tenant, it is a good idea to consider whether the situation can be resolved through negotiation.

Need help?

If you require assistance with understanding your rights and responsibilities, reach out to the team at uTenant. We work closely with our partners at JLL, and will be able to provide you with the right guidance.

Published: 8 May 2018