5 things to consider at the start of a leasing arrangement

Most businesses need to lease commercial or industrial premises to conduct their day to day operations from. Yet so many business owners find themselves trapped into lease arrangements they either didn't understand or they thought were just standard practice and didn't pay attention to. Below are 5 things business owners need to consider when starting a lease arrangement:

1. Outgoing inclusive or rent plus outgoings. Most leases have the tenants pay the outgoings (land tax, water rates, council rates, etc) and not knowing the estimated outgoings can leave a big dent in the cash flow of a business.
2. Rent in advance plus security bond. The amount that needs to be paid upfront maybe much higher than just one months rent as the lease agreement would specify the amount of rent to be paid in advance and the security bond that needs to be paid.
3. Annual rent review. Just because you are signing a lease for x amount of years does not mean that your rent is going to be fixed for the x amount of years. Commercial leases normally have an annual rent increase percentage by which the rent is going to increase.
4. GST inclusive or plus GST. Many commercial landlords are registered for GST and that means they will have to charge you GST. Paying attention to and understanding if the rent is including GST, plus GST or owner not registered for GST is very important.
5. Set up and modifications. Most businesses would need to make certain changes to the premises to suit their business and it is highly recommend that you check what the lease says about the process of such modifications and what happens when your lease ceases.

BY SURESH RAJANI

Suresh Rajani is the Business Leader at TAX FIRST (An accounting and business advisory firm)

www.taxfirst.com.au