Preparing leased premises for a business may involve construction, installations and other decisions closely tied to the property. Reviewing the lease therefore needs to include the investment you plan to make. It helps to understand who has authority to enter into the agreement, what use is contemplated, which changes are authorized and how responsibilities are allocated. Reviewing these matters identifies the agreements and questions that need clarity before improvements begin.
Identify the property and who can enter into the lease
Start by identifying the property's owner and reviewing the authority of the person who will sign. When a representative is involved, the available documentation should allow the scope of that person's authority to be assessed. A positive commercial discussion still leaves these checks open if the supporting documents have not been gathered.
Any encumbrances or conditions affecting the property that may be relevant to the lease also deserve review. The purpose is to understand whether anything needs clarification and how it relates to the proposed agreement. Documents should be assessed in the context of the particular transaction and the intended use of the premises.
Connect the intended use with the proposed improvements
Describe the business activity and the changes the space will need. That detail makes it possible to consider whether the intended use requires additional permits or authorizations and which matters need technical or legal verification. The physical ability to accommodate a business does not resolve every question about operating it there.
Clarify which works the agreement contemplates and how the relevant authorization will be documented. A clear description of the improvements helps both parties understand what is proposed and what remains open. If the project changes while the premises are being prepared, that change also needs to be considered in relation to the agreement.
Consider the lease duration alongside the investment
The conditions for remaining in the premises are part of the investment assessment. Consider how the proposed lease duration relates to preparing the space and meeting the business's needs. It also helps to understand what the agreement says about continuation and termination, and which points need a more precise definition.
This exercise helps you assess the relationship between the resources you will commit and the conditions under which you can use the property. Expectations about recovering the investment need their own assessment and assumptions. The lease provides conditions relevant to that analysis, while the viability of the business depends on additional factors.
Clarify what happens to improvements and at handover
Before starting works, review what is agreed about the improvements when the lease ends. Whether they remain or are removed, the handover conditions and any financial arrangements should be clear in the negotiations. These matters need to be considered in light of the contract and the nature of the proposed works.
Organize authorizations, each party's commitments and outstanding questions in a file that supports the review. At STRATA, we assist with legal analysis and contracting for real estate transactions, connecting the property's conditions with the business decision. The scope of that work is defined by the specific questions raised by the proposed lease.
Original STRATA content
A guide developed from STRATA’s own social media content, expanded to help you prepare for a review of your property.
General information. Each transaction must be assessed in light of its documents and circumstances.