What should be determined before concluding a lease agreement?
Before the tenant concludes a contract with the lessor of a warehouse or industrial building, they should take notice of several important things. Prior to signing the contract, it is worth to carefully analyse it in order to prevent mistakes that might severely affect the business in the years ahead.
What is the exact subject of lease
The contract specifies the surface area, location and the number of the land and mortgage register. If only part of the property is leased, the contract should indicate its size in square metres or point to the specific rooms included in the lease. Forgetting to specify the area of the lease subject is a common mistake made by parties to lease contracts.
The lease term
Another important information contained in the contract is the lease term. The provisions should precisely specify the dates of its start and end. This section should also indicate how soon before the expiration of the contract the tenant is required to inform the lessor of its extension. This is very important information, which affects aspects such as moving the business to another location without bearing additional costs. It is important to note that the lease term affects other provisions of the contract, such as the amount of rent. The longer the company plans to remain in the given location, the greater the potential for negotiations.
The amount of rent
A lease agreement always involves payment – the tenant is required to pay a specified amount of rent. The amount depends on several factors, such as the location of the property, the surface area of the leased space and the type of the building: BTS, industrial building or other. The amount is also a result of the arrangements made with the owner of the building during the negotiations. If the rent is paid in a currency other than the Polish zloty, the contract should specify the method of converting the amount. For example, the rent might be paid in Polish zlotys after converting an amount in euro according to the average rate of the National Bank of Poland on the first working day of the month for which the rent is paid.
Pay attention to:
- The day of the month by which the rent must be paid
- The penalty for a delay in payment
Service charges and others
The monthly amount of rent should be increased by service charges, which include all services related to the maintenance of the warehouse facility and the common areas in the park, such as security, removing snow, cleaning and conservation. Other fees that must be taken into consideration are utility charges, such as charges for electricity, water and telecommunications. More information on fees and the costs of lease is given below.
The cost of the above services are billed in two ways:
-by including them into the amount of rent,
-as a lump sum for the services. The tenant pays a fixed monthly lump sum for the services. Only at the end of the year the actual costs borne by the lessor are settled with the tenant.
Finishing the rooms, structural changes and additional installations
The provisions of the agreement determine to what extent and under what conditions the tenant is allowed to introduce structural changes or modify the installations. The contracts should also stipulate that the lessor has the right to carry out repairs and structural and architectural changes that are necessary for the proper functioning of the building or the leased rooms. This might often entail the need to ensure the safety of the persons using the leased space or remove any incurred damage. As such repairs do not require the consent of the tenant, it is important to remember that they follow from the contract.
It is worth determining what insurance is required of the property owner and the tenant. The most common provisions in this regard are:
- The lessor undertakes to insure the lease subject against fire, storms and floods at their own expense.
- Movable property owned by the tenant and brought by them to the area of the lease subject should be insured by them at their own expense.
Termination of the lease contract and return of the lease subject
The agreement specifies the exact date by which the tenant should vacate the building. If the contract is to end on the agreed term, it is important to agree on how soon the tenant must inform the property owner of this decision. The contract also provides for the right to withdraw from the lease without the period of advance notice in cases specified by the Civil Code and where the tenant does not comply with the agreed rules, which must be understandable and transparent for the tenant.
Pay attention to:
The notice period.
The rules for the return of the lease subject.
The condition required of the returned property.