commercial property management, 008

FAQs

Here are some common questions asked of me by commercial property managers during my consultancy work, together with my answers:

When you prepare a lease renewal document and attach it to the original lease for signature, do you also need to update the original disclosure statement?

Answer:

For all retail leases, the Schedule 3 Renewal of Lease Disclosure Statement must be prepared for a renewal of lease. In addition, it must be provided to the tenant 21 days prior to the expiry date of the current lease.

It is recommended to include the Renewal of Lease and the Schedule 3 Renewal of Lease Disclosure Statement together with the current Lease and Disclosure Statement and any other lease documentation which may be applicable, such as an Assignment of Lease or a Variation of Lease. In this way you may ensure that you have the entire chain of lease documentation.

Please note that the Schedule 3 Renewal of Lease Disclosure Statement is a prescribed document included in the Retail Leases Regulations 2013. It may be obtained from www.legislation.vic.gov.au under Statutory Rules.

 

Are you able to explain why there isn’t much included on the Renewal of Lease Disclosure Statement? Don’t we need to include updated outgoings estimates and rental figures?

Answer:

Under the Retail Leases Act 2003 the landlord is required to provide an annual statement of outgoings to the tenant. Notwithstanding that, however, the instance of a renewal of lease does provide a ready opportunity to include a renewed statement of outgoings to the tenant. The WendyWho? store sells a useful MS Word template for this.

 

We are invoicing a tenant for water usage and rates and then paying the authority directly. The landlord does not receive any reimbursement for the charges because he does not pay them. Should I charge GST on top of the water usage and rates even though it’s not a reimbursement?

Answer:

Refer to the landlord’s tax accountant. In my practical opinion, however, this is a reimbursement. You are acting for the landlord under the terms of a management authority which should include services such as payment of outgoings and invoicing of the tenant for reimbursement of same. If the landlord is registered for GST, then GST should be added to the amount of the non-taxed water rates when the tenant is invoiced.

If a lease commenced in February and is due for a CPI increase, should I wait for the CPI to be released for that quarter before making any rent adjustment?

Answer:

If the rent review date is in February, then the annual CPI movement for the quarter ending on the 31st of December of the preceding year is to be used. This is generally released late in the following January. If the tenant has already been issued with a tax invoice for February by that time, a back-dated adjustment from the review date will need to be completed prior to issuing the March invoice. Refer to the Past & Future Releases dates on the Australian Bureau of Statistics’ website for the quarterly CPI figures.

 

A CPI rent increase took place and an adjustment amount was invoiced along with the increased rental. The tenants have never paid the adjustment amount but pay the correct rent. Where do we legally stand given that rent has not been paid in full?

Answer:

In this instance it would be best to advise the tenant of the CPI rent review in writing, at the same time including an invoice for the revised rental and for any necessary adjustment. Alternatively, inform the tenant that future tax invoices will reflect the reviewed rental. A template letter for this purpose is also available from the WendyWho? shop.

Subsequently, follow up with the tenant to confirm that records have been updated and that any bank direct debit payments have been adjusted to reflect the review. If the tenant has still not paid up, just follow up as you usually would with rent arrears.

In practice, situations like these ordinarily arise due to a lack of communication or to miscommunication. Touch base with the tenant to get the tenancy back on track.

Is it only after 14 days of arrears rental that you can serve a Notice to Quit?

Answer:

Refer to the lease for each tenancy because lease clauses can and do vary. Determine whether the lease is retail or non-retail.

The term Notice to Quit is not terminology used in most commercial property management circles. There are some prescribed documents available which are Notices of Breach to be served on tenants to remedy breaches which include stipulations as to the timing of the notice. Notices are to be served in line with the terms of each lease—the lease is the instruction book.

Best practice in situations of tenant breach is to refer the situation to the landlord’s solicitor for advice and perhaps action.

Contact

If you have an enquiry or question, please fill in the contact form below or email me directly and I will get back to you shortly.
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I look forward to working with you.

Call ​(03) 8317 6623

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