4 things commercial landlords must know

Commercial properties are an attractive investment option for private investors. While commercial properties typically yield high rental returns with long tenancies, there are several things landlords must know to ensure they make the most out of their investment.

1.Commercial lease differences

If you own a residential investment property you may be surprised to know there are some key differences between commercial and residential leases. Commercial leases:

  • tend to be more involved and complex than residential leases
  • are longer than residential tenancies; usually three to five years with one or two option terms of three to five years each depending on the space of the building
  • have a minimum and maximum lease term which can be negotiated by both parties
  • are harder to break than residential agreements
  • include annual rent reviews and increases
  • have the tenant pay for all outgoings, including rates, taxes, levies, water and utilities
  • have the tenant pay for all outgoings, including rates, taxes, levies, water and utilities
  • are negotiated between landlord and tenant to equally benefit both parties.

2. Lease Agreement

The lease agreement is a legal document clearly outlining the rights and responsibilities of the landlord and tenant. Everything should be spelled out in the terms of the lease agreement to avoid confusion during the tenancy and ensure maximum protection for both parties.

The lease agreement should include:

  • rent amount and how it is calculated
  • rent increases and when they will occur; increases are typically determined by a fixed price (expressed as a percentage), market review or Consumer Price Index (CPI)
  • outgoings (rates, taxes, levies, water and utilities)
  • lease start date and duration
  • option rights for extension or renewal
  • cost and responsibility repairs, maintenance and costs
  • sign-on incentives
  • fit-out responsibilities, approvals and expenses
  • allowable improvements
  • option to assign a lease (tenant transfers the lease to a new tenant)
  • make good provisions at end of lease (return property to its original state)
  • breaking the lease (ending an agreement early) and associated fees
  • security bond, either bank guarantee or personal guarantee
  • payment of landlord fees

Each state and territory have specific legislation on commercial and retail leases. You should seek advice from a commercial lawyer before drafting your commercial lease agreement.

3. Landlord responsibilities

As a commercial landlord, it’s essential you understand your main responsibilities before negotiating the terms of the lease agreement.

In most commercial leases the tenant is responsible for the interior of the rented premises, which includes the fit-out and repairs and maintenance of walls, floors, fixtures and inclusions throughout the lease term.

As the landlord, the exterior condition and structural integrity of the property is your responsibility, including repairs and maintenance of all structural aspects of the building. You must make sure the property is fit-for-purpose, meaning it suits the nature of the tenant’s intended business operations. And, you must ensure the tenant’s operations won’t impact the local area.

Additionally, your property must have adequate building insurance, comply with building codes and meet health and safety standards. Rates and body corporate fees must be current when the lease is signed and gas and electrical safety certified.

4. Ideal tenants

Like residential property investments, securing the right commercial tenant is key to maximising your rental return. Responsible and profitable tenants that pay on time and are a good, long-term fit for your premises are also key to your success as a commercial landlord. But finding potential tenants and appealing to their specific business needs can be challenging.

Local, experienced and well-networked commercial agents are best placed to introduce ideal tenants, identify any red flags, negotiate the terms of the agreement and help you fill your commercial space – allowing you to get on with building your property investment portfolio.



Need more information?

Stills Properties has been managing investment properties for Sydney landlords for over 30 years, contact us to discuss your investment property management needs.



Prepare your investment property for winter

Winter is here and high time to assess your investment property for any potential or existing issues before they worsen. Conducting a basic winter maintenance check will not only protect your tenant, it’ll also safeguard your property and finances.

Here are some rental property maintenance precautions that landlords and tenants alike should consider as we move into the colder winter months. 

Test smoke detectors

House fires are more common in winter. Some of the causes of these fires are faulty electric blankets, heaters and appliances. While tenants must check the condition of their heating and electrical appliances before use, a smoke alarm is necessary (and required by law) to ensure the safety of the occupants in case of a fire.

Tenants are responsible for replacing the batteries and testing the device, but they must not interfere with or remove smoke alarms, without a reasonable excuse. We suggest landlords schedule annual smoke alarm maintenance checks to ensure they are operating effectively and notify the tenants. Fire and rescue NSW recommend you:

  • Test your property’s smoke alarm batteries monthly
  • Remove dust from the smoke alarm every six months
  • Replace the batteries once a year
  • Remove and fit a new smoke alarm unit every 10 years.

Service air-conditioning

If you have one or more installed in your investment property, you should make a point to clean or replace filters at the beginning of each season. Filters may need more upkeep if tenants have pets, such as dogs or cats, allow dust and dirt build up, or are big air-con users.

Treat mould

The most common cause of indoor house mould is moisture. Warm, damp rooms such as the bathroom and laundry are particularly prone to mould, especially in winter. During the colder months, tenants may open windows less frequently, especially after taking a shower or using the clothes dryer. Windows and walls become wet with condensation. Conversely, leaving windows and doors open in the early mornings and evenings brings the cool, moist air inside.

The best way to tackle mould is to ensure there’s adequate ventilation available. Make sure windows and doors can be opened easily – preferably during the warmer, sunnier parts of the day – and consider installing an exhaust fan. Let tenants know what to look for and how they can also prevent mould.

Clean gutters

It tends to rain more in winter. One of the most common winter household maintenance issues is blocked gutters and downpipes. These issues can cause all sorts of damage to your property, including leaking, rotting, rising damp, water damage, mould and in severe cases, affect the property’s foundations. If untreated, a minor issue can quickly escalate.

But it’s easy to prevent by making sure your gutters are free from leaves, twigs and other debris, especially before winter. If you don’t trust yourself on a ladder, you may prefer to hire a handyman to do the job.

Prevent slipping

Moss, mildew and algae can build up in damp, shady areas, particularly in winter. This can make driveways, paths and outdoor patios slippery and dangerous. While tenants are responsible for maintaining these areas, you should make sure they know what to do before winter and check they’re doing this at each inspection.

While there are many off-the-shelf products available to prevent moss and algae build up the issue can be easily managed by:

  • keeping the areas clean and free from leaves and debris and anything that causes the accumulation of moisture and
  • occasionally brushing and sweeping the surface.

Ongoing, proactive maintenance of your investment property, particularly during the winter months will protect your asset in the long-term.

Need more information?

Stills Properties has been managing investment properties for Sydney landlords for over 30 years, contact us to discuss your investment property management needs.

Is it time to review your property manager?

The slowdown in the current property market has seen more people renting than before. While this is good news for landlords, supply is still out-performing demand, which means the rental market is in the tenant’s favour.

Currently, there are over 2,500 properties for lease on Sydney’s North Shore alone. Property managers certainly have their hands full, but this mustn’t excuse poor service and performance.

Now more than ever, you need to make sure your property manager stacks up in today’s uber-competitive rental market.

From tenant complaints to irregular inspections, there are several signs it’s time to review your property manager.

You have bad tenants or tenant issues. If you find your property manager is continually placing unsuitable tenants who don’t pay their rent on time, or at all, disrespect or damage the property or disregard the neighbours, it’s possible your property manager is not conducting thorough tenant screening and background checks. You should have them explain their tenant screening process and tell them the type of tenant you want in your property. And you should also have them explain their rental arrears management procedure, as missed rent is one of the biggest concerns for landlords.

Your property manager is always changing. High staff turnover is not uncommon in property management, but if you’re frustrated to have a different contact each time you call, chances are your tenant is equally as frustrated. Continuity is key to building trust. Tell your property manager you want to know who is looking after your asset and that you expect a dedicated contact. If they can’t promise this, find out why. You don’t want issues within an agency to impact your property in the long-term.

You have a junior property manager. At the very least, your property manager should be marketing your property, dealing with prospects and tenants, collecting rent, handling maintenance and repair issues and responding to tenant complaints. But they should also provide their expertise; such as property market information, investment property advice and updates on legislation changes. Expertise comes with industry experience, which is unlikely to come from a junior property manager.

You’re managing your property manager. A good property manager should be proactive. If you find you’re having to contact them about your property, request regular updates, confirm when the tenancy agreement expires, ask when the smoke detector was last checked, or make sure your property is covered by the right insurance, you need to seriously consider finding a new property manager. Your time is your money. You shouldn’t need to spend time to make sure they’re on top of things at your property.

You receive irregular inspection reports. Periodic, routine inspections tell you and the property manager the condition of your property, how the tenants are looking after the property, if there are any maintenance issues or repairs that need to be addressed and if there are any issues from the tenant. They’ll also tell you how many people are living in your property. If you’re not receiving regular inspection reports or a regular monthly report, you need to know why. This is an important task for your property and the tenant, which should happen at least once every six months.  

You don’t trust their accounting. Your property is a source of income, so you should feel confident you’re receiving every dollar you’re entitled to. Property managers are responsible for holding money for you and the tenants and ensuring the right funds go into the right accounts. Trust accounting requires expert attention to detail. If you have any doubts or questions about your property manager’s record-keeping and accounting processes, you must raise this with them directly and have them take you through it until you feel confident. While spending time to review your property manager might seem like a hassle in the short-term, making sure you have the best property manager looking after your investment will give you peace of mind and cost savings in the long-run.

Need more information?

Stills Properties has been managing investment properties for Sydney landlords for over 30 years, contact us to discuss your investment property management needs.