Whether you are taking on your first office space or expanding to new premises, a commercial lease agreement governs the relationship between landlord and tenant for the duration of the lease. Unlike residential leases, commercial leases in South Africa are largely unregulated — which means the contract itself carries significant weight.
Key clauses every commercial lease must address
1. Rental amount and escalation
The lease must specify the monthly rental, when it is payable, and the annual escalation rate. Escalation is typically fixed (e.g., 8% per year) or linked to CPI. Always confirm whether the rental is quoted inclusive or exclusive of VAT.
2. Lease period and renewal options
The commencement date, expiry date, and any renewal options must be clearly stated. A renewal option gives the tenant the right — but not the obligation — to extend the lease at agreed terms. Ensure the notice period for exercising a renewal option is practical; missing it by even one day can mean losing the right entirely.
3. Permitted use
The lease will specify the permitted use of the premises. Trading outside that permitted use can entitle the landlord to cancel the lease. If your business may expand or change its activities, negotiate broader permitted use wording from the outset.
4. Deposit and guarantees
Landlords typically require a deposit (usually one to three months’ rental) and sometimes a bank guarantee or personal surety. Understand your exposure before signing — a personal surety makes you personally liable for the company’s obligations under the lease.
5. Maintenance and repairs
The lease should clearly allocate responsibility for maintenance. Typically, the tenant is responsible for day-to-day maintenance and the landlord for structural repairs. Vague wording leads to disputes. Insist on specific allocation and document the condition of the premises at commencement with a signed inspection report.
6. Assignment and subletting
Most commercial leases restrict the tenant’s ability to assign the lease or sublet the premises without the landlord’s consent. This is important if you anticipate a business restructure, sale of business, or need to sublet part of the space.
Common mistakes to avoid
Tenants frequently sign leases without understanding the full financial exposure, particularly around early cancellation penalties, reinstatement obligations, and personal surety. Having a lawyer review the lease before signing protects both parties.
At HvS Attorneys, we draft and review commercial lease agreements for businesses and property owners in Johannesburg. Contact us if you need assistance before you sign.
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