If any business is to operate efficiently as an ongoing concern, it needs to rely on a certain amount of consistency. For example, if it is a "bricks and mortar" operation, then it will need access to its rented premises, reliable services and trustworthy staff. Most of these factors are covered by a legal agreement of some sort which, from time to time, will need to be renewed. Yet such a renewal should not be treated with complacency, as if attention is not given to detail, a disaster could ensue.
If you are the owner or manager of a business like this and you're approaching a lease renewal date, why do you need to be particularly careful to check all the details?
Take the case of a retail operation that is located in a busy shopping centre. There may be dozens of other units within this centre and most of them may be occupied by a business that is not in direct competition. All is well and good in this situation, as it presents a stable trading environment and will allow this retail operation to be successful.
However, as the lease renewal date gets closer, it's important for the leaseholder to check the fine print very carefully. There may be a number of vacant units within the shopping centre and the property manager is taking steps to market their availability. It's important to make sure that the current level of exclusivity is maintained, and this must be carefully written into the lease.
Case in Point
In a fairly recent case, one tenant found themselves in a similar position and learned a hard lesson when they failed to check the small print. They thought that they had addressed the issue of exclusivity, but one word – Independent – was to be their downfall.
The property management company allowed a competitor into the shopping centre after the lease was signed. However, this new business was part of a retail chain and not determined by the appeal court to be "independent," like the appellant. The small business lost its case, and due to a significant slowdown in its turnover was forced to default on its rent and lose its right to trade.
Attention to Detail
Make sure that you get a good property lawyer on your side whenever you deal with matters like this. There's a lot at stake and you could lose your trading advantage quite easily.Share