Commonly used terms in a commercial residential or retail lease

Consumer Price Index (CPI)

The increase in the cost of living as measured against a fixed basket of goods over time within a Capital City. Often used as a benchmark for a Rent Review.

Gross Lettable Area (GLA)

Industrial property is measured by GLA. It is the entire area of a building measured from the outside walls.

Gross Rent

Rent payable including all outgoings except utilities, such as water use, electricity and telephones. Outgoings are paid by the owner.

GST

GST is a services tax currently charged in Australia at 10% of the value of applicable transactions. The ATO provides a series of guides on GST and property, which can be found here.

Head Lease

The primary Lease between a building owner and a Lessee.

Land Tax

A tax payable by the Owner applied annually on the value of the property.

Lease

The document detailing all the terms agreed between the Lessor and Lessee.

Lease Terms

Lease terms are the major points agreed between Lessee and Owner such as the Net Rent, length of lease, Option to renew, etc.

Lessee

The party named on the Lease liable for the rent and any other obligations under the Lease.

Lessor

The party offering the property for lease. Usually the owner of the property but in some cases a Lessee themselves offering the property under a Sub-lease.

Market Review

A rent review based on the comparable rents in the market for similar properties at the time of review.

Net Lettable Area (NLA)

Commercial property is measured by NLA. The measurement is complex, but a summary may be found here.

Net Rent

Rent payable excluding Outgoings and GST.

Option

The right for a Lessee to extend the Lease for a pre-agreed term.

Outgoings

Outgoings are typically paid by the Lessee and can include council rates, water rates, Strata Levies, insurances, Land Tax and management fees.

Pre-commitment

A contractual commitment to occupy space made before a building is completed or refurbished.

Rate per Square Metre (/sqm)

To compare properties equally a Rate per Square Metre is often quoted. A 100sqm office for rent at $40,000 per annum would have a Rate per Square Metre of $400/sqm.

Rent Review

A review of the rent usually applied annually during a Lease. Often in the form of a fixed percentage increase or applied at the prevailing CPI at the time of the review.

Stamp Duty

Stamp duty is a tax payable on the total value of a lease, property purchase, lease transfer, or lease assignment. A Stamp Duty Calculator can be found here.

Strata Levies

A quarterly fee paid as Outgoings to the Owners Corporation to maintain and insure a Strata Title building.

Sub-lease

A lease between an existing Lessee and a Sub-lessee. The Sub-lease is usually restricted by the terms of the Head Lease.

Sub-lessee

The party leasing the property from the existing Lessee.

Disclosure Statement

A summary of all terms and costs to the Lessee under the proposed Lease. Must be given to the Lessee within seven days of commencing negotiations.

Gross Lettable Area – Retail (GLAR)

Retail property is measured by GLAR. The measurement is complex, but a summary may be found here.

Outgoings

Outgoings in a Retail Lease are often comprehensive and can include council rates, water rates, Strata Levies, waste disposal, security, insurances, Land Tax, management fees. Any outgoings payable by the Lessee are detailed on a Disclosure Statement before a Retail Lease is signed.

Percentage Rent

A percentage share of Lessee turnover paid as Net Rent in a Retail Shopping Centre.

Promotional Levies

A percentage of Net Rent payable by a Lessee toward promotion of a Retail Shopping Centre.

Retail Lease

A lease governed by the Retail Leases Act.

Retail Leases Act

The Act governing the substance and form of all Retail Leases.

Retail Shopping Centre

A collection of retail tenancies as defined by the Retail Leases Act.

Share of Outgoings

A Share of Outgoings is paid by the Lessee in proportion to the Net Lettable Area of their tenancy compared to the Gross Lettable Area – Retail of the Retail Shopping Centre.

Floor Space Ratio (FSR)

The amount of building area that can be constructed on a given area of land. For example a 1,000sqm block with an FSR of 1.5:1 can have a building with a Gross Floor Area of 1,500sqm built on it. The actual FSR achievable is constrained by parking, setback and landscaping requirements, and may not equal the theoretical FSR.

Gross Floor Area (GFA)

GFA varies across Councils but is typically the internal area of a building less services, lifts, and in some cases parking.

Net yield

Return to the Owner after all Outgoings, expressed as a percentage of the purchase price.

Option

The right to purchase a property at an agreed price within a limited time period. A fee is usually paid for this right which is either forfeited to the Vendor if the purchase does not proceed, or applied toward the Purchase Price.

Purchaser

The party buying the property.

Strata Title

A form of title introduced in 1973 which gives an Owner title over a volume of air space and a share in the common property of a bulding.

Vendor

The party selling the property.

Yield

Return to the Owner expressed as a percentage of the purchase price.