INDUSTRIAL PROPERTY LEASING CHECKLIST (You can download a copy here)
This list is comprehensive but there will always be a unique checklist item for every new industrial lease that you enter into. Our checklist is designed to be a starting point from which you can take the necessary points when entering into the process of leasing any industrial property. Over analysis could also lead to you not concluding a transaction. Remember no leasing transaction is perfect!
We suggest following these essential check points prior to the leasing of any Industrial property and encouraged all industrial tenants to carefully evaluate their industrial property requirements prior to leasing a new factory or warehouse as follows:
- When do you need to occupy the new premises ?
- What is the preferred location/s in terms of your staff and customers?
- When do you need to hand over your existing premises to the previous landlord?
- How long will it take to transfer telephones and communications?
- What size office component do you require?
- What size factory or warehouse component do you require?
- What size (how many) ablutions and changerooms do you require
- What parking do you require?
- What additional requirements do you have e.g.
- Power requirements?
- Water supply
- Effluent handling facilities
- outside storage areas
- Spray booths
- flammable storage
- overnight accommodation for drivers
- Covered or raised loading
- Dock levellers
- No & height of doors
- floor loading capacity
- fire regulation and protection
- turning circles for trucks
- yardspace and yard surface
- height, stacking, column spacing
- facilities for the disabled
- Area to be leased
- What is the actual rentable area of the premises in square metres?
- Verify the rentable area of the premises in square metres by the landlord.
- Permitted Uses of the Premises
- What uses premises are permitted in the usage clause in the lease?
- Is the permitted real estate use clause broad enough for possible changes in the business?
- Is the permitted real estate use clause broad enough for potential lease assignments or subleases?
- Can uses be changed with landlord’s consent, which consent can’t be unreasonably withheld or delayed?
- Lease Period
- What is the commencement date of the lease?
- What is the termination date?
- What is the rental for the initial period?
- When, how and where is the rental payable?
- What is the annual rental escalation rate and when does it escalate ?
- Is there a penalty for late payment ?
- Operating costs
- Is this a gross lease (Landlord pays the rates, insurance and exterior maintenance, tenant pays for annual increases in rates and maintains the interior)?
- Is this a net lease (tenant pays the rates, insurance interior and exterior maintenance)?
- Is this a gross lease with a base rental being charged plus an amount in addition charged for operating costs. How does the base rental and operating costs escalate? (these leases usually
- allow for the base rental to escalate annually and a there is an amount budgeted for op costs annual increases adjusted by the actual amount they increase? What detailed reports does the
- landlord have to provide the tenant detail of the actual expenses?
- What is the base year for rates increases and when do these get passed onto the tenant?
- Are there security costs?
- Is the tenant responsible for the coast of drafting the lease? How much is it?
- Any other costs?
- Tenant Improvements
- What tenant installation will be necessary (T.I.) ?
- What is the cost? Who pays and how?
- How much time will it take to complete the tenant installation?
Repairs and maintenance:
- What responsibility does the tenant have for repairs or replacements (Typically the interior excluding plumbing)?
- What responsibility does the landlord have for repairs or replacements? (Typically the exterior, excluding plate glass and locks)?
- At the end of the tenancy, is tenant’s obligation to return the premises in same condition at the beginning of tenancy, excluding ordinary wear and tear? If so has a checklist with photographs
- showing any defects and condition at the lease commencement been prepared and sent to the landlord with proof of delivery retained by the tenant?
- Direct supply or individually metered?
- Method of computing and billing payment?
- Assignment and subletting:
- Is the landlord’s written approval required top sublet or assign the lease?
- Does the clause say the landlord cannot unreasonably withhold consent?
- Can the lease be assigned to affiliates of the tenant without landlord approval?
- Sale and Rebuild Clause:
- Is there a clause allowing the landlord to cancel the lease if it elects to sell or substantially rebuild the premises?
- If this clause is present, what is the notice period the landlord needs to give the tenant?
- Is there a right of cancellation for the tenant in the event of destruction?
- What obligation does the landlord have to rebuild?
- Does the tenant share in any proceeds from insurance?
- Indemnity and Disclaimer:
- Is the Indemnity mutual or tenant only?
- Waiver of claims mutual or tenant only?
- Does the tenant have a remedy period after notice of a breach?
- What remedies are available for breach?
- Option to renew
- Does the tenant have the option to renew the lease?
- How long is the renewal option?
- How far in advance must the option be exercised?
- How is rent determined for the renewal period?
- Right of first refusal or option for additional space in the building?
- What is the scope of any right of first refusal or option? How long does the tenant have before exercising the right?
- What is the amount of the deposit?
- Can it be in the form of a bank guarantee?
- Will the deposit be held in a trust account
- Is there interest on the deposit for the tenants benefit?
- Does the lease provide for the return of the tenant’s deposit within a set period after termination of the lease?
- Is a personal surety required?
- If so, is there a limit on the amount of the surety?
- When does the surety terminate?
- Rent Free Periods and Incentives:
- Will the landlord grant a free rent period?
- Does this reduce the total rental over the period or is it recouped later?
- Does landlord warrant that the premises are in compliance with applicable law? If tenant is obligated to comply with applicable law, does it exclude matters that should more properly be the responsibility of the landlord (e.g., asbestos problems, disability access etc.)?
- Is landlord obligated to comply with all laws applicable to its control of the building?
- Does the landlord give tenant electrical & plumbing compliance certificates upon occupation and expect the same from the tenant when they vacate the property?
- Does the landlord give the tenant an occupancy certificate?
- What insurance is the tenant required to maintain?
- What insurance is the landlord required to maintain?
- Has the tenant’s insurance agent reviewed the insurance requirements in the lease?
- Building Rules and Regulations:
- Are there specific rules and regulations in existence?
- Can the rules be changed without approval of tenant
- Is the landlord required to enforce the rules and regulations against other tenants
- Are there any rules that interfere with the expected operations of the tenant?
- Tenant documentation & Credit Checks:
- Landlords require copies of all Company Directors Identity Documents and proof of address for Fica purposes.
- Landlords require tenants consent to credit checks.
- Landlords require company or trust resolutions authorising signature of the lease, and or tenants are required to warrant that they are duly authorised to sign
Whilst every effort has been made to ensure the accuracy of the information contained herein, no liability can be accepted for any errors or omissions and Purchasers and Sellers are encouraged to verify facts prior to any transaction. These particulars are for information only and do not, in any circumstances, form part of any contract, either express or implied. GDP INDUSTRIAL PROPERTY or Guy de la Porte can and will in no way be held responsible for the interpretation or usage of the information detailed herein.
GDP Industrial Property is Cape Town’s longest serving specialist Industrial Property brokerage. Our main area of focus is the Airport Industrial Area and surrounding areas such as Epping, Ndabeni, Maitland, Parow Industria and Beaconvale.