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Economics of Commercial Leasing - Not Just a Legal Issue
Friday 21 February 2014

In commercial leasing practice the structuring of the deal may involve fit out incentives, plus other add on benefits that may sweeten the deal. This may create a difference between the “face rent” on the lease and the “effective” rent that underlies the transaction. That is why it is a good idea to get your lease checked by an accountant and a valuer. The economics of commercial leasing present many challenges for the unwary.

This paper discusses:

 The broad range of rental concepts including “face” and “effective” rent

 Market Rent (Effective Rent) as envisaged by Retail Shop Leases Act 1994

 Understanding the underlying costs of a commercial leasing transaction

 Understanding the accounting issues when incentives are provided to enter a lease

 Understanding the commercial implications of a market rent review clause

 Working out the market rent and obtaining valuations