HOA Signed – What Now?

“What is, at its core a straightforward process, can often not run as smoothly as it should”.

You’ve just signed a Heads of Agreement (HOA) for a new office premises — what happens next?

It is important therefore to clearly understand the key steps.

You have paid the deposit (typically one month’s gross rent) and the landlord’s lawyers have (or should have!) provided the following documentation:

• The Lease Agreement
• The Incentive Deed (if an incentive applies)
• The Bank Guarantee Guidelines

The next steps are as follows:

1)      Lease Agreement

Most Tenants will generally engage a lawyer to review the lease and the incentive deed, which is something we always recommend. Good legal advice is cheap when it comes to protecting your interests! There will generally be a couple of rounds of ‘back and forth’.

Once the Lease Agreement is agreed between the parties, you (the Tenant) will execute first by signing three (3) ‘original’ copies. It is important to note that in Queensland leases longer than three (3) years are generally required to be registered at the Titles Office and require wet signatures. Leases under three (3) years are generally not required to be registered and can be executed electronically.

2)      Incentive Deed

If the Lease Agreement contains an incentive, then a separate Incentive Deed will be provided. This deed outlines/describes the incentive i.e rent-free/rent abatement, fitout contribution etc. It sits alongside the lease but is not typically disclosed to third parties. You will generally execute two (2) copies, being one for the Landlord and one for yourself (as the Tenant).

Incentive deeds can be signed electronically but only if the platform (e.g DocuSign) supports deed execution and witnesses where required (and if all parties consent).

3)      Bank Guarantee

The bank guarantee process can typically take anywhere from 1 – 4 weeks depending on the financial institution processing it. You should receive a bank guarantee guide from the landlord’s lawyers with instructions. This guide will confirm the following details:

• Landlord (Favouree) Details
• Tenant and Premises Details
• Exact Amount
• Any Additional Landlord Requirements

It is best to request a draft of the bank guarantee in the first instance. Provide this to the Landlord’s Lawyer and have them check the details are correct before requesting a final version (avoid double fees!).

4)      Insurances

Tenants are typically required to have the following insurances in place (as a minimum):

• Public Liability Insurance usually up to $20m. The insurance certificate must name the Landlord (and sometimes the property manager) as an interested third party.
• Plate Glass Insurance. This covers damage to glass windows, doors, and internal glass partitions within the Premises.
• Workers Compensation. The Landlord will usually require proof the Tenant holds current WorkCover Qld coverage.
• Contents Insurance (optional but advised). This covers the Tenant’s own furniture, equipment and fitout against, theft, fire, damage etc.

Conclusion

The Landlord will generally not provide access to the Premises until they have confirmation from their Lawyers that they have the original leases executed correctly (in triplicate), the original bank guarantee and the insurances required (by the Landlord).

Please contact the Caden Team with any further questions!