Exercising the options on your lease
Like me you might know Jordons Seafood Restaurant at Darling Harbour as arguably one of the premier seafood restaurants in Sydney. It was certainly in an ideal location with patrons able to bask in the ambiance of the passing parade, the sunshine and dine at the same time. I have great memories of meals there over the years.
It surprised me to see that they have closed their Darling Harbour restaurant, and are hoping to open at another location which is still to be advised. I was even more surprised to find out that they had wanted to stay in their location but had not been able to do so and that it arose from issues with their lease.
Their lease had come to an end but had an option for them, if they exercised it, to stay on for a further term of another 20 years. The option was for a lease on the same conditions. They did not exercise their option properly and the Courts determined that their lease was at an end. Jordons learnt the hard way that the requirements for exercising the options were very important.
Jordons had recently spent a lot of money, over $1,000,000, on renovations and improvements, and were a Sydney icon at that location. The end of their lease will mean they will not see a return on this investment.
Every lease includes when the option is to be exercised and how the option is to be exercised. If it is not done correctly and strictly in accordance with lease then the landlord does not have to agree to give you the further term. So when the lease ended if the option had not been exercised properly then you might have to move.
The rent will be determined for the first year of the new term under the same previously agreed upon terms. Sometimes you can have the rent worked out before you exercise the option which will mean you may not exercise the option if the rent is going to increase by a large percentage. One other thing about exercising an option is at you must not be in breach of your lease if you want to exercise the option.
Click here to read the fiull account of the Jordons case.
What does this mean for you?
Well firstly, if you enjoyed going to Jordons you will need to find somewhere else to satisfy your crustacean cravings until Jordon’s finds a new premises and recommences operation. But secondly, and most importantly, you need to ensure that you exercise your lease option on time and correctly. If you are not sure of the correct requirements, seek advice. A little bit of money now can save you a lot of money in the long run. You most likely spent a lot of money getting your business premises fit out properly, and have considerable goodwill attracted to your location. Don’t put yourself in a position where you have to close your doors and shut up shop!
As for me, I’m off to Cockle Bay to check out Nick’s ….
For further information, contact the Commercial Business & Property Team
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