Saving hassles when leasing out commercial property

Saving hassles when leasing out commercial property

April 27, 2016 Uncategorized 0 Comments

Attract prospective lessees by having your Council approval ready

 

MB Town Planning is sometimes approached by prospective lessees of commercial property.

However, when we investigate the intended use, the required building upgrade works and approvals are often too onerous for the lessee to deal with within a commercial time frame.

On those occasions we are left wondering why property owners have left their potential tenants in that situation.  When a commercial property is already leased but there is some possibility that the tenant may vacate, or when you are reaching the end of the current lease period, it may be worthwhile to check whether new tenants are likely to have problems and then seek to address those problems sooner rather than later.

Apply for generic use in advance

 

Property owners will often not seek consent in advance because they do not yet know what use the new tenant may propose. However, it may be worth applying for a generic use in advance. For example, the area upstairs from a shop might not have any clear consent history for its use.  The owner could seek consent for the use of that area for office purposes.  If a new tenant then wanted to use that area for retail premises, the consent process for the office will still be likely to be beneficial because in many cases there can be a change of use from office to retail without consent.

In any case, any problems (such as fire safety or access requirements) will have been addressed as part of that consent process.

Overcome five common obstacles by acting early

 

Development consent processes can take a very long time. Councils can sometimes take an unreasonable approach to the assessment of issues, such as car-parking requirements for example.  Obtaining consent can potentially take six months or even longer.  Potential tenants normally cannot wait that long and will look elsewhere. By getting your Council approval early, you can overcome the following five key obstacles:

 

1.  No approvals on Council records

In some cases, especially for older buildings, Council may not have any record of the original building being approved.  Council may not have any record of the use of the building being approved.

Council might have a record of only part of the building being used. A common situation is that the consent history may be clear for a ground level shop, but it might not be clear what the upper level is approved for.

The commercial building might have been internally split into different tenancy areas without any formal approval.

In many cases tenants are able to change, for example, one type of retail use to another without development consent.  Internal changes can often be carried out as either exempt or complying development (complying development is development that a private certifier can issue a certificate for).  Even some completely new commercial building work can be dealt with as complying development.

However, one of the requirements for development to be exempt or complying is that the current use must be lawful.  If Council does not hold records of any approval, then a lessee will be taking a risk in occupying the premises or carrying out what would otherwise be exempt development works (e.g. no structural shelving).

The risk is that Council may serve an order on the new tenant and owner to cease occupying the building.

In order to minimise those problems, and to have premises ready for a new use or internal alterations under complying development, the owner should consider obtaining development consent and/or a building certificate well in advance of a new tenant seeking to occupy the premises.

One of the reasons that the owner of the building might not seek consent or a building certificate in advance is that they may be concerned that Council will fine them for current unauthorised occupation; or that Council may order demolition of the building.

Each case should be considered on its own merits.  MB Town Planning can assist the building owner to understand the consequences of various courses of action.  However, in many cases Council will recognise that the lack of an approval record is likely a failure in their own record-keeping, especially if the premises are very well established.  It will then be a matter of negotiating an acceptable outcome through a development consent process.

Although each situation is unique, in many cases Council would be unlikely to issue a fine or to issue unreasonable orders on a well established use that does not have development consent, as long as the owner follows an appropriate pathway towards addressing the situation.

By ensuring that their property has consent for its building works and uses, property owners can more effectively lease out their property because the prospective tenants will be more readily able to carry out their use as exempt development or will be more readily able to obtain a complying development certificate.

 

2.  No copy of the consent for the building

It is surprising how often the owner of a commercial building does not have a copy of the relevant consents and other planning documents for their building (either electronic or otherwise).

Those consents are highly valuable, because if a prospective tenant wants to be sure that they can occupy and use the premises, they will want to see those documents.

If the owner of a commercial property cannot provide a copy of the consent documents to the tenant, the tenant or owner will have to obtain those documents from the Council.  That process can take up to 21 days – or even longer if the Council is not concerned about meeting statutory time frames.

Even if the tenant can view a copy of the approval documents, they might not be allowed to obtain a copy of the plans for copyright reasons.  If the owner is aware of that problem in advance at least they will have time to deal with it.

 

3.  Access issues

Older commercial properties frequently do not have access for people with a disability.  Even relatively ‘modern’ looking buildings might not have the proper level of accessibility.

Prior to 2010, this was usually not such a problem.  Someone seeking development consent could make a development application and include a vaguely written “unreasonable hardship” case.  It would then just be up to the Assessing Officer to make a judgement.

However, since 2010 the Access to Premises Standard has been introduced and imposes much more onerous access requirements than previously.

In the case of works carried out by tenants of multi-tenanted buildings there would normally be an exemption to onerous access requirements (although check with an access consultant or building regulations consultant to be sure).  However, in many cases it will be necessary to provide access for people with a disability to any part of a building where new building work is proposed.

A commercial property owner should check whether their property has any access issues and should engage an access consultant if there is any doubt.  If the commercial property owner does that sufficiently in advance of a new tenant seeking to take out a lease, they will have time to address those issues.  Even if a physical solution is not available, the property owner might be able to obtain approval for an “alternative solution” or some other approach to resolve the issue.

 

4.  Unclear hours of operation

An existing shop might have a proper consent, but that consent might specify restricted trading hours.  For example, the approved hours might be 9am to 5pm weekdays only.  Those hours might be sufficient for the current tenant, but a new tenant might want extended trading hours.

If commercial premises are within an established shopping street and are not near to residential uses, extended trading hours might not be a problem.  However, they still require consent.

In order to save time, the owner of the property should consider applying for the maximum reasonable extended trading hours.  For example, within a shopping street like King Street Newtown trading from 7am to 10pm daily might not be a problem for Council.  It would then just be a matter of making a development application for those extended trading hours.  Then, when a new tenant wants extended trading hours that will be less likely to be a problem.

 

5.  Fire upgrading requirements

In many cases, a new use of an existing commercial property will generate fire upgrading issues.

By engaging a building regulations consultant in advance, a property owner can reduce the likelihood that this will be a problem for a new tenancy.  The required fire safety upgrading works can be carried out in advance.

 

Conclusion

By getting your Council approval early, you can attract prospective lessees for your commercial property. Lessees can be assured that their intended use is permissible, or that consent for change of use can be easily obtained. Both property owners and lessees will benefit by having consent organised early.

MB Town Planning can help you obtain consent early by:

  • Analysing your current situation
  • Obtaining & reviewing consent records for your property
  • Briefing & engaging other required consultants
  • Providing a strategy to ensure that your premises are ready to lease to a wide range of potential tenants

MB Town Planning offers an initial consultation of half hour of Verbal Advice over the phone, plus 20 minutes preparation beforehand, for $210- plus GST, to discuss your commercial property needs.

During the initial consultation we help clarify issues and determine an appropriate course of action.  We can then identify the next steps and assist in implementing those.

Book an initial consultation to discuss your commercial property needs.




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