Keeping our clients informed is important to us so we regularly publish our thoughts on topics that will be of interest to anyone involved with commercial property. We call them ‘insights’ and we hope you find them of interest.
A Business name as Lessee ?
Often we receive instructions to prepare a Lease where the Lessee (Tenant) is shown as a Business Name. Many small business owners identify closely with their Business name and want it to be displayed prominently everywhere possible. Unfortunately, this often extends to asking that the Lease be prepared in the Business Name.
This is not possible. A Lease creates an ‘interest in Land’ and (with the occasional rare exception) there are only two entities that can legally hold an ‘interest in Land’. They are: -
1)an individual; or
2)a Pty Ltd Company.
So when a prospective Lessee says that they want the Lease to be in the name of their Business, you probably need to dig a little deeper and explain that a Lease cannot be in a business name and ask whether they want it in their name as an individual or perhaps a Pty Ltd Company if they have one. It may turn out that the Company name is the same as their Business name but this is not generally the case.
If they say that they want the Lease in a Company name, obviously the issue of the Directors Personally Guaranteeing the obligations of the Lessee needs to be addressed.