Can a lease letter work after a lease agreement comes into effect? LOO was a binding agreement that recorded the intention of the parties to establish and lease, under certain conditions, a Masters Store on the Strathdale site and to enter into a formal agreement on the lease agreement on the basis of the Woolworths Standard Form Agreement (AFL). For advice on negotiating a lease, please contact Laura Scotton. Considerations that should be addressed in a lease agreement include a lease, plans and specifications, a copy of the subdivision plan (if any) and details of other „leases“ or similars related to the lease agreement. As we have seen, an AFL is often more complicated than the eventual lease and negotiations for both documents can take several months depending on their complexity. One option that the parties often turn to is the conclusion of a shorter, less formal document, which briefly outlines their agreement. This is often referred to as the Heads of Agreement (HOA). There are a large number of disputes related to leases, particularly where premises are „built for the ends.“ Such litigation is a common practice, as both parties suffer considerable harm if the building does not proceed as intended by the parties. For example, if the building is delayed for any reason, the proposed tenant may have to find alternative premises with a short-term lease, which is expected to result in significant costs. Another risk is that the building cannot be built to the requirements of the proposed tenant and therefore not be useful. It is customary for quarrels to focus on the question of what was to be built and what was actually built. Well-developed agreements can help you reduce these risks. Typically, an AFL is structured to settle contractual obligations until the lease begins.
As such, there is usually a clause stipulating that the AFL contract is terminated at the beginning of the lease. While this seems acceptable in principle, there may be unintended consequences. The lessor may have had obligations within the AFL to complete the building and, unless there is an express requirement that these obligations be included in the lease, they are no longer applicable. There are many other similar practical and business provisions that must be agreed upon for registration in the AFL, but which are often ignored when negotiating the terms of the future lease. Caveat emptor. The parties should take due account of the scope of the „comprehensive agreement“ clause in the AFL or the lease.