11 Jan 2013
Words Tim Admin

The Motel Lease - Other Important Issues

Our previous articles have considered the some important issues to be addressed in a Motel Lease. This article brings us to the conclusion of our detailed examination of the Motel Lease, however before we conclude, it is worth mentioning in summary some of the other issues that should be considered when negotiating a Motel Lease. 1. Insurances Generally the tenant will be required to take out and maintain certain insurances. For example: (a) public risk insurance; (b) plate glass insurance; (c) building insurance; (d) landlord's loss of profits insurance; (e) workers' compensation; and (f) all other insurances reasonably required in connection with the Motel 2. Liquor Licence If the Motel is licensed, the lease should contain provisions to protect the liquor licence. For example there should be requirements that that tenant: (a) strictly comply with the Liquor Act; (b) do all things necessary to keep the liquor licence current (including making applications for renewal, complying with all provisions of the Liquor Act); (c) forward a copy of all information supplied by the tenant under the Liquor Act to the landlord. 3. Damage Destruction or Resumption Generally if the Motel is destroyed or damaged the lease should require the landlord to, within a certain period of time, decide whether to reinstate or repair the Motel. There will be no obligation on the landlord to re-instate the motel and if the landlord decides not to reinstate the Motel then either party should have the ability to terminate the lease. If the landlord decides to reinstate the Motel, then the lease should contain obligations for those works to be completed in a timely manner. 4. Abatement of Rent If the Motel is destroyed or damaged the lease should provide for an abatement of rent and outgoings so that the tenant is not obliged to pay the rent or outgoings until the Motel has been reinstated. If the Motel is partially damaged, the lease should provide for a partial abatement of rent and outgoings. 5. Default As with any commercial lease, a Motel lease should clearly set out the circumstances in which the tenant will be in default of the Lease and the consequences of any such default. 6. What happens at the end of the Lease A Motel Lease should set out what is to happen at the end of the lease. For example, the tenant will generally be required to: (a) vacate the Motel; (b) leave the Motel in the condition required by the maintenance clauses; (c) transfer the business name and any licences (including a liquor licence) to the Landlord; and (d) provide to the Landlord the full trading figures for the Motel for certain period of time. If the Motel Lease requires the landlord to purchase the tenant's property at the end of the lease (as discussed in our last article) then it is important that the lease specify that the tenant must not remove that property from the Motel. As mentioned above, this brings us to the end of our detailed consideration of the Motel Lease. Our next few articles will consider the issues to be considered when purchasing a motel business (freehold and leasehold).