At LegalVision, we know that retail leasing can be confusing, particularly when you have no commercial experience. This handy guide sets out five essential things you MUST know before entering into a retail lease.
1. Know the Retail Lease Legislation and Determine if it Applies to Your Lease
Each State and Territory in Australia has specific retail lease legislation as follows:
- New South Wales: Retail Leases Act 1994 (NSW)
- Victoria: Retail Leases Act 2003 (Vic)
- Queensland: Retail Shop Leases Act 1994 (QLD)
- Western Australia: Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)
- South Australia: Retail and Commercial Leases Act 1985 (SA)
- Tasmania: Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (Tas)
- Northern Territory: Business Tenancies (Fair Dealings) Act 2002 (NT)
- Australian Capital Territory: Leases (Commercial and Retail) Act 2001 (ACT)
(collectively, Retail Lease Legislation).
Importantly, you should be aware of the Retail Lease Legislation applying to your lease and ensure that your Landlord is compliant.
Note that each piece of Retail Lease Legislation contains a definition of what a “retail lease” is and that this is a threshold question. Below we explain some of the key compliance issues tenants should look out for.
2. Can the Landlord Charge Lease Preparation Fees
Whether the landlord can charge lease preparation fees varies in each jurisdiction. A summary of the position in each state and territory is as follows:
New South Wales: Retail Leases Act 1994 (NSW)
New South Wales leasing legislation prohibits lease preparation expenses. However, there is a loophole in that the Landlord can charge for amendments or changes to an existing lease under section 14 of the Retail Leases Act.
Victoria: Retail Leases Act 2003 (Vic)
Under section 51 of the Retail Leases Act, a tenant is not liable for the landlord’s lease preparation or mortgagee’s consent expenses but may be liable for costs on the assignment of the lease.
Queensland: Retail Shop Leases Act 1994 (QLD)
While the tenant is not liable for the landlord’s lease preparation expenses, the tenant may be liable to pay survey fees, mortgagee’s consent fees, lease registration fees and assignment of lease fees or a variation of lease/consent to sublease.
Western Australia: Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)
In Western Australia, a retail tenant cannot be held liable for the Landlord’s lease preparation expenses or mortgagee’s consent, but may still be responsible for assignment of lease expenses under section 14B of the Commercial Tenancy (Retail Shops) Agreements Act.
South Australia: Retail and Commercial Leases Act 1985 (SA)
South Australia is the only State where a tenant can be liable for lease preparation expenses. Here, a tenant can be liable for up to half of the landlord’s retail lease preparation costs (including mortgagee consent fees) plus stamp duty and government fees.
Tasmania: Fair Trading (Code of Practice for Retail Tenancies) – Regulations 1998 (Tas)
In Tasmania, both parties must pay their costs of entering into the lease, but the Landlord can pass on negotiation expenses if the tenant wishes to change the lease or if the tenant withdraws from the lease after authorising its preparation. The Landlord may also pass on other expenses.
Northern Territory: Business Tenancies (Fair Dealings) Act 2002 (NT)
This is the only Territory where the landlord can recover a reasonable sum from the tenant for lease preparation, provided the Landlord provides a copy of accounts and the method of calculation in the landlord’s disclosure statement. Note if a tenant withdraws, the Landlord can also charge a reasonable sum for costs.
Australian Capital Territory: Leases (Commercial and Retail) Act 2001 (ACT)
In the ACT, except for the lease registration fees, the Landlord can not pass on any costs, including lease preparation, mortgagees consent and stamp duty.
In each State and Territory, the Landlord must provide a Disclosure Statement to the Tenant (at least seven days in most jurisdictions, except for the ACT where the requirement is 14 days).
- The landlord must provide the Disclosure Statement setting out the lease’s key details such as:
- The Term;
- Rent payable;
- Disclosure of all outgoings;
- Disclosure of any demolition; or
- Renovation plans.
In most jurisdictions, the Retail Lease Legislation allows the Tenant to terminate the lease under certain circumstances if the Landlord doesn’t provide the disclosure statement.
There is also a requirement under the Retail Leases Legislation in some states and territories for the Tenant to acknowledge the Landlord’s disclosure and return a “tenant’s disclosure” to complete the disclosure requirements.
4. Agreement on the Key Terms
You should be clear on the lease’s commercial terms before agreeing, including:
- Options periods
- Rent review regime
- Make good
- Landlord and Tenant’s works
- Who pays for outgoings; and
- Any special conditions.
5. Always Obtain Legal Advice
Finally, a retail lease is a big deal. You are signing a contract to bind you for years and may be liable for extras such as “make good” to the premises. Make sure you are covered and you understand all of the lease obligations.
Questions about your retail lease? Let our retail leasing lawyers know on 1300 544 755.