Reading time: 4 minutes

Before entering into a retail lease, you should ensure you have a thorough inspection of the premises and understand the lease agreement. You may be locked into the lease for a lengthy period, so you should be confident the premises are right for you and your business. This article provides a checklist for what you should check before entering into a retail lease agreement.

Do You Know Your Disclosure Obligations?

Before the landlord provides you with your final lease agreement, they should give you a disclosure statement. Under the disclosure statement obligations, the landlord must give you the key terms of the agreement before you enter into the lease.

Generally, the landlord needs to provide you with this statement at least seven days before signing the lease. However, this can vary depending on which state or territory you are based in.

You should review the disclosure statement, as it outlines the outgoings and extra costs you will need to pay for the duration of the lease. Furthermore, the statement should identify any additional hidden costs that you may not be aware of.

What is the Permitted Use of the Premises?

Your disclosure statement will set out the landlord’s permitted use for the premises. You should check this with your local council to ensure the type of business you are running is suitable for the premises. If not, you can ask the council whether a development approval is required.

If development approval is needed, you should ensure any lease documentation you sign is conditional upon the approval. Then, if the council rejects your development approval, you will not be required to enter into the lease. If you do not have council approval and enter into the lease, you will still need to fulfil the terms of the lease, such as paying rent, despite not being able to operate your business.

What Costs Are Payable?

Typically with retail leases, your landlord cannot pass on to you their costs for preparing, negotiating or finalising the lease. However, you will be required to pay for the outgoings of the premises, such as land tax and any fire safety maintenance.

Are There Incentives?

Landlords often use lease incentives to entice tenants. Incentives offered include a rent-free period, rent reduction or a fit-out contribution. Where there is a rent-free period, a landlord will usually allow for the period to cover the fit-out period. However, landlords may offer an extended rent-free period for long-term retail leases.

A rent reduction is applied throughout the lease and reduces each monthly payment. You should be aware that the rent reduction does not affect any form of a market rent review.

Finally, a landlord may contribute to the tenant’s fit-out works as agreed upon in the incentive deed. When your landlord pays these costs depends on the terms in your agreement.

Each of these incentives have different tax implications. Generally, these incentives will include a clawback or payback provision in the lease, which requires you to repay the amount after triggered by a particular event.

Do I Need to Provide a Personal Guarantee?

If you are entering into a retail lease with your company entity, your landlord may request a personal guarantee from the company directors. The personal guarantee may place your personal assets at risk. Therefore, it is worth considering other alternatives, such as:

  • negotiating with your landlord to increase the security deposit or bank guarantee; or
  • reducing your liability under the personal guarantee by agreeing to a certain amount.

You can refuse to offer a personal guarantee. However, your landlord may require it before allowing you to sign the lease agreement. You may want to seek financial advice before providing this type of guarantee.

Key Takeaways

Before entering into a retail lease, you should ensure you have considered whether you:

  • know your disclosure obligations;
  • are permitted to use the leased premises;
  • will receive a lease incentive; and
  • need to provide a personal guarantee.

If you have any questions, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.


Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Evangelia Douventzidis
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards