I Am a Retail Tenant. What Are My Landlord’s Disclosure Obligations?

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Table of Contents

• Do Retail Lease Laws Cover My Lease?
• Your Landlord’s Obligations
• Delivery of Disclosure Documents
• Key Takeaways

Retail lease laws are different in different parts of Australia, but they all aim to protect you as a retail tenant. Before you enter into a retail lease, every state and territory requires your landlord to disclose certain information to you in a document called a disclosure statement. Landlords must provide this information, and failure to do so may give you the right to terminate your lease. This article will highlight some of your landlord’s disclosure obligations to you as a retail tenant.

Do Retail Lease Laws Cover My Lease?

Laws concerning retail leases vary between states. Whether retail laws govern your lease depends on which state or territory you are in. The same lease with the same tenant might be governed by retail laws in one state but not in another. Some states include a set list of retail businesses in their laws, and others interpret the law more generally. All state laws also have exceptions.

Your Landlord’s Obligations

In most states and territories, a landlord must provide you with a copy of the proposed lease when business negotiations start. The landlord must also provide a disclosure statement at least seven days before you enter into a retail lease. ‘Entering into’ has a slightly different meaning across the states, but generally, a lease has been entered into as soon as:

• all parties have signed the lease;
• you have moved into the premises; or
• you have started paying rent.

The landlord must provide the disclosure statement in the form that is specified by the laws in each state.

A disclosure statement will include information about the proposed lease, such as:

• rent;
• rent review;
• details of outgoings (these are the landlord’s costs of operating the shopping centre that your shop is located in);
• other associated costs;
• permitted use;
• area of the premises; and
• the term of the lease.

It will also include information about the shopping centre the premises is located in, such as:

• tenancy mix (this is the range of businesses that operate in the shopping centre);
• centre trading hours;
• centre car parking details;
• proposed future works; and
• any other relevant provisions (such as the likelihood of you having to relocate or the demolition of the premises).

Disclosing Rent and Rent Review

Landlords must tell you:

• how much your rent will be; and
• when and how your rent will increase.

Generally, rent is reviewed annually and at the start of an option term. Typically rent changes according to:

• a fixed percentage increase (this is where rent increases by a set percentage on specified dates during the term of the lease);
• the consumer price index (CPI) (this is where rent increases according to changes to the CPI); or
• a market rent review (this is where the landlord assesses your rent according to the market).

In commercial leases, the landlord will include a clause stating that the rent cannot decrease from year to year. This is called a ratchet clause. However, most retail laws prevent these clauses in retail leases. This means that a market review should reflect the market and allow rent to go up or down.

Disclosing Outgoings

Outgoings are the landlord’s costs of operating and managing the shopping centre or building your premises are located in. They should not include costs associated with improvements made to the centre. Outgoings may include:

• council rates;
• taxes;
• waste and sewerage fees; and
• cleaning.

You are only required to pay outgoings if the landlord clearly included them in the disclosure statement and they are legally entitled to reimbursement.

The law also requires the landlord to be clear on how they will calculate your contribution to outgoings. Usually, you will have to pay a proportion of the fees related to running the shopping centre. Outgoings are generally split into categories, such as:

• rates;
• charges;
• taxes; and
• services.

Delivery of Disclosure Documents

Disclosure happens after you have the draft lease and disclosure statement. Your landlord may give disclosure in several ways, including:

• hand delivery;
• post; or
• fax.

Key Takeaways

Your landlord has various disclosure obligations under the retail lease laws. These include:

• providing you with the relevant disclosure statement and a draft lease;
• disclosing information about all costs you need to pay; and
• appropriately delivering the necessary documents.

If you have any questions about disclosure or need assistance reviewing your retail lease, get in touch with LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.