The differences between a retail and non-retail lease are a source of confusion. Taken at face value, people associate ‘retail’ with a lease for a shop and non-retail (such as a commercial lease) being a lease for office premises. The distinction between the two is, however, important when determining whether they are the type of business premises that attract protection under state-based retail legislation. Each state defines a retail lease differently and so, the same business that might be considered retail in Victoria would be regarded as non-retail or commercial in NSW due to location. Below, we set out the key differences between a retail and non-retail lease.
Is the business conducted from the premises retail or non-retail? By retail, we are referring to the end user – is the business selling goods and providing services to consumers? Fashion stores, restaurants, hairdressers are the typical types of retail business that we associate with retail leasing. In NSW and QLD, the legislation prescribes the type of business that is deemed to be retail and in doing so, removes the guesswork of trying to figure out if the permitted use is for retail purposes. In Victoria and the ACT, the definition is broader with no prescribed regulations so that it is often safer for landlords to assume the Act applies unless they could prove that the premises fall within the exemption.
Location of the Business Premises
Where is the business located? If you operate a medical centre, dental practice or accounting practice in a shopping centre, then your lease will be deemed a retail lease. A retail shopping centre is defined as a cluster of premises with five or more shops. If you operate the same type of business but not in a shopping centre, then in NSW and QLD your lease is considered a commercial lease. In Victoria, unless the premises are located on the first three floors of the building (counting from the ground floor, first floor and second floor), anywhere above the second floor is not deemed as a retail lease.
Premises are typically exempt from being a retail premises if:
- The size of the premises exceeds 1000 square metres;
- The occupancy cost (rent and outgoings) is more than $1 million per annum (this is also excluded from the protection of the retail legislation and therefore considered an exempt retail lease);
- The tenant is a listed corporation;
- The term of the lease is less than one year or more than fifteen years.
The differences between a retail and non-retail lease aren’t always straightforward, and many factors including the size of the premises, the location (including what floor!) could make a big difference to attracting protection under your state’s retail legislation. If you have any questions or require assistance in reviewing your lease document, get in touch with our experienced commercial leasing lawyers on 1300 544 755.