Starting or expanding your own salon is an exciting time for any beauty therapist. Selecting the ideal location for your salon should be a carefully thought-out decision that considers the terms of your commercial lease. In this article, we set out what you need to know about commercial leases in NSW.
What Commercial Lease Do I Need?
Setting up a salon means you will require a retail lease. A retail lease refers to a type of commercial lease, intended wholly or partially for shops in retail. Commercial leases are important documents that set out the rights and obligations of the owner of the commercial property (landlord), and the party who has agreed to occupy the premises (tenant).
Each Australian state has developed its own retail lease legislation. As such, ensure that your lawyer is familiar with your relevant state’s legislation. If your salon is set up in NSW, you will refer to the Retail Leases Act 1994 (NSW).
Before Entering My Lease: What Do I Need to Know?
Planning is incredibly important to ensure you negotiate a lease that suits your salon’s interests. Make sure you have an understanding of how you want to run your business, to allow your lawyer to negotiate a workable lease.
Before signing the lease, the landlord is required by law to provide certain documents to the tenant. The Retail Leases Act 1994 (NSW) requires a landlord to provide you with the following:
- A draft copy of the lease before it is signed;
- A disclosure document; and
- A copy of the Retail Tenancy Guide by NSW Fair Trading.
The purpose of providing these documents is to inform tenants fully about their rights and obligations.
Before you sign your lease, you should always:
- Have a thorough understanding of the terms and clauses;
- Discuss any contentious matters with the landlord;
- Research the relevant legislation;
- Liaise with someone from your small business association or fair trading office.
Always spend time asking your leasing lawyer about any unclear rights and obligations presented in the commercial lease. Knowing the rights and obligations of all parties to your lease will help down the track should a dispute arise, or if the landlord fails to comply with the terms of the retail lease.
Commencing the Term of your Retail Lease
The term of your lease will be the period in which your salon business has an exclusive right of possession to use the commercial property. In NSW, it is accepted that commencement of a retail lease occurs when either:
- You enter into possession of the property as a lessee;
- You begin to pay rent (money paid in advance as a deposit to secure the premises for a proposed lease doesn’t constitute rent paid); or
- All parties sign the lease or assignment.
What Happens at the End of Your Lease?
Retail leases in NSW operate for a minimum of five years. Terms less than five years will be automatically extended to five years unless the tenant waives this right by obtaining a Section 16 Certificate.
Although it’s difficult to predict your salon’s success, it’s worthwhile having a clear idea of how long you wish to occupy the premise when negotiating. An ‘option to renew’ clause could allow you to renew the lease based on the same conditions before the lease ends. Without this clause, renewing a lease would become a matter of negotiation between you and your landlord. This may be a costly activity as some tenants often find themselves settling for different rental payments and service charges.
Think of entering your commercial lease as buffing your nails before a manicure. Just as a smooth nail surface provides the best foundation on which to apply your polish, an experienced commercial leasing lawyer will create a clearly drafted and well-executed lease, paving the way for your beauty therapy business to thrive. Questions? Let us know.