So you just found the perfect location in the ACT for your new business venture. You’ve negotiated the rent, you’ve had a walk through the premises, you can clearly see yourself opening shop, and you’re all pumped up to get started. Except the agent has given you a 60-page legal document called the “lease” and tells you that you must sign it ASAP if you want to secure it before someone else does. What is the lease about and what should you know about your rights under the lease?
If you are leasing a shop premises in Canberra for the purpose of retail, then your lease will be regulated by the Leases (Commercial and Retail) Act 2001. Being protected under the Act means that the Landlord must comply with certain procedures. We set these out below as we provide a brief overview of retail leasing in the ACT to help you demystify the process.
Before entering into the lease, a landlord must provide you with a disclosure statement to ensure that you get a snapshot of the commercial terms of the Lease and what payment and costs you will be expected to pay. This includes providing you with an estimate of all outgoings or running costs of the premises. If the Landlord provides any information in the Disclosure Statement that later turns out to be false or misleading, you may be entitled to compensation for any damage you may have suffered as a result.
A landlord must also keep your security bond in an interest-bearing account during the term of your lease and give it back to you with interest at the end of your lease if there has been no default or breach on your part. The Landlord cannot ask you to provide a security bond that exceeds the equivalent of three month’s rent.
If you are required to pay for outgoings, the Landlord must first give you an itemised estimate of the outgoings so you are clear as to what you are paying for. The landlord also must provide you with a written auditor’s report at the end of the accounting period. This lets you know if you have overpaid or underpaid the outgoings amount during the year and you are entitled to an adjustment. The only exception where the Landlord does not need to give you any statement of estimate of outgoings is if the outgoings payable relates to water, sewerage and drainage rates and charges, statutory charges or insurance payment.
The Landlord must allow you to assign your lease at any time during the term unless they can prove that there are reasonable grounds to believe that the assignee either:
- Intends to change the permitted use; or
- Has inferior financial resources to run the business; or
- Lacks the skills to run the business.
The only other circumstances in which the Landlord may withhold consent to an assignment of your lease is if you have been in default and have not rectified your breach.
Leasing a retail shop premises involves a significant cost commitment, and it pays to do your homework and understand your rights under the retail legislation. If you would like assistance in reviewing your lease document and have an expert your lease’s terms, let our commercial leasing team know on 1300 544 755.