If you are a tenant entering into a commercial or retail lease, you should understand not only your obligations and responsibilities, but also the landlord’s. We set these obligations out below.
Is The Lease a Retail Lease?
The landlord will have additional responsibilities under a retail lease. State-based legislation governs retail leases, which while similar in their objective to protect tenants, contain slight differences. For example, the Retail Leases Act 1994 (NSW) protects retail leases in NSW whereas, in Victoria, tenants fall under the Retail Leases Act 2003 (VIC). The landlord has a responsibility to provide tenants with a disclosure statement before signing the lease (usually at least seven days).
Depending on which state the premises is located, the landlord may also have the responsibility to provide tenants with other documents. For instance, the NSW Retail Tenant’s Guide (for NSW) or the Victorian Small Business Commissioner’s Information Brochure (for VIC).
Tenants do not have to sign the lease until they receive these documents. If a tenant has not yet received these documents, they should ask their landlord.
Landlord to Prepare Lease
The landlord or the landlord’s solicitor is usually responsible for drafting and issuing the lease to the tenant, including:
- any relevant cover page (such as the LPI cover sheet for NSW), and
- the lease annexure, or
- terms of the lease.
Once a tenant receives the lease from the landlord, it’s sensible to seek independent legal advice to ensure there are no onerous or unfair provisions, for example:
- unreasonable make good provisions;
- liquidated damages on breach of the lease; or
- providing an excessive security deposit.
- making any amendments the tenant requests;
- ensuring the tenant signs the lease correctly.
The tenant must return any other relevant documents to the landlord such as bank guarantee and insurance certificate of currency. In some cases, parties may prepare a heads of agreement (HOA) before the lease.
Either the landlord or commercial property agent for the premises can prepare the HOA, who will advise the landlord or their solicitor once the HOA is signed. If tenants are purchasing a business from a vendor, the existing tenant will assign the lease. You will then require the relevant transfer of lease forms and a deed of consent to assign the lease.
Landlord to Pay Own Preparation Costs
Landlords and tenants are responsible for paying their own costs to prepare the lease. For commercial (non-retail) leases, however, note that the landlord has the right to require tenants to cover its cost as well. In South Australia, parties share the costs for retail leases.
Landlord to Register
Where relevant, the landlord is responsible for registering the lease and tenants should ensure this is stated in the lease. Although the landlord may be responsible for lodging the documents, the tenant remains responsible for the registration fees and in some cases, mortgagee consent fees.
Registration differs from state to state, for example, landlords are not required to register a lease in Victoria. Other states, however, will protect short-term leases – anything longer should be registered. Tenants should receive a copy of the lease once registered for their records.
If you are a potential tenant considering entering a commercial lease, you should keep in mind the following key points:
- Check to see if the lease is covered by the retail lease legislation in your relevant state;
- If you are a retail lease tenant, you should request the disclosure statement and any other documents the landlord has the obligation to provide to you prior to signing the lease;
- The landlord will be responsible for preparing the lease and other relevant documentation;
- The landlord is responsible for making any agreed amendments to the lease;
- If you are a retail lease tenant, consider who has the liability for the landlord’s costs;
- The landlord should register the lease, if applicable (but note the tenant must pay the registration fee).
If you have any questions about the leasing process or need assistance reviewing your lease, get in touch with LegalVision’s commercial leasing lawyers on 1300 544 755.
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