A retail commercial lease, also known as a retail lease, is a legally binding contract that spells out the rights and responsibilities of a tenant and landlord in respect to retail premises. Retail leasing legislation is state-based, which means that the definition of a retail lease differs in each state and territory. As a general rule, if the property being leased has a shop front, is in a shopping centre and/or is mainly used for selling goods or services to the public then the lease of such a property will most likely be considered to be a retail lease.
When Does a Retail Lease Start?
A retail lease generally starts on the date specified in the lease document, after it is signed by both the tenant and landlord. It may also start before the formal signing of the lease if the tenant takes possession of the premises before signing the lease.
What is a Registered Lease?
A registered lease is a lease that is registered on the title of a property. In the majority of states a lease which is for a period of three years or longer must be registered. A registered lease provides a tenant with additional property rights compared to an unregistered lease.
If you require more information on whether or not your lease should be registered talk to a lawyer or get online legal advice through LegalVision.
What to Do Before you Sign a Retail Lease
The landlord is required by law to give the tenant a draft copy of the lease before it is signed. In some states, the landlord is also required to provide disclosure statements and copies of other documents as specified in the relevant legislation.
Before you sign a lease you should always:
- Take time to review the clauses and terms of the lease.
- Discuss any contentious matters with the landlord.
- Read any relevant legislation.
- Talk to someone from your small business association, fair trading office or a small business lawyer.
- Talk to a leasing lawyer.
The Length of the Lease
One of the essential things you should work out from the start is the term of the lease, including whether or not there is an option to renew at the end of the lease and if so, on what terms.
Purposes and Restrictions Clauses
You should check the lease to see if there are clauses which restrict your business activity, such as:
- Does the lease restrict certain types of business activity?
- Does it factor in any potential changes which may occur?
- Does it prohibit you from offering certain services?
- How does the lease provide for any ‘permitted use’ changes during the lease term?
You should check to see what the lease says about rent and changes to the rent. The rent clause or clauses may include changes as a result of increases in CPI, market rent reviews and annual increases.
The lease should spell out whether or not the landlord insures the property and the tenant’s insurance obligations. In any event, you should consider taking out insurance. If you are unsure about your insurance options you should speak to an insurance broker or business lawyer.
Costs in Retail Leases
You need to clarify what the lease says about who is responsible for costs, such as:
- Costs of preparing the lease
- Costs of changing the lease
- Signage, fixtures and fittings
- Stamp duty
- Legal fees
- Promotion and advertising
- Wear and tear
- Make good (i.e. at the end of the lease returning the property to the condition it was in at the start of the lease)
Security Bonds and Rent in Advance
A lease will usually state that a tenant must provide a security bond or lodge a bank or personal guarantee. In some states, bonds are not allowed to be worth more than 4 weeks rent. Otherwise, it is simply a matter of negotiation. A bond or guarantee of three or four months rent is not uncommon.
For further legal assistance, get in touch with one of our commercial leasing lawyers.
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