Retail leases are leases of a business premise where the permitted use is for selling goods. Generally, these premises exist in shopping centres. However, what constitutes a ‘retail’ lease will vary from state to state, depending on the respective retail legislation (state-based retail Acts).
Most state-based retail Acts will prescribe minimum requirements for landlords to fulfil before signing a lease. This may include defining a retail lease and requiring the issue of a disclosure statement. Therefore, you should consult a leasing lawyer to ensure that your lease protects your rights and obligations as a tenant and that the landlord and the lease comply with the relevant legislation.
Retail Leases
At its core, a retail lease is a legally binding document. It sets out the rights and obligations of a retail tenant and a landlord regarding retail premises. What distinguishes a retail lease from a commercial lease is that state-based retail Acts will govern retail leases. Ultimately, their primary purpose is to protect tenants and require appropriate disclosure from landlords before retailers enter leases.
State-Based Retail Acts
As noted previously, each state has specific retail leasing acts. The laws varying from state to state will define what constitutes a retail lease. As such, it might be helpful to seek legal advice to help determine whether the Act covers your lease. However, as a general rule, legislation will likely consider a retail lease to be a premise that is:
- less than 1000m2;
- is located within a shopping centre; and/or
- is used primarily for selling retail goods and services to the public.
Dispute Resolution
When a dispute arises between the parties to a retail lease, the respective retail legislation will often dictate the process of resolving the dispute.
Clauses to Consider When Reviewing Your Lease
You should review and negotiate the clauses of your lease to suit your particular requirements and ensure that the lease is compliant with retail legislation. You will find a summary of the critical clauses below.
Costs
The legislation will often require the landlord to provide you with certain disclosures. One essential requirement relates to costs. In particular, a common requirement will be to disclose ‘outgoings’ that can vary year to year. Moreover, these costs can often shock some tenants who may not be aware of the costs that incur overtime. Therefore, the disclosure statement should clearly state what costs you will incur when signing the lease. Further, the lease itself should reflect this. In addition, it is essential to note that the law will often not permit the passing of specific money and lease preparations to the tenant.
Rent
One of the most significant aspects of a lease is the payment of rent. Rent clauses contain terms on:
- how changes to rent payments are to be made;
- rent reviews;
- turnover rent; and
- annual increases (where applicable).
Note that rent can only increase once every 12 months, as the lease specifies. The methods for rent review include:
- consumer price index;
- fixed percentage; and
- market review
Insurance
Furthermore, a lease will often specify insurance obligations. Often, this includes public liability and plate glass insurance.
Key Takeaways
You should ensure you receive the necessary disclosure under the relevant retail legislation. For example, ensure that your landlord provides you with outgoing estimates and a leasing disclosure statement. Furthermore, note that once you sign the lease, you are bound to its terms until the lease ends. Therefore, obtaining legal advice on your lease is always a good idea. Additionally, it might be helpful to note the lease provisions concerning the assignment and sublease. This step is crucial if you prefer to have options to release yourself completely (or partially) from your lease obligations during its term.
If you would like to ensure your lease covers your rights or if you are a landlord wanting to ensure you are compliant with the law, our specialist leasing lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A lease will commence on the date specified on the lease after both parties have signed.
A registered lease is a lease on the title of a property and provides a tenant with greater security.
An assignment is when you transfer your rights under the lease to another party. A lease will often contain the conditions upon lease assignment. However, a landlord should not be able to withhold consent unreasonably.
