- A retail lease is a binding legal contract relating to retail premises. It is governed by state or territory specific retail leasing legislation.
- Some of the retail leasing legislation provisions set out minimum terms or the requirement for the lessee’s lawyer to provide a certificate if a lease is under a certain length.
- You should consult a retail leasing lawyer before entering into a lease negotiation to ensure your rights and obligations are protected as a tenant or landlord and that the lease complies with the relevant retail leasing legislation in your state or territory.
Retail Commercial Leases
A retail lease also referred to as a retail, commercial lease, is a legally binding document that sets out the rights and responsibilities of a retail tenant and a landlord, in respect to retail premises. Compared to commercial leases, retail leases have more rules about how the lease works and more protection for tenants.
Retail Leasing Legislation
Each state or territory has its specific retail leasing legislation. With the definition of a retail lease differing in each state and territory, there is no single definition of a retail lease. Generally, if property being leased has a shop front, is in a shopping centre and/ or is used for primarily selling retail goods and services to the public, then it will be considered a retail lease. However, this must be verified on a case by case basis and it is always a good idea to obtain legal advice as to the application of the retail leases legislation.
Disputes that arise between tenants and landlords from time to time can be resolved through informal negotiation. Mediation and the State Administrative Tribunal can also be avenues to resolve leasing disputes, noting that the lease and the retail leases legislation sets out specific dispute resolution procedures for the state or territory that the retail premises are located in.
- Before signing a retail lease, ensure that you have been provided with the necessary disclosure under the relevant retail leases act, engage with a leasing lawyer to ensure you review the clauses and the terms of the proposed lease and discuss any contentious matters with the landlord.
- Once you have entered into the lease, you are contractually bound to carry out the lease obligations until the lease ends.
- You should also consider the provisions of the lease with respect to assignment or sublease. If you plan on either of these options during your tenancy, it is important that the lease allows you the flexibility to do this.
Clauses of a Retail Lease
Lease clauses should be reviewed and negotiated before signing a retail lease. This includes the terms of the lease and any options to renew, the amount and payment of the rent and any methods to review and increase the rent, as well as the permitted use of the premises and the facilities.
For a new retail, commercial lease, both parties must agree and sign off the written lease and the landlord is required to give a copy of the proposed lease and other disclosures required under the retail leases legislation (disclosure statement) as soon as the lease negotiations start.
The lease should clearly state which party will cover costs incurred in the lease, including costs of preparing the lease, stamp duty, legal fees, outgoings, tax and promotion and advertising. Security bonds, insurance costs and repairs and maintenance costs are also likely to be included. It is important to note that the retail leases legislation in all states and territories across Australia contain provisions to restrict the landlord claiming key money and lease preparation expenses from the tenant. Note that this prohibition often does not extend to amendments as a result of lease negotiations or the costs of the landlord on any subsequent assignment of lease.
Purpose and Restriction Clauses
Certain lease documents contain restrictions such as types of business activity, prohibition of the offering of certain services and permitted use changes during the lease term. It is essential that, before you sign a lease, you ensure that the premises can be put to the use that you intend and that the lease allows for this.
Rent clauses contain terms on how changes to rent payments can be made, rent reviews, turnover rent (where applicable) and annual increases. Rent can only increase once every 12 months and only in the way specified in the lease (i.e., Consumer Price Index, fixed percentage or review to market).
Insurance obligations include whether or not the landlord insures the property and the tenant’s insurance obligations. Note the tenant will always require public liability insurance as a minimum requirement.
Frequently Asked Questions about Retail Leases
Q: When does a retail lease start?
A: A retail, commercial lease commences on the date specified on the lease after it is signed by both the landlord and the tenant.
Q: What is a registered lease?
A: A registered lease is a lease that is registered on the title of a property. This provides greater security for the tenant.
Q: Who handles security bonds/ bank guarantees?
A: A lease will usually state that a tenant must provide a security bond or bank guarantee.
Q: What is an assignment of lease?
A: A lease assignment is a transfer to another party. The lease will contain clauses about whether the assignment is possible and the conditions necessary for an assignment to take place.
Q: Can a landlord refuse assignment?
A: The landlord can refuse assignment on certain limited grounds. However, where retail leases are concerned each state-specific retail lease also governs the assignment of retail leases.
How can LegalVision help me?
We have helped many businesses with retail, commercial leases, and it would be our pleasure to assist you. We provide fixed prices for your certainty and peace of mind. Call LegalVision today on 1300 544 755.