Are you considering leasing a petrol station to operate your own petrol station business? If so, there are a number of legal considerations that you should keep in mind. These legal considerations go beyond the usual considerations involved in leasing a premises since petrol station leases are also subject to environmental compliance requirements. This article outlines some of the critical issues you should keep in mind when entering a petrol station lease.
What is a Petrol Station Lease?
A petrol station lease is usually the lease of the land where a petrol station is located. In particular, this may include the:
- petrol station business itself;
- tanks kept underground on the land; and
- petrol/diesel pumps located outside the petrol station shop.
Whether a petrol station is classified as a retail lease or a commercial lease will differ across states and territories. However, you must understand whether you are a tenant under a retail or a commercial lease, as this will impact:
- how and when the lease is reviewed; and
- each party’s rights and obligations.
Ultimately, a lawyer can assist you with making this determination.
What Should a Petrol Station Lease Contain?
A petrol station lease will commonly include all of the standard commercial terms that are found in leases. For example, this may include the following:
- rent payment obligations and rent review procedures;
- the covenant of quiet enjoyment;
- the lease term and any applicable rights to renew the lease for further terms;
- your right to assign, sub-lease or licence the lease;
- your general obligations regarding repair and maintenance;
- your obligations on termination of the lease, such as make good and refurbishment obligations;
- indemnities and releases; and
- relocation, damage and destruction clauses.
This list is not exhaustive and is only an example of the clauses commonly found in all leases, including petrol station leases.
Continue reading this article below the formAdditional Lease Obligations in Petrol Station Leases
State-based environmental laws will likely apply to your lease since petrol stations are considered ‘contaminated land’. These laws may apply to your land both during the term of your lease and long after your lease. In this regard, environmental laws will usually regulate the following:
- reporting;
- testing; and
- management of remedial work to reinstate the land after the lease.
For example, in New South Wales, petrol stations are subject to the environmental laws the Environmental Protection Authority (EPA) enforces. The EPA has a number of powers and rights to declare a land as contaminated. This includes the right to require an investigation or remediation of land under a management order. The EPA can exercise its powers against both you and the landlord.
Are You Obligated to Report Contaminated Land?
If you become aware of the land becoming contaminated as the tenant, you may have to report this knowledge under the relevant environmental laws. Your failure to do so may place you in breach of such laws.
For example, in NSW, the environmental laws require the contaminator and the landlord to notify the EPA once they become aware of a contamination on the land. A failure to notify the EPA of such contamination could result in penalties being imposed on both the landlord and the contaminator.
Are You Obligated to Conduct an Assessment Report?
Most petrol station leases will impose requirements on the tenant or obligations on the landlord to conduct an environmental assessment report at the commencement and expiration of the lease.
An environmental assessment report will ensure that the tenant makes good or remediates the premises at the expiration of the lease compared to the land’s initial status at the beginning of the lease. This make good requirement is usually the responsibility of the tenant. As such, you should consider this within your budget.
Further obligations within a petrol station lease may include a requirement that you:
- comply with the relevant environmental laws, including complying with all directions from the relevant environmental authority;
- do not cause any land contamination;
- provide the landlord and/or the environmental authority with notice of any spill or leaks;
- provide a regular environmental plan in accordance with your state-specific laws;
- maintain all fuel equipment; and
- compensate the landlord for any damage or contamination during the lease.
Key Takeaways
Petrol stations impose many different responsibilities upon tenants that you should be aware of prior to entering a lease. These obligations may create further costs for your business that you should factor in. Notably, most petrol station leases will impose an obligation on tenants to comply with the relevant environmental laws, including complying with all directions from the relevant environmental authority.
If you would like to have your petrol station lease reviewed or have any questions regarding your petrol station lease, 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.
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