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If you run a petrol station or are in the process of purchasing a lease for a petrol station, there are a number of different legal responsibilities that you will have to consider. In addition to the standard considerations of buying a business, there are also environmental compliance requirements that continue long after your lease ends. This article will explain the critical issues that you must keep in mind as the tenant of a petrol station lease.

What is a Petrol Station Lease?

A petrol station lease is commonly a lease of the whole land that a petrol station is situated on. This might include the:

  • petrol station business itself;
  • tanks kept underground the land; and
  • pumps located outside the service station shop. 

Each state and territory in Australia regulates leases differently in terms of whether a petrol station lease is considered to be a retail lease. You can tell if something is a retail lease rather than a commercial lease if your relevant state-based retail leasing laws apply (a lawyer can help with this). If so, then you will need to review the lease with this in mind.

What Should My Lease Contain?

Generally, petrol station leases will contain standard commercial terms, such as:

  • rent payments and rent review procedures;
  • the length of lease and whether there are any rights to further terms;
  • your general obligations to repair and maintain the premises;
  • your rights to assign or transfer the lease;
  • terms detailing what happens if the premises are damaged;
  • indemnities and releases; and
  • how the lease ends and obligations upon termination or expiry of the lease.

Additional Obligations Specific to Petrol Station Leases

As petrol stations are considered to be ‘contaminated land’, you also need to be aware of any state-based environmental laws. These laws may apply to the land both during your lease and long after it ends. In this regard, environmental laws regulate the:

  • reporting;
  • testing; and
  • management of remedial work to reinstate the land after the lease.

For example, in New South Wales (NSW), environmental laws relating to petrol stations are governed by the Environmental Protection Authority (EPA). The EPA has far-reaching powers and can declare land to be contaminated. They can also order the investigation or remediation of land under a management order. It is important to note that the EPA has powers over both the owners of the land and you, the tenant.

Each state and territory across Australia have different environmental requirements. Therefore, you should make yourself aware of these before entering into a lease for a petrol station.

Are You Obligated to Report Contaminated Land?

Another issue can arise when you lease a petrol station if you become aware of contaminated land.

For example, if one of the underground fuel pumps leaks, are you required to report it?

Using our NSW example again, the environmental laws require that both the person who contaminated the land and the landowner notify the EPA once they become aware of the contamination. Failure to do so could result in penalties imposed by the EPA.

What Should My Petrol Station Lease Contain?

Because of the environmental laws that typically apply to the land attached to a petrol station lease, it is common to see a number of different obligations within a petrol station lease.

There may be a requirement for either the landlord or yourself to carry out an environmental assessment report. You may need to do this at the start of the lease and again at the end of the lease. This will provide a comparison to make good or remediate the property at the end of the lease. Undertaking this will usually be your responsibility as a tenant. Therefore, you should budget for this in addition to your other business set up expenses.

Furthermore, as a tenant, there many different obligations that you might have to undertake during the term of the lease. These may include that you:

  • comply with all environmental laws;
  • do not cause land contamination;
  • provide written notice of any spill or leak;
  • provide a regular environmental management plan based on your specific state laws;
  • compensate the landlord for any accidents or contamination during the lease; and
  • maintain all fuel equipment – both above and below ground.

Having a formal written document is very important. It ensures that there are no disputes on who caused contamination and who is entitled to compensation.

Key Takeaways

Before buying a petrol station, you should do your homework and thoroughly understand your obligations. A petrol station lease imposes many different responsibilities, so you should be aware of them so you can factor in any compliance costs. If you have any questions about buying a petrol station or would like assistance reviewing your petrol station lease, get in touch with LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.

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