If you are looking to lease retail premises in Victoria, there will be a number of different things that you need to consider, one of which is the law surrounding retail leasing. Having an in-depth understanding of your responsibilities as a retail tenant in Victoria will help you avoid any legal troubles down the line. This article will explain the key issues relating to every stage of leasing retail premises in Victoria.
How is Retail Leasing Regulated in Victoria?
Retail leasing in Victoria is governed by the Retail Leases Act 2003 (the Act). The Act sets out the minimum standards that both you and your landlord must follow in retail leasing relationships.
The Act only covers businesses that are used mainly for the sale of goods in the retail sector. To be covered under the Act, the rent that you pay must be less than $1 million a year. Your business will also be excluded from coverage under the Act if it is:
- a storage, manufacturing or wholesaling businesses;
- a listed corporation or subsidiary of a corporation; or
- under a lease term of less than a year.
If you are unsure if the Act covers you, you should ask your landlord and seek legal advice before you enter into a lease. This will ensure that you follow the correct procedures. As a tenant, it is beneficial for you to be under the umbrella of a retail lease and retail leasing laws will then protect you.
You should negotiate the commercial terms for your retail lease with your landlord before entering into the lease. Some commercial terms that you should consider include the:
- length of the lease’s term;
- rental rate; and
- process of rental increases over time.
Once you and your landlord agree on the terms, you should document them in a heads of agreement or letter of offer. The landlord’s agent or lawyer can then use this information to draft the lease.
Landlord’s Disclosure Requirements
Before entering into a new retail lease, the landlord must provide you with:
- a written copy of the lease;
- the Victorian Small Business Commissioner information booklet; and
- a copy of a disclosure statement for the premises (this must be given at least seven days before the lease commences).
The disclosure statement will set out the:
- key commercial terms of the lease;
- projected or estimated outgoings; and
- details of any other agreements made between you and your landlord.
If the landlord does not provide the disclosure statement, you can withhold paying rent until you have received it.
Can the Landlord Charge Me With Lease Preparation Expenses?
The landlord is not permitted to pass on their costs for lease preparation and negotiation to you, the tenant.
If your landlord attempts to do so, you should point out that, as a retail tenant, this is not allowed.
Do I Need to Pay a Security Bond?
It is common for the landlord to require you to put up the equivalent of between three to six months rent as security under the lease. The landlord can claim this money without notice and require you to “top up” the security bond or bank guarantee if you:
Note that a landlord should not access these funds unless you have breached the lease. If a landlord accesses them without cause, you may be able to pursue the matter in legal proceedings.
Can I Claim Compensation From My Landlord?
During the term of your lease, it is possible to rely on the Act to claim compensation in very limited circumstances. In this regard, you can claim compensation from a landlord for loss or damage if the landlord has:
- restricted your access to the premises;
- caused disruption to your business; or
- failed to fix damages to your premises that they were legally obligated to fix.
Can a Landlord Force Me to Move My Business?
A landlord can only force you to relocate your business if there is a relocation clause in the lease.
The Act also regulates any relocation provisions in your lease. It notes that the landlord must pay reasonable compensation to facilitate your move. They must also offer alternative premises for your business.
Can the Landlord Stop Me From Assigning My Lease?
Within Victoria, a landlord cannot stop you from assigning your lease. However, you must follow the procedure of assignment that is outlined in the Act. As a general rule of thumb, you will need to:
- obtain your landlord’s written consent to assign the lease;
- provide as much detail as possible about the new tenant to the landlord; and
- provide the new tenant with an updated disclosure statement.
If you lease, or want to lease, retail premises in Victoria, you need to be aware of your legal obligations. Furthermore, you should also be aware of the landlord’s legal obligations to you. Throughout your leasing relationship with the landlord, the Act continues to apply and regulates your:
- bank guarantee;
- relocation; and
- other provisions.
If you have any questions about leasing a retail property in Victoria, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.
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