Tenants Guide to Commercial Retail Leases in NSW

In New South Wales (NSW), retail leases are covered by the Retail Leases Act 1994. The Act provides for minimum standards which must be followed in commercial leasing relationships. This article will help you understand some of the relevant obligations for both the tenant and the landlord in retail leases in NSW.

Disclosure Statement

Your prospective landlord must provide you with a disclosure statement at least seven days before the lease begins. A disclosure statement outlines the key commercial terms and provisions of the lease. It also acts as a summary of your financial obligations. However, if your landlord does not give you a disclosure statement, you may be able to terminate your lease under certain circumstances in NSW.   

You should ensure that your disclosure statement includes any agreements you and your prospective landlord reached in prior negotiations. Your landlord could face a penalty if they:

• do not provide you with a disclosure statement; or
• provide you with an incomplete disclosure statement. 

Tenant’s Disclosure Statement

As the tenant, you are also required to produce a disclosure statement to the landlord. This disclosure statement must state whether you have:

• received the landlord’s disclosure statement;
• a copy of the draft lease;
• received any professional advice about the lease; and
• received any other promises or representations by the landlord, which are not in the lease. 

What is the Minimum Period for a Retail Lease?

The minimum period for a retail lease is five years and this includes any options to renew. However, if you want a shorter lease period, you need to give the landlord a special notice called a section 16 certificate. You will need to have this signed by a lawyer if you want to waive your rights to the statutory minimum term. 

Rent Variation

The lease must specify how the rent will be varied and how often. If the lease states that any variations will be made at market rates, then the lease should also state the process for appointing a market valuer. However, if the parties cannot agree on this, then the valuer will be appointed by the NSW Civil and Administrative Tribunal (NCAT).

The Bond

If the parties agree that the landlord will be given a cash bond, then the landlord must deposit this with the NSW Government’s retail bond scheme.

Incentives

Your prospective landlord may use a lease incentive to entice you to enter into the lease. Incentives may include: 

• an offer for a rent-free period; 
• a rent reduction; or 
• a contribution to the fit-out of the premises.

A separate incentive deed that goes hand in hand with your lease may outline the incentive. Importantly, you will need to review this deed carefully as each incentive has different tax implications.

Permitted Use

Permitted use in your retail lease describes how you can use the space when running your business. Therefore, it is essential that your lease and disclosure document accurately and broadly describe your shop’s permitted use.

What if a Landlord Disrupts My Business?

Under NSW law, a landlord is required to take all reasonable steps to prevent causing a disruption to your business. Therefore, you may be eligible for compensation if the landlord disrupts your business. Additionally, if the landlord wants to do any type of work that may disrupt your business, they must give you two months’ notice. The only exception is in the case of an emergency.

Damage and Repairs

You should check the lease to make sure that all possible situations involving damage and repairs are covered. If your shop is damaged, you are required to tell the landlord in writing and that you want it fixed. However, if your landlord does not respond in a reasonable time frame, then you may be able to apply for compensation. 

Key Takeaways 

As a tenant entering into a retail lease, it is crucial to be aware of your legal rights and obligations under your lease. Your prospective landlord has obligations that they must comply with. Additionally, being aware of your landlord’s obligations and rights ensures that you are in the best position when negotiating and entering into your lease. To get a better understanding of these rights and duties, it is worth speaking with a leasing lawyer before entering into retail leases in NSW. Contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions