4 Tips Before Entering a Retail Lease

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Table of Contents

• 1. Request Copies of Any Additional Documentation
• 2. Determine the Level of Power a Landlord Has in Terminating the Lease
• 3. Check Whether the Landlord is Attempting to Recover Costs
• 4. See Whether the Landlord Can Take Possession of Your Property
• Key Takeaways

Although each state has different laws covering retail leases, there are several consistencies. One point to remember is that retail legislation will not cover every commercial property. That is because all jurisdictions in Australia have a particular definition associated with ‘retail premises’. For example, if you are undertaking commercial activities in an office building, the applicable state or territory legislation may not cover the lease that you sign as it does not fit the definition of ‘retail premises’. This article will run through some important tips to consider before entering a retail lease, particularly in light of the unfair contract laws introduced in November 2016.

1. Request Copies of Any Additional Documentation

A thorough review of the retail lease may reveal that other documents will set out your obligations while occupying the premises. For example, this may include:

• Strata rules;
• Shopping centre rules; or
• Rules relating to common areas.

It is important to request copies of this additional documentation if they are not already attached to the retail lease itself. With the introduction of the unfair contract laws, where one party has the power to vary the rules unilaterally, the law may deem the term to be unfair. These laws are set out in the Australian Competition and Consumer Commission (ACCC) guidelines and form part of the Australian Consumer Laws (ACL). In reviewing a retail lease, a potential tenant may wish to consider negotiating any clauses that allow for the unilateral variation of rules without any limitations.

2. Determine the Level of Power a Landlord Has in Terminating the Lease

All potential tenants should read closely any termination clauses. Termination clauses should have a degree of flexibility so that it is in the prospective tenant’s best interest. For example, if you have delayed in your payment of rent, the landlord might allow you seven days to make the payment before terminating the lease.

A retail lease that allows the landlord to terminate the lease as soon as rent is late does not enable for this same level of flexibility. The same goes when considering any breach of the lease’s terms. You should look to have a certain period to remedy any late payments.

3. Check Whether the Landlord is Attempting to Recover Costs

A retail lease may include clauses which allow the landlord to recover costs. These costs may concern reimbursements for remedying a breach or repairing damages that the landlord has caused. Not only should you know these obligations that you may have in paying extra costs, but you should also look at the clause to determine whether the landlord’s rights are unlimited.

You should require the landlord to prove to you what the costs are. You might require them to prepare itemised invoices to prove that the costs were reasonable considering the circumstances. The ACL may consider the unlimited right to recover costs as unfair.

4. See Whether the Landlord Can Take Possession of Your Property

Retail leases may include clauses that allow the landlord to take possession of your property if you leave it in the premises after the expiry of the lease. Although it is understandable that the landlord will need to make the premises fit for the next tenant, it is in the prospective tenant’s interests to receive notice and have a reasonable time after the expiry of the lease to remove their property. The ACL may consider this type of clause unfair if the tenant receives no notice at all.

Key Takeaways

Often, entering a retail lease is a large commitment. Prospective tenants should be not only aware of their financial obligations throughout the term of the tenancy but also their legal rights and obligations according to the lease. If you have any further questions or need assistance reviewing your retail lease, get in touch with our leasing lawyers on 1300 544 755 or fill out the form and LegalVision will be in touch.