When negotiating a retail lease, it’s all about location-location-location, or so they say. Several operating factors make up the success of a business. Nevertheless, it is categorically undeniable that a company’s abilities to maintain a suitable, well-positioned and inviting workspace, is an essential pre-requisite to running a successful business venture.

Clients absolutely love walking into well-presented and appealing shops. By the same token, staff are happier, more productive and content when working in an environment that is conducive to the same.

The property market being what it is, it is often not feasible for businesses to purchase retail premises. As a result, businesses have no option but to enter into long and often complex retail leases. It is important to mention at the outset that retail leases are of a special category. They apply to listed businesses, which include most service providers, eateries, shops, stores, supermarkets or outlets positioned within shopping centres. Whether or not your lease falls within the legal definition of a retail shop lease will depend upon your particular circumstances.

Rights of a lessee tenant when negotiating a retail lease

Numerous rights are afforded to a lessee under a retail lease during the negotiation stage. It is of vital importance that you are well aware of your rights, so as not to be taken advantage of by an unscrupulous lessor.

  1. The right to be provided with a draft lease agreement: At the outset, when negotiating a retail lease, you have the right to be furnished with a copy of the draft lease for the premises. By law, a lessor is not permitted to advertise a premises for occupation unless, and until, a draft retail lease has been available to the prospective tenant.
  2. The right to a retail tenancy guide: During the negotiation phase, as the prospective lessee, you are entitled to a retail tenancy guide. The guide is a pre-prepared document that is designed to assist tenants in understanding the key aspects of leasing a shop.
  3. The right to a disclosure statement: At least a week (7 days) before a retail lease is entered into, the tenant is to be afforded a disclosure statement in the form prescribed by the Retail Leases Act 1994 (NSW). If you, as the tenants, are not provided with a disclosure statement, are provided with an incomplete disclosure statement or are not provided with a disclosure statement in the prescribed form, you have a right to terminate the retail lease within 6 months of its execution.
  4. Minimum lease terms: Under the Retail Leases Act 1994 (NSW) a retail lease must not be entered into for less than 5 years (including any option to renew). If a retail lease is purported to be granted for a term of less than 5 years, a certificate from a lawyer or licensed conveyancer is required. Should this requirement be breached, you as the tenant may be able to demand that the lease be extended to the 5-year mark.
  5. Prohibition on recovering lease preparation costs: Don’t be fooled! Under the Retail Property Act 1994 (NSW), a landlord lessor cannot charge you for the costs of preparing the lease. Such costs may include legal and other expenses incurred in connection with the drafting or otherwise of the retail lease. Please note that any amendments made to the retail lease may be charged for.

Conclusion

Retail leases can be lengthy at best and at worst they may be riddled with convoluted legal jargon. Before you spend considerable time and money in entering such a lease, it is prudent to have a legal professional not only look over the document, but also advise you of your rights and liabilities under the same. Our friendly team of LegalVision lawyers would be happy to assist you with any questions that you may have.

Vanja Simic
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