If you are a tenant entering into a retail lease for a shop premises, you will receive a number of different documents to consider, one of which should be a landlord’s disclosure statement. But what does this document do and why do you get it? This article will explain what a retail lease disclosure statement is and what you need to consider after receiving one.
What is a Disclosure Statement?
Retail leasing is regulated differently in each state and territory of Australia. However, each state across Australia has a requirement that landlords must provide a tenant starting or renewing a lease with a disclosure statement before they sign up to the lease.
Furthermore, the specific contents of a disclosure statement vary from state to state around Australia. However, in all states, a disclosure statement is a summary guide of the important commercial terms of the lease.
The disclosure statement aims to provide you with a snapshot of your financial obligations under the lease. It also outlines what your position is concerning common leasing issues, like:
- rent review;
- any other costs associated with the lease;
- tenancy mix (if in a shopping centre); and
- important key provisions, such as those relating to the likelihood of relocation or demolition of the premises.
When Should a Landlord Give You a Disclosure Statement?
In the ordinary course of retail leasing, after successfully negotiating the lease, the landlord will give you a formal letter of offer, often known as a heads of agreement. This document sets out the agreed key commercial terms.
Once you reach an agreement on the letter of offer, the landlord’s lawyer should issue a disclosure statement and draft of the lease. Furthermore, they should draft any other documents like fit-out deeds or incentive deeds that accompany the lease.
At this point, you should carefully review the lease documents and the disclosure statement to confirm that all the information is correct.
Each state or territory in Australia has slightly different disclosure requirements under the retail leasing laws. It is important that you are aware of the relevant retail leasing laws for your state or territory before entering into a lease.
What to Look Out For in the Disclosure Statement
The disclosure statement sets out your financial obligations under the lease. Therefore, it is important that you look out for information on the:
- rent you must pay for the first year;
- rent review method to be used to increase the rent each year;
- dates that the rent review will take place; and
- other financial obligations that apply to the lease, such as lease outgoings or shopping centre promotion fees that you must pay.
It is critical that you review these figures. Particularly, you should pay attention to any itemised outgoings figures to give you an idea of the additional costs you must pay per month on top of your rent. If, upon reviewing the outgoings, you do not understand what certain costs are for, seek clarification before you accept and sign the disclosure statement and the lease. If you do not query them at this stage, you may lose the right to dispute them later on.
In addition to the financial obligations, the disclosure statement should also reflect your agreement to lease the premises. Therefore, it should set out the obligations that you have under the lease, such as:
- whether you must redecorate the premises during the lease term and how often this is to occur (for example, must you repaint every three years or only at the end of the lease term?);
- what you must do at the end of your lease to make good the premises;
- any fit-out works to be carried out and whether you or the landlord will do these works;
- what type of insurance you must to take out; and
- what form of security you must provide under the lease (will this be a bank guarantee, personal guarantee or both?).
Do I Need to Return the Disclosure Statement to the Landlord?
Once you are satisfied that the disclosure statement reflects your agreement with the landlord, you should sign the statement and return it to the landlord.
Some landlords will wait to issue the draft lease until you have first returned the disclosure statement to them. However, if you would like to see the lease and disclosure statement at the same time, you should request to do so.
The disclosure statement is a document that a landlord has to provide you as the incoming tenant of retail premises. It provides a summary of the major commercial terms of the lease.
You should review your disclosure statement carefully before entering into a lease. If you would like assistance in reviewing your disclosure statement, or have any questions about entering into your lease, get in touch with our LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.
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