A lot of brick and mortar stores rent the premises they run their business from. Rental agreements for businesses differ from other types of rental agreements, as the scope of requirements is usually very different.
Like most other business activities, retail leases are governed by legislation in Australia. However, they differ between states.
In this article, we’ll go through the law that governs retail leases in NSW specifically – the Retail Leases Act – and what it means for both landlords and tenants.
What Is A Retail Lease?
A retail lease is similar to a commercial lease, but they’re slightly different.
Retail leases are specifically for businesses that engage in retail as part of their business activities. Businesses under commercial lease do not need to be in retail – they can be warehouses or an office.
Retail leases also have different regulations to those of a commercial lease.
Stores that sell clothing, furniture, groceries, homeware are all likely to be under a Retail Lease Agreement.
Retail Leases Act NSW
The Retail Leases Act 1994 is the state legislation governing the rules behind retails leases in NSW. It covers crucial matters such as rent, outgoings, assignments, landlord rights, tenant rights and much more – whether you are a tenant or a landlord, it’s important to be aware of this legislation.
If you need help ensuring that your retail lease is compliant with this legislation, our lawyers can assist you with our Retail Lease package.
I’m A Tenant – What Do I Need To Do?
As a tenant, there’s a couple of things you need to be aware of that form your rights and responsibilities under the legislation.
We’ll cover these in detail below.
Retail Lease Disclosure Statement
Schedule 2 of the Retail Leases Act determines that a disclosure statement must be provided to all tenants by the landlord at least 7 days prior to the lease starting. The disclosure statement must contain the main elements that were agreed upon by both parties.
If a landlord does not provide a disclosure statement, the tenant may be able to end the lease.
Once a landlord has provided the disclosure statement, the tenant then has 7 days to provide their own. The disclosure statements must be signed by both parties.
You can view a disclosure statement here.
Retail Lease Bonds And Deposits
According to the Act, a tenant will need to provide the landlord with a bond or deposit payment. This is usually the total of approximately 3 months of rent.
It is your duty to pay the deposit or bond on time. According to section 16C of the Act, it is the landlord’s responsibility to deposit the payment within 20 days of receiving it with the Director General of Department of State and Regional Development.
Permitted use refers to the ways in which the premises can be used. For example there may be restrictions on certain facilities, noise levels, closing hours and activities.
As a tenant, it’s important to discuss what kinds of use the premises permits, have them negotiated or discussed in the contract and follow through with them.
We’ve written more about the concept of permitted use and what you should know about it.
I’m A Landlord – What Do I Need To Do?
When renting out a property, there are a number of things landlords need to ensure they are complying with under the legislation.
Let’s go through these obligations below.
Get A Retail Lease Agreement
Primarily, it’s incredibly important to have a Retail Lease Agreement with your tenants. An agreement will protect you, your property and your tenants from unwanted disputes.
Additionally, you would ideally like to have a smooth sailing relationship with your tenants. Having a lease agreement in place can help have a better relationship with them, as both parties are clear on all matters and misunderstandings are less likely to occur.
Rent abatement is not a necessity, however, it may be something you want to look into as a landlord.
Rent abatement is when landlords offer decreased rent or no rent for a certain amount of time as an incentive to get tenants to sign up. In return, tenants may sign a longer lease agreement.
If rent abatement is something you and your tenants agree to, be sure to have it drafted into your Retail Lease Agreement.
Retail Lease In Other States
The Retail Leases Act is state legislation, therefore, it only applies to residents of NSW.
If you don’t currently reside in NSW, it’s better to check the relevant legislation for your state. We’ve taken a look at some of them for you below.
Retail Leases Act Victoria
The Retail Leases Act 2003 is the main Victorian legislation that looks after Retail Lease Agreements. Much like the NSW legislation, it thoroughly covers a whole range of matters from premises, fit outs, rent review, outgoings, relocation and refurbishment.
For residents of Victoria, it’s advisable to be familiar with this legislation.
Retail Shop Leases Act QLD
The Retail Shop Lease Act 1994 is the law governing retail leases in Queensland. The Act applies automatically to those businesses that are located in a retail shopping location as well as businesses that conduct any kind of retail activity.
The legislation covers both the duties of landlords and tenants – everything important is likely to be found in it. You may need to seek the help of a legal professional to ensure you are compliant.
Western Australia Retail Leases Act
The Commercial Tenancy (Retail Shops) Agreements Act 1985 is the governing legislation for retail lease agreements in Western Australia. Most, if not all, retail shops are covered by the Act, as well as services like hairdressing, dry cleaning and beauty therapy.
If you’re in Western Australia running a shop that provides goods or services, the Act may apply to you.
Can I Assign My Retail Lease?
Retail leases can be assigned to another party. However, the tenant must have the explicit permissions of the landlord first.
Once a tenant approaches the landlord about assigning their retail lease, the landlord must provide an answer no later than 28 days after the request was made.
Get A Deed Of Assignment Of Lease
If you wish to assign your retail lease to another party, then it’s important to get the assignment in writing. A Deed Of Assignment of Lease will do just that, by ensuring your rights and obligations as the tenant are then transferred to the new party.
It’s important to have this in writing and clearly set out the terms for the new tenant so there’s no confusion and the process can be beneficial for all parties involved. It’s best to have an experienced legal professional help you with this – talk to us today if you have any questions.
Can I Extend My Retail Lease?
This will depend on both the landlord and the tenant. If both parties are fine with extending the lease, then they can agree to drag the termination date of the lease agreement out. For example, a lease that was supposed to end on X date will not end 6 months from X.
If you are thinking of extending your retail lease agreement, ensure the new date has been added to the existing agreement and have it reviewed (or you can always have a new one drawn up) and signed by both parties.
Can I Renew My Retail Lease?
Again, this will depend on both the landlord and the tenant. If the two parties are okay with renewing the lease agreement, then they will draw up on a new contract with a different termination date.
As renewal involves a new contract altogether, this is also a chance to renegotiate any terms. However, you could also choose to keep the new contract as similar to the old one.
Additionally, when a lease is being renewed, the landlord still owes the tenant a disclosure statement at least 7 days before the beginning of the lease.
What If I Don’t Have A Lease Agreement?
For commercial leases, there’s not a lot that can be done if you don’t have a lease agreement. All your rights and responsibilities are secured in a lease agreement – without one in place, it’s hard to provide evidence of an agreement (even if one was made verbally) and more specifically, what the terms of the agreement were.
It’s always in your best interest to have a written agreement drawn up, preferably by a legal professional, so you can be assured the contract has been constructed clearly and without any ambiguities.
Where Can I Get A Retail Lease Agreement?
It is important to specifically get a lease agreement that is catered to a retail lease. Commercial leases dealing with businesses are obviously very different to other types of leases, such as residential ones. So, the agreement needs to reflect this and cater to the specifics of your agreement.
At Sprintlaw, our team of lawyers can draft a Retail Lease Agreement, tailored to your business’ requirements. It should cover matters like management, length, termination, assignment plus much more – contact us today to get more information.
It doesn’t matter whether you are a landlord or tenant – knowing how the Retail Leases Act applies to you is extremely important. To summarise what we’ve discussed:
- A retail lease is a lease agreement for businesses engaging in the sale of goods
- The Retail Lease Act is the main legislation governing retail lease agreements
- Tenants and landlords must both sign disclosure statements – it is the landlord’s responsibility to send the first one
- Tenants should also be aware of their deposit payments as well as the permitted use for the property
- Landlords need to make sure they have a retail lease agreement in place which includes any offers for rent abatement that have been agreed to
- The Retail Leases Act applies to NSW only, however, other states have their own version
- Leases can be assigned with the landlords permission – it’s advisable to get a deed of assignment here
- Retail leases can also be extended and renewed
If you would like a consultation on the retail leases act, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
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