Retail & Commercial Leases
Business & Commercial Law
Ensure you are protected when entering into a Retail or Commercial lease
Retail and commercial leases can be a minefield to navigate for both landlords and tenants, and if not handled correctly, can be costly to rectify. It is imperative to obtain the right advice before making a legally binding commitment in the form of a retail or commercial lease.
Attwood Marshall Lawyers understands that for tenants, finding the right commercial space is critically important for your business. For landlords, it is paramount to secure a reliable tenant whilst ensuring your commercial objectives are achieved.
Are you a Landlord?
The Landlord’s solicitor usually drafts the lease documentation. We have extensive experience in drafting lease agreements enabling us to ensure your commercial objectives are met and you are safeguarded against the common pitfalls of leasing.
Are you a Tenant?
As a tenant, entering into a lease can be a daunting process. Whether it is your first-time leasing, or you’re an experienced tenant, it is imperative to obtain legal advice prior to signing any lease documentation (including an Agreement to Lease). If you do not obtain legal advice prior to entering into a Lease, this may have serious legal and financial consequences for you. Our lawyers will ensure you are guided through the process, giving your business the best chance for success in its new premises.
Our property lawyers can provide expert advice in various types of leasing matters including:
- Retail shop leases
- Office leases
- Medical & dental practice leases
- Industrial/Commercial buildings
Whether you are a landlord or tenant, we will ensure you have a comprehensive understanding of your lease, delivered to you in plain English, so you know exactly where you stand.
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A lease is a Contract between the owner of a property (known as the Landlord or the Lessor) and the occupier of the premises (known as the Tenant or Lessee). The Lease sets out the terms of the agreement and the rights and obligations of each party. The Tenant or Lessee’s occupancy of the premises is usually for the purpose of carrying on a business.
An Agreement to Lease is signed by the Landlord and Tenant specifying the essential terms on which the parties agree to lease a premise, pending the signing of formal lease documentation. The terms may generally include the term of the lease including options, rent, how and when rent increases will be calculated, who will be responsible for the payment of outgoings and any works to be undertaken by either party.
There are a number of terms and provisions that should be clearly stated in a Lease. These can include the annual/monthly rent, the outgoings, the bond payable by the tenant, the method and frequency of rental payments, the rights of each party, the obligations of each party, the lettable area of the premises and the events of termination.
Outgoings are costs incurred by the landlord and are often passed to the tenant under the terms of the Lease. Outgoings may include rates, water, body corporate levies, insurance, and management fees.
A Guarantor is an individual who guarantees the performance of the tenant under the Lease. The Guarantor is required to meet the obligations of the tenant if the tenant is in default of the Lease. A Guarantor is usually required when the tenant is a company.
A security bond is usually payable by the tenant prior to the commencement of a Lease. The security bond is protection for the landlord if the tenant defaults on their obligations under the Lease (e.g. fails to pay the rent). The security bond can often be paid as a cash bond or a bank guarantee.
A bank guarantee is a document provided by the tenant’s bank as an assurance that the amount of the bank guarantee will be paid to the landlord if the tenant defaults on their obligations under the Lease. In some instances, a bank guarantee can be accepted in lieu of a cash bond.
An Assignment of Lease is the process where the original tenant (the “assignor”) assigns their right to the leased premises to someone else (the “assignee”).
An Assignment of Lease commonly occurs when the tenant sells their business. In this case, the seller of the business would assign their rights to the leased premises to the buyer of the business.
An option is a further period after the initial term of the lease whereby a tenant can elect to extend the lease for the option period, provided they have strictly conformed to the terms of the lease.
You must read all the terms of the lease and exercise the option in accordance with the lease. This usually requires the tenant to serve a formal notice on the landlord at some time before the expiry of the current lease. Be aware – as the option may need to be exercised a number of months before the expiry of the lease. An incorrect or out of time option notice can result in the tenant not receiving the benefit of the option and being required to vacate the premises. It is important to obtain legal advice before you attempt to exercise an option to make sure it is prepared and served strictly in accordance with the terms of the lease.
There are a number of key differences which separate a retail lease from a commercial lease.
Retail Leases are governed by state specific retail legislation. In Queensland, retail leases are governed by the Retail Shop Leases Act 1994. In New South Wales, retail leases are governed by the Retail Leases Act 1994. This is in contrast to a commercial lease which is not governed by its own legislation. Retail Leases require both the landlord and the tenant to have an understanding of their rights and obligations under legislation.
- Disclosure and Advice Documentation
One of the key differences between a Retail Lease and a Commercial Lease is that the former requires a number of documents to be submitted between the parties prior to the commencement date of the Lease. The landlord must provide the tenant with a ‘Lessor’s Disclosure Statement’ at least 7 days before the tenant enters into the lease. The tenant must provide a ‘Lessee Disclosure Statement’ ‘Financial Advice Report’ (prepared by an accountant) and a ‘Legal Advice Report’ (prepared by a solicitor) at least 7 days before the tenant enters into the lease. Failure to comply with the required documentation can have serious implications on the lease.
A Commercial Lease allows the landlord to recover the costs for preparing the Lease from the tenant, however, this is prohibited if the premises is a retail shop. Under retail shop legislation, each party is responsible for their own legal costs in relation to the lease and only certain costs (such as the costs to register the lease) can be passed to the tenant.
Across the states there are different definitions of what constitutes a retail shop. However, if the following apply, the lease will likely be considered a Retail Shop Lease:
- It is a type of business described as a ‘Retail Shop’ under the legislation for the state in which the business is conducted; or
- The business is conducted in a retail shopping centre; or
- Premises which is used wholly or predominately for the carrying on of a retail business.
It is important to seek legal advice as to whether or not the premises you are leasing falls under retail shop legislation. Contact our friendly property team any time on 1800 621 071 to discuss your leasing matter.