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Are you considering entering into a Retail Lease? Understand your rights before you sign the Lease

Property Law

A retail lease is very different to a residential and commercial lease, as it is highly regulated and governed by the Retail Leases Act 1994 (NSW) (“Act”).

A retail lease exists where a shop is selling and supplying goods or services where the shop is less than 1,000 square metres and is used for a retail business.

It is important that prospective tenants are aware of the requirements of a retail lease and clearly understand their rights and obligations, as disputes often arise where tenants do not understand the document they are signing, and by that time it is often too late to resolve.

At the outset a tenant should be given by the landlord a Disclosure Statement, at least seven (7) days prior to the commencement of the lease.  The Disclosure Statement is just as important as the lease itself.  A Disclosure Statement details the outgoings payable by the tenant, the details of any fitout works, the rights to exclusivity of use, any planned development and other obligations of both parties.

If you are entering into retail lease in a shopping centre the Disclosure Statement also should include the annual sales of the centre, whether turnover rent is payable, and details of any major fitout.  It is important that this document is accurate in that it reflects the agreement between the parties.  If anything is different from what you have been advised, it should be discussed prior to signing the lease.  Retail lease disputes often arise out of inaccuracies of a Disclosure Statement, and can end up being very costly to resolve.

Once a Disclosure Statement is signed, the tenant can then sign the lease.  It is important that a tenant signs the Lease prior to taking possession or commencing payment of rent.

Considerations for the lease itself include maintenance and repair of equipment, rent, methods of rent review, details of the permitted use, the requirement for a bond and trading hours.

In a shopping centre other considerations include the requirement to contribute to an advertising and promotion fund and the calculation of turnover rent.

In respect to legal costs, the Act states that the landlord is responsible for preparation of the lease.  The tenant is only responsible for expenses such as registration fees and any costs incurred by the landlord to amend the lease once the Disclosure Statement has been signed. Mortgagee consent fees can also be a disputed expense and should be dealt with when negotiating the lease.

The bond can be paid by cash or bank guarantee.  If it is paid by cash a tenant must ensure that the landlord lodges the bond with the Retail Tenancy Unit within 20 business days of receipt.  The benefit of paying by a cash bond is that there is more protection afforded to the bond in that there are specific procedures for paying out bond money at the end of the lease, especially where there is a dispute and the landlord attempts to call upon the bond.

At Atkinson Vinden we understand the importance of entering into a Lease that is right for you.  Please contact a member of our Property team (02) 9411 4466 if you would like assistance in this area.