Retail & Commercial Leases
We often assist clients as they embark on retail and commercial leasing. While it can be an exciting time to start or expand a business, it can also be a complex and stressful process, particularly for those who are not familiar with the legal and financial aspects involved.
What is a Retail Lease?
Retail leases are for premises that are primarily used for the sale of goods or services to the public. These premises are typically used for businesses such as shops, cafes, restaurants, and hairdressers. Retail leases are governed by the Retail Leases Act 2003 (Vic), which provides additional protections for tenants in retail premises. Under this Act, retail tenants have a range of protections, including the right to a minimum term of five years, the right to renew the lease, and the right to have disputes resolved through mediation.
The Act also imposes certain disclosure obligations on the landlord who must ensure that the leasing negotiations and terms of the lease comply with these laws. A disclosure statement, which must be provided to a tenant when they are entering into or renewing a lease, includes essential information such as the term of the lease, renewal options and details of rent and outgoings.
What is a Commercial Lease?
Commercial leases are for premises that are primarily used for business or other than retail. Common examples include offices on 3rd floor and above, most industrial warehouses, factories, and farming or agricultural leases.
Commercial leases are not governed by any specific legislation. Therefore, unlike a retail lease where many of the terms are prescribed by legislation, a commercial lease is generally negotiated between the parties, and there are no mandatory provisions and protections that must be included. This means that the rights and obligations of the parties will vary depending on the terms of the lease agreement.
Negotiate the Terms
Both commercial and retail leases are legally binding documents, and it is important to negotiate the terms and conditions before signing the lease. A lawyer can help you review and negotiate the terms of the lease to ensure that they are fair and reasonable.
It is important to seek legal advice from a lawyer with experience in retail and commercial leasing. They can advise you on the legal aspects of the lease, such as the terms of the contract, the disclosure obligations of the landlord, and the dispute resolution mechanisms.
Consider the Costs
Tenants are responsible for paying certain costs in addition to the rent, such as outgoings and maintenance costs. It is important to understand these costs and budget for them accordingly.
Different costs are payable by tenants under retail leases and commercial leases. In a retail lease, the landlord will typically pass through the obligations to pay for certain outgoings such as council rates, water rates, and building insurance. In contract, in a commercial lease, the landlord has the right to recover land tax in addition to other outgoings.
Lease disputes can be costly and disruptive, so it is important to seek legal advice from an experienced property lawyer before entering a lease agreement. We can assist with:
- Drafting and reviewing retail and commercial leases
- Negotiating the terms of the lease agreement (including rent, transfer options, duration, exit and renewal options)
- Subletting of premises
- Lease assignments and transfers
If you need assistance, contact [email protected] or call 0414 939 448 for expert legal advice.