The term “Retail Lease” is used to describe Leases of retail premises which are governed by the Retail Leases Act 1994. This is a specific piece of legislation applying to a written or oral agreement to lease retail premises in New South Wales.  There is similar legislation in other states.

The Act refers to a “Retail Shop” and defines it as premises that are used wholly or predominantly for the carrying out of a prescribed retail activity or are in a retail shopping centre.  These terms have tricky and complicated definitions and if you are leasing a retail shop then you need to take care.
The Retail Leases Act does not apply to a Lease for more than 25 years or if the premises have a lettable area of 1,000m² or more. It is not possible to override or contract out of the provisions of the Retail Leases Act. If there is a clause in a Retail Lease which is inconsistent with the provisions of the Retail Leases Act then the clause is void.
The Retail Leases Act imposes a number of obligations and prohibitions which do not apply to other forms of Leases and failure to understand these can be fatal.  The landlord, for example, cannot recover the lease preparation costs from the tenant and this is a peculiar prohibition applying only to a Retail Lease.
Retail Lease - Lease Hub

Retail Lease Checklist:

  1. The landlord must provide a copy of the draft Lease and the Retail Tenancy Guide before the Lease is entered into.
  2. The landlord must provide the tenant with a Disclosure Statement 7 days prior to entering into the Lease.
  3. The tenant must give the landlord a Lessee’s Disclosure Statement no later than 7 days after the tenant receives the Landlord’s Disclosure Statement.
  4. What is the length of time of the Lease?  Is the tenant to be given an option?  Are there any circumstances when the term of the Lease could be reduced if, for example, the premises were destroyed? The term of a Retail Lease is extended to 5 years unless a Section 16 Certificate is provided certifying that the tenant agrees to a Lease for a term less than 5 years.
  5. There are strict limitations on the ability of the landlord to recover some outgoings and in some cases the landlord will be required to have the amount of outgoings audited annually.
  6. A Security Deposit paid by the tenant must be lodged with the Retail Tenancy Unit.  A landlord and tenant cannot agree to retain and invest the Security Deposit.
  7. Special provisions apply for premises in a retail shopping centre.
  8. The checklist for Commercial Leases set out above should also be considered and applied where necessary.
  9. The Retail Leases Act prohibits “ratchet clauses”; clauses which prevent rent from decreasing.

For further lease information contact our team on (02) 4926 1944.