An experienced legal expert unpicks the complexities of negotiating a retail lease and ensuring it is compliant with the rules and regulations governing them in Victoria
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Moving into a commercial space can be exciting and rewarding. However, commercial leases can be confusing, particularly when your lease is a Retail Lease. Here is Legally Yours’ guide to help you understand the key factors that may affect you and your business when you sign a retail lease.
What is a Retail Lease?
A retail lease is a type of commercial lease that relates to retail premises. Retail leases in Victoria are in most cases governed by the Retail Leases Act 2003 (Vic) (“the Act”).
If you’re in the business of selling or hiring goods or services, then your premises will likely be considered ‘retail premises’ under the Act.
Some examples of ‘retail premises’ are:
- Fashion stores
- Cafes and bars
- Accounting practices
- Gymnasiums
- Graphic Design studios
Some examples of businesses not caught by the Act:
- Wholesalers, manufacturers or storage providers
- Businesses where the cost of occupancy exceeds $1m per annum
- If the term of the lease is less then one year (unless consecutively renewed)
- Listed corporations and their subsidiaries
- Businesses who have been granted an exemption
In all of these cases your premises are generally not considered ‘retail premises’ and therefore the Act will not apply to your business.
What terms and conditions should I negotiate before signing a Retail Lease?
A lot of tenants forget that they have the opportunity to negotiate the terms of their lease. When doing so it’s important to consider the following main terms, as these will form the basis of your negotiations:
- The required rent and the method used to review or increase the rent during the term of the lease.
- The term of the lease and whether you are provided with options to renew the lease.
- The amount of outgoings under the lease and whether you or the landlord is responsible for paying the outgoings.
- The amount (if any) of security deposit.
- What the ‘permitted use’ of the premises is under the lease.
What is the minimum term for a Retail Lease in Victoria?
Under the Act the minimum term for a Retail Lease in Victoria is five years.
What is the landlord required to provide to me as a new tenant?
The Act requires the landlord to give the tenant the following:
- A copy of the proposed lease and a disclosure statement at least 7 days before you sign the lease
- A copy of the Victorian Small Business Commissioner Information brochure on retail leases
Once you’ve signed the lease the landlord is then required to provide you with a copy of the fully signed lease within 28 days.
Should I sign a Retail Lease before obtaining permits and licences for my business?
Ideally a tenant should obtain all relevant licences and permits prior to signing a Retail Lease. If this is not possible, negotiate with the landlord to insert a clause stating that the lease is conditional on the licences and permits being obtained.
What if the landlord has mortgaged the premises? Does the bank need to provide consent?
It’s important to ask the landlord whether the premises are mortgaged. If so, it is likely that the bank or financial institution will need to provide consent to the Retail Lease.
As a tenant it will be prudent to ask for a copy of the consent from the bank or financial institution as soon as possible during negotiations. If consent has not been provided then it’s possible that the bank or financial institution may be entitled to evict you as a tenant.
If you’re thinking about signing a retail lease and would like a leasing expert to guide you through the process please contact Mira Stammers on 1300 822 708.
Brought to you by Mira Stammers, CEO, Legally Yours. Mira has extensive experience in corporate law in both Melbourne and London and regularly advises business owners in the areas of corporate and real estate law. Mira has a team of expert lawyers experienced in all areas of law that provide fixed-fee legal advice to businesses across Australia. If you’re looking for an expert leasing lawyer, Mira can help.
