Do I have a Retail Lease?
Dec 18, 2019The key criteria to consider if you think you are entering into a Retail Lease
Retail Leases are governed by the Retail Leases Act 1994 (NSW) (‘the Act’) and are subject to different laws and regulations to standard Commercial Leases. It is important that you correctly identify whether your lease is a Retail Lease for the purposes of the legislation, as there are different obligations and rules imposed on you and the landlord if that is the case.
What types of leased property are covered under the Act?
The Act applies to leases over ‘Retail Shops’ which are defined under the Act as being a premises that:
- are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a shopping centre), or
- Are used, or proposed to be used, for the carrying on of any business… in a retail shopping centre.
The Act provides a comprehensive list of businesses which are considered Retail Shops under this definition (as contained in Schedule 1 of the Act) – this list can be accessed here. If your particular shop type is not listed specifically, it is important that you consider whether you would be covered generally by one of the categories under that list. For example – “Shops selling or engaged in providing any one or more of the following goods or services in relation to any person: accessories, baby wear, bags, caps, clothing, clothing alterations, underwear or sunshades.”
Under sub-section (b) of this definition, businesses in a Retail Shopping Centre are also deemed as being Retail Shops. Retail Shopping Centres are characterised as a cluster of premises which have the following attributes:
- at least 5 of the premises are used wholly or predominantly for the carrying on of one or more listed businesses,
- the premises are all owned by the same person, or have (or would if leased have) the same lessor or the same head lessor, or comprise lots within a single strata plan under the Strata Schemes Development Act 2015,
- the premises are located in the one building or in 2 or more buildings that are either adjoining or separated only by common areas or other areas owned by the owner of the retail shops,
- the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade.
So, if you have a business that you think is in a Retail Shopping Centre, you should consider whether you would fall into this definition, or whether you would fall into an exception to that rule. We recommend that you get legal advice to assist you in making this determination.
Disclosure Obligations
If you are entering into a Retail Lease then there are some preliminary matters which need to be addressed before you sign any lease.
- The lease and Lessor Disclosure Statement will need to be prepared prior to the property being offered for lease, and should be provided to you along with the Retail Tenancy Guide when negotiating the lease. You will need to sign an acknowledgement confirming your receipt of those documents;
- You should not enter into the lease until 7 days following receipt of those documents;
- You will need to provide a Lessee’s Disclosure Statement within 7 days of receiving the Landlord’s Disclosure Statement.
Costs & Bonds
Unlike with Commercial Leases, the landlord cannot pass their legal fees for the preparation of the lease to the tenant (save for some limited circumstances). The landlord is also required to deposit any cash bond that you may provide with the NSW Government’s Retail Bond Scheme within 20 business days of receiving that bond.
If you are entering into a Retail Lease, we recommend that you obtain legal representation to assist you with negotiations and execution of the documents so that you meet all your obligations under the Act.
Contact the Shire Legal team if you have any questions.
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