• 7 mins read

Taking on a retail lease is an exciting step for a business, and it’s a significant commitment too. Therefore, you need to exercise due diligence for both your rights and obligations before you sign a retail lease agreement which is a significant legal document that binds both parties.  

As part of signing the lease agreement, it is highly recommended to seek qualified advice from a specialised leasing lawyer. The following considerations will equip to engage in your lease negotiations, as well as effectively communicate with your lawyer regarding any retail lease concerns.  

1. Understand the Legal Commencement of a Retail Lease  

A lease is considered initiated when any of the following events occur:  

      • The tenant takes possession of the premises; or  

      • Rent payments commence; or  

      • Both parties sign the lease agreement.   

    As a potential tenant, you should only take any of the above actions once you are fully prepared to proceed with the lease.  

    2. Be Aware of the Landlord Obligations in Retail Lease Negotiations  

    During your lease negotiations, landlords are legally obligated to provide potential tenants with a Victorian Small Business Commission information brochure on retail leases and a proposed lease.   

    Additionally, at least seven days prior to finalising the lease, landlords must provide tenants with a disclosure statement and a completed proposed lease for the property. This disclosure statement needs to contain crucial financial details such as rent, outgoings, and other obligations, which can significantly impact a business’s viability.   

    Note, a disclosure statement also needs to be given to a tenant when a lease is being renewed.  

    3. Review All Essential Items in Your Retail Lease  

    It’s important that the legal retail lease you are signing aligns with the needs of you and your business.   

    Following are the essential items you need to review in your retail lease before signing:  

        • Lease term and renewal options.  

        • Commencement rent amount and terms of rent reviews.  

        • Dates for exercising lease options.  

        • Outgoings and occupancy costs.  

        • Permitted use of premises.  

        • End-of-lease obligations.  

        • Lease assignment terms.  

      4. Be Aware That Some State Government Requirements Override Retail Leases  

      State Government requirements vary across Australia. Therefore, it is essential to understand each state’s stipulations.   

      The Retail Leases Act contains by-state requirements that override a lease such as requiring landlords to:  

          • Maintaining and repairing premises  

          • Providing annual estimates of outgoings.  

          • Covering lease preparation costs and Act compliance expenses.  

          • Issuing reminder notices regarding lease options and renewals.  

        Retail leases carry significant weight for retail businesses and need to be meticulously considered as they are legally binding documents. It’s imperative for business owners to thoroughly review every aspect of the lease before signing, and to seek legal advice if there are any uncertainties.  

        Ensure you keep up to date with all changes by referring to your relevant state’s information, as this information can change over time.   

        If you are interested to invest in a commercial property with a retail lease, or you are a landlord with inquiries on your tenancy, the team at TPA are ready to assist with your enquiry. Contact us today.   

        Disclaimer: The Property Advisory (TPA) is a property investment company. The information provided on our website, social media platforms, and other communication channels is intended for general informational purposes only and should not be construed as financial or investment advice. Please consult with a professional financial advisor before making any investment decisions. All rights reserved by The Property Advisory and may not be distributed without the permission of The Property Advisory.