Commercial & Retail Leases
A commercial or retail lease is a contractual agreement that sets out the rights and responsibilities for landlords and tenants of an enterprise or business. So, once the lease is signed, it is legally binding for many years. Therefore, it is extremely important to get it right from the beginning.
From a landlord’s perspective, a good lease has maximum obligations on the tenant for maintenance, repairs, make good and outgoings. However, from a tenant’s perspective, they want a lease with minimal obligations. Therefore, it is always important to strike a balance so the lease fairly sustains both parties for many years.
Therefore, whether you are a commercial landlord or tenant, it is important to be aware of your obligations and rights under the lease.
WHAT IS A LEASE?
A lease states that the owner of the property (landlord) will allow the use of that property to a person or entity (tenant) for a specified time and payment. However, a commercial lease differs slightly from a retail lease.
A commercial lease is usually a premises, which has no retail activity. This is not always easily determined. Generally speaking, customers are unable to purchase goods or services directly from the building. Commercial premises are usually offices, warehouses or industrial sites.
Previous to the internet, there was a clearer distinction between a commercial lease and a retail lease. However, with the introduction to the internet and online selling, more manufacturing and wholesale businesses are now covered under retail leases, especially if they are selling goods and services directly to consumers.
The distinction between a commercial lease and a retail lease is crucial.
This is because retail leases within Victoria are governed by the Retail Leases Act 2003 (Vic). The Retail Leases Act imposes a number of statutory rights and obligations on both the landlord and tenant. Some items to be considered are:
- The landlord must provide a disclosure statement to the tenant, at least 14 days prior to the retail lease being signed
- Tenants have a right to a minimum term for a period of five years unless that right is waived
- Landlords must repair and maintain the structure of the premises, appliances, fittings and fixtures provided under the lease
- Tenants are not required to pay the landlord’s legal costs and other expenses on preparing the lease documents
- Landlords must provide annual estimates of outgoings payable. If this is not provided then the tenant may not be required to pay the outgoings. Further, a landlord cannot require a tenant to pay land tax
- Landlords must hold a security deposit in an interest-bearing account
- Landlords must not unreasonably withhold consent to transfer the lease and the Retail Leases Act sets out the requirements of such transfer to a new tenant Setting timeframes and requirements in respect of options to renew the lease term;
- Tenants are offered protection against unconscionable or deceptive conduct by the landlord
- Rights and obligations around the termination of a retail lease
WHAT SHOULD BE COVERED IN A LEASE?
The key issues which should be dealt with in any commercial lease include:
- Lease term and options to renew
- Rent and rent reviews
- Permitted use
- Repair and maintenance obligations
- Redevelopment and relocation
- Compensation for disruption caused by landlord’s works
- Assignment and sub-leasing
- Default, breaches and termination
A poorly drafted lease can significantly affect your financial position whether you are a commercial landlord or a tenant. A commercial lawyer looks over paperwork prior to signing to help avoid legal pitfalls and alleviate any cause for concern.
As a tenant, your business goodwill is tied to being able to trade from the leased premises. Leasing for a longer duration allows longevity for your business. Your customers know where you are and how to find you. The security of tenure also ensures you are not spending money relocating your business to another space. Besides the duration of the lease, you also need to consider the options to renew and rent.
Pressing issues for a landlord include, security deposits, use of the premises, fit-out and make good obligations and rent reviews.
COMMERCIAL AND RETAIL LEASING DISPUTES
Our experienced business and commercial lawyers regularly act for landlords and tenants in all aspects of commercial and retail leases. This includes advising and acting on behalf of clients in lease disputes (including non-payment of rent, outgoings and other complex disputes) in the Victorian Small Business Commission, Victorian Civil and Administrative Tribunal and other Victorian Courts.
Our aim is to offer practical, solid advice so our clients obtain the best results.
Mackinnon Jacobs Lawyers ensures you are protected from every angle and can assist with all legal aspects in relation to commercial leases and retail leases. If would like our lawyers to provide you with personal, tailored advice, call or contact us via email.
Would you like to know more?Contact our Commerical and Business Law expert Anothony Presutto on 1300 424 452 to receive personalised advice about your case.