02 8005 3955

info@clicklaw.com.au

Retail Lease – is it or isn’t it?

Leasing a property for a shop or business is not as simple as signing a lease contract and paying the rent. Certain factors of your lease may trigger the application of specific laws and rules that you may not be aware of.

In NSW, the government regulates the leases of “retail shops”. The Retail Leases Act 1994 prescribes certain requirements and determines your rights and obligations specific to leases falling within the ambit of a “retail shop lease”. Therefore, before you sign a lease, it is important to know if your lease is governed by the Retail Leases Act 1994 because an appropriate lease is vital to the success (or failure) of your business.

When does the Act apply to your Lease?

The Act applies to your lease if your business is either:

  • included in the “listed business” specified in Schedule 1 of the Act (such as bakeries, nail bars, pet shops, cosmetic shops, etc.) whether or not in a retail shopping centre, or
  • conducted in premises located in a retail shopping centre, whether or not considered as a “listed business”. For example, a dentist or an office in a Shopping Centre will most likely be considered a retail lease.

How does the Act define a Retail Shopping Centre?

A “retail shopping centre” means a cluster of premises that has all of 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 the same lessor or the same head lessor, or comprise lots within a single strata plan under the Strata Schemes (Freehold Development) Act 1973 or the StrataSchemes (Leasehold Development) Act 1986;
  • 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; and
  • the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade.

Are there any Exceptions?

The Act does not apply to certain leases, such as:

  • Leases for a term of 25 years or more;
  • Short-term leases for a term of less than 6 months, unless covered by the exceptions provided in the Act;
  • shops that have a lettable area of 1,000 square metres or more;
  • shops that are used wholly or predominantly for the carrying on of a business by the lessee on behalf of the lessor;
  • any shop within premises where the principal business carried on those premises is the operation of a cinema, bowling alley or skating rink and the shop is operated by the person who operates the cinema, bowling alley or skating rink;
  • any premises in an office tower that forms part of a retail shopping centre; or
  • premises of a class or description prescribed by the regulations as exempt from this Act.

ClickLaw suggests the following tips:

You should not sign a lease without properly understanding the requirements of the Retail Leases Act 1994, including your rights and obligations under the Act. You can make a well-informed decisions with proper legal advice.

If you would like to discuss anything related to the Retail Leases Act 1994, please don’t hesitate to give us a call here at ClickLaw.

John Kettle