All states have legislation governing retail leases that impose rights and obligations on the landlord and tenant. Each party must be aware of the legislation as failing to comply may lead to penalties.

Parties must be careful to obtain appropriate legal advice before entering into a retail lease.  Beware as the legislation may override clauses in the lease.

Landlords must ensure they comply with the following:

·  Provide a disclosure compliant with the legislation before a tenant signs or enters into a lease;

·  A rent review clause must not preclude or limit a rent reduction on a market review;

·  Give certain notices regarding options and decisions as to whether or not to grant new leases;

·  Provide compensation when required under the legislation;

·  Not act unconscionably; and

·  Comply with the dispute resolution process under the legislation.

 

Things tenant’s should consider before entering into a lease

Things tenant’s should consider before entering into a lease

1. Suitability of the premises

Is the premises suitable for your business? Considerations should be given to location, size, town planning issues and approvals, term of the lease, rent, rent review, incentives, outgoings, trading hours, signage and parking.

2. Negotiate terms of the lease with the landlord

What are the key terms you are prepared to accept? The terms you should agree on before a lease is prepared include:

o   Term;

o   Rent and rent review;

o   Options;

o   Outgoings;

o   Incentives;

o   Exclusivity;

o   Assign and sublet provisions;

o   If a security is to be given such as bank guarantee or guarantor;

o   Who will pay for the costs associated with the lease;

o   Is parking available and if so is there an additional cost?

o   Who will maintain, repair and replace the air conditioning;

o   Is the lease conditional on you obtaining your DA for use, signage or works.

Once the above are agreed the agent or landlord should prepare a summary of agreed terms generally called a Heads of Agreement or Letter of Intent.

A lease will subsequently be prepared.

3. Engage a lawyer to review your lease

A lawyer should ensure that the following occurs:

a. the agreed terms are inserted into the lease;

b. the legislation is complied with;

c. identify aspects of the lease that impose greater costs and obligations on you;

d. negotiate a lease that is preferable and fair to you;

e. ensure final agreed items are all incorporated into the lease;

f. ensure the lease has been executed correctly by both parties;

g. ensure the lease is registered; and

h. save you money over the life of your lease.

4. Obtain a final signed and registered copy of the lease

The correct parties must sign the lease. To confirm this has been done correctly, a company search should be completed. Either two directors or a director and secretary of a company must sign on behalf of the corporation for them to be bound by the lease.

Once executed correctly, the lease should be registered to protect the interests of the tenant. This means that if the landlord decides to sell the land then the new purchaser has notice of the lease.

Final point

No lease is standard. They all vary and should be reviewed before being signed.

If you do not obtain legal advice, then you may be agreeing to a lease that you may not be able to afford due to its hidden costs and obligations. You could risk losing thousands if you do not obtain specialist leasing advice from a lawyer.