Commercial and Retail Leases

Practice Areas > Commercial and Retail Leases

Commercial and retail leases can be complex documents. Whilst landlord and tenants rights are generally prescribed in legislation, the lease itself will determine how those rights and obligations are to be applied. Rent can be very expensive for the tenant and is probably one of the biggest outgoings of any business. It is therefore important to know what your legal rights and obligations are and you should always get legal advice if considering entering into a commercial or retail lease.

mdp McDonald Partners have extensive experience in the fields of commercial and retail leasing, and can provide clear and timely advice to both landlords and tenants.

Disclosure Statements

Retails leases in Victoria are subject to the Retail Leases Act 2003 (Vic). This covers leases for any retail premises used for the sale or hire of goods (subject to certain exceptions).

Where the Retail Leases Act applies, landlords must provide a tenant with a copy of the lease and a disclosure statement which must be provided at least seven days prior to entering into the lease.

The tenant may, in some circumstances, have the right to withhold rent or terminate the lease if the landlord fails to provide the tenant with a disclosure statement. The tenant may also have the right to terminate the lease if the disclosure statement is misleading, false or materially incomplete.

Entering into a retail lease represents a significant investment, and therefore it is essential that you understand your rights and obligations in the lease as well as the content of the disclosure statement.

 mdp McDonald Partners can provide assistance with the preparation or review of leases and disclosure statements.

Rent

All leases should clearly identify:

• the amount of rent payable;

• dates / times when rent is payable;

• all outgoings payable by the tenant;

• options to renew rent; and

• rent review dates, method of rent review calculation

Some retail lease provide for rent to be calculated on the gross turnover of a business. If this applies to your lease, you should obtain legal advice. These agreements can place unnecessary strain on the tenant or may in the breach of the tenant's obligations under other legislation or professional rules (for examples, the Pharmacy Practice Act 2004).

Other Expenses

Leases also set out what the parties' obligations are to repair and maintain the property.

As a rule, a landlord is responsible for maintaining the property (the structure and fittings) in good repair. This may include plant and equipment and if not otherwise installed by the tenant.

A landlord may also be responsible for maintaining infrastructure for gas, electricity, water, drainage or other services. A landlord is not responsible for maintaining or repairing such infrastructure if the tenant is responsible for misuse of or, damage to that infrastructure.

Permitted Uses

A retail lease must identify the permitted use, or uses, of the property. 

As a tenant, you should consider if the permitted use is restrictive to your business or whether you are able to negotiate a change of permitted use subject to the landlord's approval (in writing).

As a landlord, you should consider whether you are able to allow your premises to be used as proposed in the lease as legislation, council zoning laws and other similar regulations may restrict or prevent you from doing so. Leasing a property without obtaining property approvals or misrepresenting that the tenant is able to conduct its business on your premises when legislation states otherwise can expose you to significant penalties and possible legal action for damages by the tenant.

Renewing and Assigning a Lease

A right to renew you lease must be stipulated in the agreement. This is usually termed as an "option to renew", "option" and may provide for the tenant to have the chance to renew their lease 2 or 3 times for the same length of the initial lease. All leases should have a timeframe in which the tenant must exercise the option to renew. Depending on the nature of the business, this period may be negotiated.

How the option is to be exercised, the terms and conditions on which the lease is renewable and how the rent is to be calculated during the renewed term are all negotiable when entering a lease. Both tenant and landlord should also consider issues such as the ability to assign the lease if the tenant decides to sell the business.

 mdp McDonald Partners has a wealth of experience drafting commercial and retail leases for landlords in order to protect their business premises. We are also experienced in acting for tenants anvd have achieved notable commercial results for our clients in terms and conditions with landlords.