Everything You Need To Know About Retail Leases
Retail premises are those clusters of premises generally promoted or regarded as a shopping centre, a shopping mall, a shopping arcade or shopping court. If you're a business looking for the perfect space to run your retail shop, or perhaps a property owner keen to generate income by leasing your space to a retailer, then you'll need to enter into a retail lease. The legislation that deals with retail leases varies from state to state, so it's important to get the right information before signing any contract.
At Bradley and Bray, we're here to help navigate you through the complexities of establishing a retail shop lease in Queensland, which is why we've prepared the below guide on everything you need to know about retail leases.
What is a retail lease?
A retail lease in Queensland is commonly referred to as a retail shop lease, and exists where the lease is for:
A tenanted business which is in a Retail Shopping Centre.
Where the tenant business is predominately or wholly used for the operation of a retail business.
The piece of legislation that sets out the regulations for retail leases is the Retail Shop Leases Act (QLD) 1994 "(The Act"). The rights and obligations between landlords and tenants are balanced within the Act, and is a crucial piece of legislation to familiarise yourself with, should you be looking at entering into a retail lease.
A lease becomes effective once both parties execute the lease, which makes it all the more important to check up on the legal requirements, restrictions and rights before agreeing to one.
What is the difference between a Retail Lease and a Commercial Lease?
Many people often confuse Retail Leases with Commercial Leases, and understandably so. Whilst a commercial lease is very similar to a retail lease, there are a few key differences.
Commercial lease
Is usually held where the premises are used with no retail activity, such as warehouses, industrial sites or an office within a commercial building.
Retail lease
Exists where the permitted use of the business premises is for selling goods, and is hence considered a retail property.
Some of the similarities between retail and commercial leases are in the standard obligations that apply to both, where the tenant is bound to:
Pay rent on time, and at the specified amount.
Provide the landlord with a bank guarantee, personal guarantee or suitable security bond. (Bank guarantees are issued by banks, where they guarantee to a landlord that the tenant's financial viability will perform according to the terms within the lease).
Attend to any internal maintenance.
Reimburse the costs of any utilities that are attributable to the leased area of the premises back to the landlord.
Close and lock the premises correctly and keep it secure when not in use.
Maintain a level of cleanliness and good working condition of the premises.
Only use the premises for the permitted use that is agreed on and described in the lease.
The key differences between commercial leases and retail leases are around the disclosure of information, unconscionable conduct (which includes misleading or deceptive conduct) and the lease preparation fees.
What do I need to set up a lease for a retail premises?
One of your key responsibilities, regardless of if you're a lessee or lessor, is to conduct your research and make sure that you are covered when it comes to agreeing on your lease conditions.
1. Understand your benefits and protections
The benefits and protections that the Act provides for tenants is higher within a retail lease than it is for other commercial leases, which makes it all the more important for tenants to familiarise themselves with the legislation's relevant provisions.
As a retail tenant, you might be surprised that you are protected under the Act so that:
Your landlord can't charge you with land tax.
Landlords are restricted on how they carry out rent review mechanisms.
The landlord has restrictions on what proportion of outgoings they require as payment from you.
Your prospective landlord is not able to pass the costs for preparing the lease document onto you.
2. Check the definition of a Retail Business
In Queensland, there is an extensive list of the different types of businesses that do and don't fall within the definition of what's considered to be a 'Retail Business'. Section 5c of the Act provides a very broad definition, so it pays to search Schedule 1 within the Retail Shop Leases Regulation 2016 (QLD) to check if your business (or the one you're looking at leasing to) is legally classified as a Retail Business.
For example, if the lettable area is larger than 1000m2, then it's not considered as 'retail'. Also, if the space is in a multi-story building but only 25% or less are retail shops, then it also doesn't meet the definition.
3. Know whether the retail property is considered a Retail Shopping Centre
Shopping centres appear obvious to the layman, however, the Act's section s5D describes in detail what is legally considered to be a Retail Shopping Centre. The Act states that retail shopping centres are considered to be a cluster of premises that have all of the below attributes:
Five or more of the premises are being used wholly or predominantly for carrying on retail businesses.
All of the premises are owned by the one person, or have the one lessor (or head lessor), or if the premises were leased, would have the one lessor or head lessor, or otherwise comprise lots within a single community titles scheme under the Body Corporate and Community Management Act 1997.
All the premises must be located in the one building. If they're located in two or more buildings, then the building must be adjoining, or owned by the one person but separated by common areas, other areas owned by owner or a road. (If there is more than one owner, then the buildings must be separated by common areas or a road).
4. Provide and receive disclosure statements
Before a person enters into any retail lease, a disclosure statement must be provided by both the lessor and lessee. The lessor's disclosure statement is one of the ways that retail tenants are further protected as it must contain information relating to the prospective lease, including:
key lease terms,
details of the premises,
details of outgoings,
other relevant costs associated with the lease, which might include car parking.
The lessor's disclosure statement has to be provided to the lessee at least seven days prior to entering into the lease. If the lessor's disclosure statement has misleading, false or incomplete information or isn't provided with the seven-day timeframe, then the tenant has up to six months from the lease start date to provide written notice that they want to terminate the lease.
Similarly, the lessee's disclosure statement, provided by the tenant, needs to be provided to the prospective landlord, and cover:
Information about the tenant's business circumstances.
A Financial Advice Report (if the tenant has less than five retail leases) as well as a legal advice report.
Can I access legal help when setting up a retail lease?
Given that a legal advice report, issued by a lawyer, is required by a tenant as part of a retail lease, then it's paramount you access local, Queensland-based lawyers that can provide you with the legal services you need.
We know that understanding, interpreting and sometimes even finding the relevant law or legislation can be confusing and stressful — particularly if your small business hinges on finding the perfect retail space.
We assist both landlords and tenants in Queensland; don't leave yourself open to the liability of the unknown when it comes to retail leases.
Fill in your details now to get in touch with us and discover how our team of leading Sunshine Coast Commercial Lawyers can make your complex retail lease, simple!
This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers takes no responsibility for any use of the information provided in this article.
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