Negotiating on behalf of the Tenant:
A tenant will almost always prefer to have their lease governed by the Retail Lease Act as it offers additional statutory protection over their tenancy. A tenant may prefer to have their lease characterised as a Retail Lease in some circumstances. Where the premises is located in a retail precinct, save for very limited circumstances, the parties will be bound by the Retail Leases Act.
If consumers visit the premises as part of the custom of the use of that premises, then it is likely that lease is at least liable to being considered/ protected under the Retail Lease Act.
Option to Renew
Retail leases will almost never come with an option to purchase but rather an option to renew their tenancy, depending on the landlord. A renewed tenancy under the provisions of a lease with such an option ought to apply the same conditions that were subject of the initial term, save for anything negotiated in a variation. An option to renew, unless the parties seek to substantially change the terms of the agreement by way of variation, should be a simple process whereby the parties simply continue to operate, but for any applied rent review which will increase the tenants rent payable.
Term and Rental Review
The term of a retail lease is likely to be 5 or more years. Rent in a retail premises will generally be higher than a commercial lease because of the location of that premises. Almost every lease will contain an annual method of rent review; whether by fixed percentage increase; by reference to the CPI; or a market review. A retail lease can only have one method of lease review for the entire initial term, then at an option the method can change.
Outgoings
For retail premises it’s much harder to tell the outgoings applicable, so the lease will generally have a mechanism for use of the premises versus the landlord “acting reasonably” for usage outside of the operating hours. This becomes even more convoluted when this use commences in the relevant fitout period. Some retail leases can be negotiated in the early stages to be “gross rent” leases where the rent payable includes any and all rental costs, which is more determinable for both Parties from an early stage.
Deposits under a Retail Lease
Generally speaking, if a landlord to a retail lease seeks to retain your deposit for a lease that fell through, they are prohibited from doing so under s14 of the Retail Leases Act (NSW) (with similarly protections afforded under the same acts in different states). However, even under the Retail Leases Act sub-s 14(4) where a landlord effectively prepares a finalised lease in conjunction with instructions codified in a disclosure statement, and a change to that lease occurs which does not:
(a) amend or insert particulars;
(b) amend a failure made by the lessor to include/ not include an essential term; or
(c) amend a requested change prior to the tenant was issued a disclosure statement.
Then the landlord can invoice for work subsequent to negotiations on points that are not canvassed immediately above.
Have you read negotiation of lease on behalf of the landlord.
This article was written by Racha Abboud, Partner, Jack Coles, Associate and Rita Ters, Lawyer.
