Entering into a retail lease agreement is one of the most significant business decisions a business owner can make. The RMB Commercial Law Division explains key aspects of the landlord-tenant relationship.
In NSW, retail leases are governed by the Retail Leases Act 1994 (NSW) which offers protections for retail tenants, such as disclosure requirements, fair trading practices, dispute resolution mechanisms and rent review rules.
It is important to understand whether your lease is a retail lease, and whether you have access to these protections, and to keep an eye out for the following key elements of your retail lease agreement:
The lease term specifies how long you’ll occupy the space. This should align with your business goals, whether you need short-term flexibility or long-term stability. Look for renewal options that allow you to extend the lease and pay attention to clauses which set out how rent will be adjusted over time.
Your base rent is just one component of the cost. Retail leases can include additional expenses such as insurance, maintenance fees, outgoings, and special clauses regarding additional rent such as percentage rent, where you pay a percentage of your sales. These costs must all be accounted for in your financial planning.
The permitted use clause defines what type of business you can operate in the space. Ensure it aligns with your intended business activities. It is essential that you make your own enquiries as to any approvals you may need to operate your business from the premises, as this is not the landlord’s obligation.
Clarify who is responsible for maintenance and repairs. Make sure the lease specifies which areas you are responsible for, and which fall under the landlord’s duties.
Many leases require a security deposit, often equivalent to several months’ rent. Ensure you understand the deposit amount and conditions for its return. If you're a small business, a personal guarantee may be required, making you personally liable for the lease.
It is essential that you review any Special Conditions to the lease. These are binding clauses that apply to your specific lease and can contain various additional rights and obligations.
Carefully reviewing these elements and obtaining legal advice before signing your retail lease will help you to make well-informed business decisions and avoid unexpected costs and complications. With the right legal guidance, you can avoid costly mistakes, negotiate more favourable terms, and ensure that your lease supports the long-term success of your business.
RMB provides support for all business and retail lease agreements, your first step should be to contact our office to arrange a consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.