Retail leases are a type of commercial lease applying to premises used for retail businesses, such as cafes, shops, or service-based operations. In NSW, the Retail Leases Act 1994 (NSW) [the Act], gives tenants more protections than standard commercial leases.
What is a retail lease?
A retail lease is a legally binding agreement between a landlord and a tenant for premises used wholly or predominantly for retail purposes. Retail businesses include:
- restaurants or cafes;
- beauty salons or hairdressers;
- pharmacies; and
- clothing stores.
The Act applies to most retail leases where the:
- premises are under 1,000 square metres in size; and
- lease term is longer than six months (or if the lease term is less than six months but is renewable beyond six months). There is are no minimum lease term requirements.
Features of retail leases
Retail leases are more regulated than other types of commercial leases. Key features include:
Disclosure statements:
Landlords must provide tenants with a disclosure statement outlining key lease terms (including outgoings, rent, and obligations) at least 7 days before the lease is signed.
Rent reviews:
The lease must specify how rent increases are calculated, whether through market reviews, fixed percentages, or CPI adjustments.
Outgoings:
The lease must specify all outgoings the tenant is responsible for, such as strata levies, insurance, and council rates.
Security of tenure:
Tenants may have the option to renew the lease when it expires, giving their business continuity.
“Make good” obligations:
The lease may require that, at the end of the lease, tenants must restore the premises to its original condition.
The Retail Leasing Process
Finding the right premises
Search for a retail space that meets your business needs in terms of location, size, and budget.
Disclosure statement
The landlord must give the tenant a disclosure statement outlining all key terms of the lease. The tenant should carefully review this document.
Lease negotiation
Negotiate and discuss terms, such as lease duration, rent, outgoings, and fit-out contributions.
Seek legal advice
Seek legal advice to understand your rights and obligations.
Sign the lease
Both parties sign the lease. The tenant generally pays the first month’s rent and a security deposit.
Register the lease
Retail leases longer than 3 years must be registered with NSW Land Registry Services. Registration makes the lease enforceable and protects your interests.
Timeframe
Lease preparation: Negotiating and finalising a retail lease can take 2–6 weeks or longer, depending on it’s complexity.
Takeaways
Retail leases in NSW are governed by strict regulations to protect both landlords and tenants. Understanding the basics, reviewing disclosure statements carefully, and seeking legal advice can help you navigate the leasing process confidently.
Here to Help
If you are entering into a retail lease, contact us for legal advice and representation.
