The Retail Leases Act 1994 (NSW) regulates the rights and obligations of lessors and lessees for retail shops.

In 2023 the range of businesses covered by the Retail Leases Act 1994 expanded to include gymnasiums and fitness centres (including yoga, pilates, barre and dance studios) and small bars. Previously, small bars and fitness centres were only covered by the legislation if they were located within a shopping centre or retail strip.

Does it matter whether your business comes under the Act?

If your business is covered by the Act, a retail lease applies. The legislation gives a lessee further protections and coverage and is preferable to a commercial lease. The legislation protects a lessee from unconscionable or deceptive conduct by the lessor. It also allows for less negotiations: lacking such legislative protections, a commercial lease generally has to be more complex and in-depth. A commercial lease consequently has to contain all of the required protections for the tenant.

The legislation also prevents the lessor from charging the tenant the lease preparation costs, so this need not be negotiated. Further, a disclosure statement must be provided to the lessee setting out information about the premises. Information is provided about fit outs, works, refurbishment, a break down of outgoings and other applicable costs in great detail. The statement should also include information about any planned demolition works and alterations or renovations to the building or shopping centre.

If the shop is located within a shopping centre, the statement also contains further information relating to the centre including the floor plan, anchor tenants, annual turnover, and the tenancy mix.

Commercial leases apply to any businesses that are not listed in the schedule of the Act. This includes, industrial premises, warehouses, and office spaces. It also includes any spaces with a lettable area of over 1,000 square metres (even if they are considered retail otherwise). The Act also doesn’t cover shops operated within a bowling alley, cinema or skating rink by the same person who is operating the cinema, bowling alley or skating rink.

Lessees must be a lot more cautious about a commercial lease as there are no legislative protections (aside from the Conveyancing Act 1919 (NSW)) and all rights must be negotiated and altered within the lease so that it is not unfair or onerous.

A commercial lessor can also charge the lessee for lease preparation, mortgagee consent fees, and costs for additional negotiations.

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If you’re considering entering a Retail or commercial lease contact us for expert advice and assistance.