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

Does it matter if your business comes under the Act?

If your business is covered by the Act, a retail lease applies. The legislation gives a lessee (i.e. a tenant) 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 than a commercial lease.

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 prevents the lessor (i.e. the landlord) from charging the tenant the lease preparation costs. A disclosure statement must be provided to the lessee setting out information about the premises. It includes information about fit outs, works, refurbishment, a break down of outgoings and other applicable costs in great detail. The disclosure 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 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, office spaces, and 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 person who operates 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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