Commercial & Retail Leases

In Victoria, commercial leases are governed through the operation and interpretation of such legislation such as the Retail Tenancies Reform Act 1998, the Retail Tenancies Act 1986, the Landlord and Tenants Act 1958 and the Transfer of Land Act 1958.
Business proprietors may choose to lease premises for many reasons; these may include capital and cash flow limits and size and location flexibility. If you choose to rent your business premises it is crucial to be familiar with the legal aspects of tenancy.
Before signing any business property lease or lease renewal option, you should consult with a Solicitor at Portelli and Co for advice on the meanings of the various clauses. Make sure you are fully aware of the commitment you are undertaking.

Documents That Must Be Provided to a Prospective Tenant:

The Retail Reform Act requires that a Landlord must, seven days before entering into a lease provide to a prospective tenant:

  • A Disclosure Statement
  • A Proposed Lease
  • An information booklet about retail tenancies

It is always advisable that these documents are prepared by a solicitor (in the case of a landlord) as failure to provide accurate information may result in the tenant withholding rent until proper disclosure is given, further no rent is payable until accurate disclosure is given, and the Lessor has the right to terminate the lease within seven days of receiving the disclosure statement.
If a Disclosure statement is misleading or false the tenant may be able to terminate within 28 days of receiving the lease, receiving the Disclosure Statement or entering into the lease, whichever occurs last.
It is also advisable that a tenant has a solicitor review the lease documentation before committing to and signing the lease.

What is a Disclosure Statement?

A Disclosure Statement is a document that discloses to a prospective tenant information that is required for the tenant to make an informed decision prior to entering into a lease.
It contains a list of outgoings for which the Landlord is required to supply information or estimates.

Things to Consider Before Entering Into a Lease

  • What is the duration of the lease. For example, if you are taking over an existing lease, how much longer does it have to run?
  • Does the lease have an option (or options) to renew? Does the tenant need to give prior notice of intention to take up the next option? Must this notice be in writing and how long before expiration of the lease?
  • What is the rental (annual, monthly, weekly)?
  • How often and on what basis can the rental be varied, e.g. is it based on turnover, gross profit, C.P.I., flat percentage increase?
  • Who is responsible for the rates and taxes on the property?
  • What types of property insurance are required under the terms of the lease? Who is responsible for these insurances?
  • Does the lease include a Right of Assignment clause, i.e. can you transfer the lease in the event of selling the business and, if so, under what conditions?
  • Can the tenant sublet all or part of the premises? If so, under what conditions?
  • Does the lease allow for the type of business the lessee intends conducting? Are there any limitations that might hinder diversification?
  • Does the type of business you intend operating require a special license? For example, a food shop requires a health permit normally issued by the local council. Have you checked whether this permit will be available to you if you sign the lease?
  • Does the business you want to operate require a town planning permit and, if so, has the relevant permit been granted? Town planning permits are often subject to stringent conditions. How will these conditions affect your business?
  • Who is responsible for maintenance of the structure, fixtures, fittings, equipment and chattels?