Commercial Leases

Many people may have entered into a lease or tenancy agreement for residential premises before, however it is almost inevitable that every business purchased is conducted from leased premises.

A lease gives the business owner an exclusive right to occupy the premises and operate the business from that premises. The most common types of leases businesses enter into are for:

office space
a retail outlet, including shop and restaurant
warehouse including factory

A lease should:

describe the premises which the business is to occupy
state who pays for any fitout
state the commencement date, the termination date and any option period
state the annual rental, outgoings and provide for rental review
state the permitted use of the premises
state if a security bond or guarantee is required
state the rights and obligations of the tenant and the landlord
state the requirements for insurance
state whether the lease can be assigned or transferred
state who pays for repairs and maintenance of the premises and the equipment
state how the lease can be terminated and what happens on termination
state the hours of trading

Apart from the above:

if the term of a lease is more than 3 years, including any renewal period, then it must be registered with the Department of Lands
the tenant must make it known to the landlord what the premises will be used for and whether the premises meet the tenant's requirements
the tenant must enquire whether permission from Council or other government body is required for carrying out business from that premises
the landlord's conduct must not be unconscionable or misleading or deceptive

The lease for business can be generally categorized into 2 groups: retail leases; and other commercial leases.

Retail Leases

A majority of the retail leases are subject to Legislation. Whilst the Act provides a list of businesses to which it applies, the key features include:

the area of the premises is less than 1,000m2
the premises are used for retail business
the landlord has to disclose to you all the important facts including rental and outgoings prior to entering into a lease
apart from payment of stamp duty and the registration fee, the tenant cannot be asked to pay for the landlord's legal costs unless the tenant requests further changes to the lease
the lease is for a minimum of 5 years including any renewal period unless a certificate is given stating that the lease is for a lesser period
the landlord cannot ask for any key money (either in cash or other benefit) in order to rent the premises to you or to renew the lease
if a security bond is given, the money is now held with the Retail Tenancy Unit, a NSW Government body
the tenant is protected to a certain extent if the landlord wish to relocate you or redevelop the premises
a specialist retail valuer can be appointed if the landlord and tenant cannot agree to market rental upon renewal

Other Commercial Leases

are not affected by the Retail Leases Act
the tenant can be required to pay the landlord's legal costs

Lease Disputes

Invariably disputes do arise in respect of leases. A dispute resolution mechanism has been set up for retail leases where the Retail Tenancy Unit will try to encourage the parties to mediate before the matter is referred to the Retail Leases Division of the Administrative Decisions Tribunal. It can be an expensive exercise going to the Court to settle a lease dispute.

Needless to say, it is important to consult your solicitor before you enter into a lease to ensure that everything agreed to is contained or stated in the lease.

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