Retail Leases: A General Overview
A lease provides a written record of the terms and conditions for the occupancy of the property by the tenant with the Landlord. Its purpose is to create certainty of the occupancy and terms and conditions of use.
Entering into a lease is a very important element of any business, it represents the right for a business owner to conduct business from a particular location; as well as representing one of the business’s largest outgoings.
There are a few key things to consider when entering into a retail shop lease.
Rent
This is an important element of the lease. How much rent will the tenant be paying per payment period and through the term of the lease. It is however not the only cost associated with a lease.
Outgoings
The terms of the lease may provide that the tenant may be liable for certain outgoings ranging from utilities to contributions to costs imposed by Landlord for marketing and other activities undertaken by shopping centres.
Term and Options for further Terms
The lease will provide for an initial term. This may be a matter of months or years. It may also provide an option to renew. This can often include several options. Eg. an initial term of 3 years with option to renew for another 3 year period.
The option to renew will be based on certain terms and conditions, most often the compliance of the tenant to the terms of the lease. Eg. there are no significant breaches during the initial term. There will often be a mechanism to renegotiate the financial terms.
Suitability of the premises
This raises several issues, namely the condition of the premises, the required licences and regulatory compliance as well as the nature of the business to be conducted at the premises. Can the business legally operate from the premises?
Trading Hours
Trading hours can often be an issue for business owners in shopping centres as they may have to give undertakings to operate whilst the shopping centre is open. Trading hours can also be dictated by the relevant state rules and regulations.
Sale of business
It is important to consider the transferability of the lease as it is an important asset of a business and is often essential for the sale of business.
Legislative Protection for the Tenant
Retail shop leases are governed by the Retail Shop Leases Act 1994 (Qld), which gives both parties rights and obligations. For example, at least 7 days before a prospective tenant enters into a retail shop lease, the landlord must give the tenant a draft of the lease and a disclosure statement. The tenant can accept the disclosure statement later only by signing a waiver notice, supported by a lawyer’s advice report unless the tenant is a major lessee.
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Joe Kafrouni, Accredited Specialist in Business Law, Kafrouni Law
Disclaimer: This article is general information only and is not legal advice. Before acting on it, get advice on your own circumstances. To the extent the law allows, Kafrouni Law accepts no liability for any loss arising from reliance on it. This article is the copyright of Kafrouni Law.
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