Comasters Law Firm and Notary Public | Negotiating Retail Leases
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Negotiating Retail Leases

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Commercial leasing of shops such as antique shops, bookshops, fast food outlets, furniture showrooms, and restaurants which conduct businesses in New South Wales, are governed by the Retail Leases Act 1994.

 

The Act has certain peculiarities and this article addresses the practical implications of them. It is asserted by the government of the day that under this Act, the lessee’s (tenant’s) rights are favourably protected. There are traps for the unwary and you should not sign a lease until you have fully considered all the relevant points and how they will apply to you. The following points should be noted by the lessor (landlord) so as to avoid any unwanted or adverse outcomes when entering into a lease agreement. These points should also be noted by the lessee (tenant) who intends to lease new premises (so as to increase its bargaining power).

 

Disclosure Statement

Section 11 of the Retail Leases Act provides that the lessee is to be given a disclosure statement prior to entering into a lease agreement. The statement is to be provided at least 7 days before a retail shop lease is signed. A disclosure statement is a statement in writing that contains relevant information in the form as set out in Schedule 2 of the Act (see sample below). If a lessee was not given a disclosure statement or if the disclosure statement that was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within 3 months after the lease was signed.

 

Review to current market rent

Section 19 of the Act which refers to Reviews to current market rent (a common provision under commercial leases) says that:

A retail shop lease that provides for rent to be changed to current market rent is taken to include provision to the following effect (summarised):

  1. The current market rent of the retail shop is the rent that, having regard to the terms and conditions of the lease would be reasonably expected to be paid for the shop if it were unoccupied.
  2. Rent concessions and other benefits are declared to be relevant matters to be taken into account in the assessment of current market rent.
  3. The value of goodwill created by the lessee’s occupation and the value of the lessee’s fixtures and fittings are to be ignored for the purposes of the assessment of current market rent.
  4. If the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a person appointed by agreement between the parties to the lease.

 

For a sample of the disclosure statement (as provided in Schedule 2 of the Act), please view the PDF version of this article.

 

Comasters can advise lessors (landlords) or lessees (tenants) of their respective rights. We are able to prepare (or review) comprehensive lease documents, and also negotiate on behalf of clients.

© Comasters 2001.

 

Important: This is not advice. Clients should not act solely on the basis of the material contained in this paper. Our formal advice should be sought before acting on any aspect of the above information.