Lease instructions

Lease Instructions

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Landlord's cannot pass their legal costs associated with preparation of a new RETAIL lease. However, if the landlord incurs costs in connection with the assignment of the lease or sub-lease, then the tenant may be liable to pay for these expenses.

The Retail Leases Act 2003 applies to a retail premises lease used wholly or predominantly for the sale or hire of goods by retail or the retail provision of services. The Victorian Court of Appeal decision in IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178 has interpreted the Retail Leases Act 2003 to confirm that premises used for supplying commercial services to other businesses are covered by the Retail Leases Act 2003.

A Disclosure Statement is a document that outlines important information and details about the lease so the tenant can understand – at a glance – the key elements of the lease. You need a disclosure statement for: 1: Non-shopping centre retail premises. 2: Shopping centre retail premises. 3: Renewal of a lease. : Assignment of a lease with an ongoing business.

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IMPORTANT! - for retail leases, if less than five years, a section 21(5) of the Retail Leases Act 2003 (Vic) certificate is required, Otherwise default five year term. Retail leases must be more than 12 months.

Retail lease security deposits must be invested

A lease provides terms for a particular period of occupancy, and may include an option to renew. EXAMPLE - 5 year term with an one option to renew for another 5 year term.

IMPORTANT! - Under the Retail Leases Act 2003, landlords cannot pass on their land tax liability to tenants.

FAQ

What is a lease?

A lease is an agreement between an owner of land and a tenant which grants a right of exclusive possession to the tenant. This means the tenant can exclude the whole world, including the landlord, from accessing the land for the term of the lease as long as the tenant complies with its obligations under the lease agreement.

What are 'retail premises'?

The Retail Leases Act applies to leases of ‘retail premises’ entered into or renewed after 1 May 2003.
Section 4 of the Act defines ‘Retail premises’ are premises that, under the terms of the lease, are used wholly or predominantly for:

  • the retail sale or hire of goods;
  • the retail provision of services; or
  • the carrying on of a specified business or specified kind of business as determined by the Minister.

The Victorian Small Business Commission provides a useful guide.

What are 'retail' and 'non-retail' premises'?

The Retail Leases Act 2003 (Act) addresses this imbalance in bargaining power for leases of retail premises in a number of ways, for example by providing that:

  • a landlord cannot pass on to a tenant the cost of preparing and negotiating the lease (section 51 of the Act);
  • a landlord must consent to a tenant’s request for assignment of the lease except in limited circumstances (section 60 of the Act);
  • a tenant has a right to a minimum term of 5 years, even if the lease provides for a shorter term. However, a tenant can contract of out this right if the tenant obtains a certificate from the Small Business Commissioner under section 21(5) of the Act and gives the landlord a copy of the certificate; and
  • a landlord is responsible for undertaking certain repairs and maintaining the premises in certain ways (section 52 of the Act).

What exemptions are there to the Retail Leases Act 2003?

Not all retail tenancies are leases of ‘retail premises’. Some types of leases are exempt from the application of the Act, and the Minister for Small Business, Innovation and Trade has the power to exempt further kinds of business, premises, tenant or leases.

  • Local council premises used wholly or predominantly for public or municipal purposes;
  • Leases for premises used wholly or predominantly for public or municipal purposes with a rent of $10,000 or less;
  • Premises where occupancy costs under the lease are more than $1,000,000 p/a;
  • Premises where the tenant carries on the business as the landlord’s employee or agent;
  • Premises where the tenant is a listed corporation or its subsidiary;
  • Premises located above the first three storeys in a building used for retail purposes; and
  • Leases 15 years or longer in duration that impose substantial obligations on the tenant.

 

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