Victoria Retail Lease Agreements

Victoria Retail Lease
Many Australian state governments have expanded their concept of consumer protection to include small business consumers who were bargaining on a far from level playing field, where owners of large shopping centres had all the advantages and all the power . They seek to provide this protection by making sure that prospective tenants have sufficient information to make a sound business decision when entering into or renewing a lease.

Recent amendments clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions. As a result, the amendments require greater responsibility and pro-active behaviour from the landlord.

Disclosure Statements

A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.

If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct. At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into. The law requires the landlord to give the tenant a disclosure statement at least seven days before entering into the lease. Tough penalties apply if it isn’t, or if the statement is inaccurate.

In particular, the Act renders void lease provisions which require any tenant’s payment for contribution to fit out that has not been disclosed in a disclosure statement. In most states law entitles the tenant, if he/she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent they do pay is non refundable).

For new leases a landlord has to provide the tenant with a copy of the unsigned agreement (with the names and addresses of the parties included), a disclosure statement, and a government prepared information brochure when negotiations are commenced, and in no case less than 7 days before the lease is entered into. (That is, negotiations must proceed for 7 days; a landlord can’t just sign a tenant up on the spot). A copy of the proposed lease has to be provided once it has been signed. The copies can be photocopies. If the landlord doesn’t supply a full copy of the lease, or doesn’t do it within 28 days of it being signed, or the disclosure statement is wrong, the tenant can also end the lease.

The tenant doesn’t have to pay for fit-out contributions if the liability to pay them is not disclosed in the disclosure statement.

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time. This can particularly occur in the case of providing estimates or statements of outgoings. Strata levies are also to be included in the list of outgoings.
Lease Periods

In Victoria a landlord needs the permission of the Small Business Commissioner to have a lease of less than 5 years.
Outgoings

A landlord has to provide a written estimate, before entering into the lease and 1 month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions) otherwise the tenant doesn’t have to pay them. If a landlord wants the tenant to pay for a share of the expenses (other than usual outgoings – such as marketing expenses) he/she must provide an audited account, which is generally both too hard and too expensive.

A landlord can’t ask a tenant for capital costs or interest on any loans. In Victoria , he/she also can’t ask the tenant to pay land tax or any legal or other expenses relating to drawing up of the lease, the disclosure statement or other documents required by the Act.

A landlord can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability.
In Victoria a tenant cannot be asked to pay Key Money.
Registering

A landlord must notify the Small Business Commissioner of the agreement, including the names and addresses of the parties, the start and expiry date; and details about the options.
Bonds

A landlord may ask for a bond, or security deposit. If received, it has to be put in an interest bearing account and the interest belongs to the tenant. Landlords must return a security deposit to the tenant as soon as practicable after the lease ends where the tenant has performed all obligations under the lease. The tenant has the option to provide a bank guarantee instead of a security deposit. Any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.
Rent Increases

As the market ones are so complicated it is recommended that the rent be reviewed at the end of each lease period.
Breach Notices

A landlord is required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to he/she entering the premises.
Renewal and Options to renew .

In all states, if an option for renewal is not exercised at the right time it will be lost.
The tenant can exercise an option for renewal even if there has been a breach of the lease, generally the lease will set out the provisions to exercise the option.

Western Australia Retail Lease Agreements

Western Australia Retail Leases

Many Australian state governments have expanded their concept of consumer protection to include small business consumers who were bargaining on a far from level playing field, where owners of large shopping centres had all the advantages and all the power. The state governments seek to provide this protection by making sure that prospective tenants have sufficient information to make sound business decisions when entering into or renewing a retail lease.

Recent amendments to the Commercial Tenancy (Retail Shops) Agreement Act 1985 in WA clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions. As a result, the amendments require greater responsibility and pro-active behaviour from the Landlords.

The Commercial Tenancy (Retail Shops) Agreement Act 1985 regulates retail and other commercial tenancies. The principal focus is on the need for transparency of information and fairness in the contract by:

• requiring a disclosure statement by the Owner (lessor ) to the tenant (lessee);
• establishing a consistent and fair process for rent reviews;
• giving the tenant an entitlement to a minimum lease period of up to 5 years;
• regulating the distribution of specified landlord expenses to tenants;
• provide access to alternative lower cost mediation and dispute resolution mechanisms offered by the State Administrative Tribunal.

It is important for landlords and tenants of retail premises and other businesses covered by the Act to establish the impact of the Act on their lease agreement.
Commercial Tenancy (Retail Shops) Agreement Act covers parties involved in retail/commercial leases for shop premises which are:

• up to but no greater than1000 square metres in area;
• tenanted by private businesses but not publicly listed companies and their subsidiaries;
• tenanted by non-retail businesses where located in a shopping centre (of 5 or more retail shops or specified businesses);
• the business carried out by the lessee is a specified business such as a dry cleaning, hairdressing, beauty therapy, shoe repair, video store or some petrol station agreements.

Disclosure statements:

The Law in Western Australia , is very clear:

A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.
If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct.

At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into. See s6A of the Act.

Tough penalties apply if you don’t provide this guide or if the statement is inaccurate. In particular, Commercial Tenancy (Retail Shops) Agreement Act 1985 renders void, lease provisions which require any tenant’s payment for contribution to fit out, that has not been disclosed in a disclosure statement. In most states the law entitles the tenant, if he/she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent paid is non refundable).

The only way a tenant cannot end the lease in case of inadequate disclosure is where:

• the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned,
• the tenant is in substantially as good a position as the tenant would have been if the failure had not occurred.

Commercial Tenancy Forms and Act

The property owner or their agent is required to provide forms specified by Regulations under Commercial Tenancy (Retail Shops) Agreement Act to prospective tenants to enable a proper assessment of a lease proposal.
Contact the State Law Publishers:

10, William Street ,

Perth ,

Phone: (08) 9321 7688;

website: www.slp.wa.gov.au

for information on authorised copies of the Act, the Regulations and the Forms see ‘ The tenant guide’ (form 6)

If the tenant requires it additions may need to be included in the statement such as;

• After hours access
• Air conditioning
• Air control
• Cool rooms/freezers
• Dedicated parking bays
• Delivery access
• Drainage
• External equipment
• Fire protection
• Floor loading
• Hot/cold water
• Power/lighting
• Security
• Shop fit-out
• Telephone/facsimile/radio
• Tenancy cleaning
• Wall loading
• Wet/dry waste
• Other:

If a lease is subject to the Act, any dispute arising between the tenant and the landlord may be referred to the State Administrative Tribunal. The fee payable is currently $29.00.

If a lease is entered into by way of the ‘renewal of a lease’ on the exercise of an option, a landlord should make a fresh disclosure statement.

For new leases you have to provide the tenant with a copy of the unsigned agreement (with the names and addresses of the parties included), a disclosure statement, and a government prepared Information Brochure available from the Department of Consumer and Employment Protection

You do not need an information leaflet or a disclosure statement in WA for RENEWALS.

The tenant doesn’t have to pay for fit-out contributions if the liability to pay them is not disclosed in the disclosure statement. However, if you alert the tenant to the fact that there will be a requirement for payment of an outgoing, and, specify that it is to be calculated by a third party in a reasonable fashion then that is sufficient (unlike stricter requirements in other states).

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time. This can particularly occur in the case of providing estimates or statements of outgoings. Strata levies are also to be included in the list of outgoings.
The Commercial Tenancy (Retail Shops) Agreements Amendment Act1998 introduces to retail/commercial leases covered by the Act, more than thirty changes which:

• improve disclosure and information for prospective tenants particularly in the form of a new Tenant guide;
• support fairness and equity in rent review provisions including the prohibition of ratchet clauses (which took no account of current market rent levels);
• introduce a rationale to limit tenant contributions to valid landlord expenses;
• prohibit management fees being recovered from tenants by managing agents or owners managing their own properties;
• clarify obligations in relation to contributions to sinking, marketing and promotion funds;
• enhance protection by adopting nationally recognised audit standards; and
• extend the jurisdiction and powers of the Registrar and Commercial Tribunal in support of these initiatives.

In all states, the lessor must provide the lessee with a copy of the Tenant Guide promptly (although there is no specific requirement for this in WA, it goers to the question of unconscionable conduct if you don’t).

You cannot demand that a tenant pay you key money.

In 2007, the Retail Shops and Fair Trading Legislation Amendment Act 2005 (RSFT Act) introduced unconscionable conduct provisions to the Commercial Tenancy Act. The RSFT Act does not include provisions that allow appeal from a Commercial Tribunal ruling.
5 year Minimum term

Section 13 of Commercial Tenancy (Retail Shops) Agreement Act 1985 provides tenants entering a new retail shop for the first time the right to at least five years tenancy to help establish and develop the business, with an option for a further five years.

Section 13(b) provides provisions regarding how renewal notices should be administered when the term of the lease expires. Landlords are not required, under the notice of renewal, to specify rent until 3 months before the expiry of the lease. A tenant may negotiate a shorter lease term with the landlord.
Rent Increases

Section 11(2)(b) of the Act provides that unless specific provision is made in the retail shop lease for the time at which review may be initiated, either party can initiate the market rent review process at any stage. At the end of each lease period the rent should be reviewed. In Western Australia , two rental increases a year are acceptable.
Outgoings

The lessor has to provide a written estimate, before entering into the lease and 1 month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions). Otherwise the tenant does not have to pay them. If you want the tenant to pay for a share of your expenses (other than usual outgoings – such as marketing expenses) you have to provide an audited account.

You can’t ask your tenant for capital costs or interest on your loans. In Western Australia , you also can’t ask the tenant to pay your land tax or your legal or other expenses relating to drawing up of the lease, the disclosure statement or other documents required by the Act.

You can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability, in all states.
Legal expenses

Section 12 of the Act relates to tenants’ contribution to landlord’s regular operating expenses and does not include reference to who pays the cost of preparing and negotiating a lease. WA retail leases generally include provisions making tenants pay the landlord’s legal costs in preparing and negotiating the lease.

Bond

You may ask for a bond, or security deposit. If you get it, in Western Australia you should put it in an interest bearing account and credit the interest to the tenant, but, there is no specific provision for this (however it may go against you if there is a dispute and you haven’t). You must return a security deposit to the tenant as soon as practicable after the lease ends where the tenant has performed all obligations under the lease.

The tenant has the option to provide a bank guarantee instead of a security deposit. Any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.
Breaches

You are required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to the landlord entering the premises.

Renewal – options

In all states, if an option for renewal is not exercised at the right time it will be lost.

The tenant can exercise an option for renewal even if there has been a breach of the lease – generally the lease will set out the provisions for exercise of the option.

NSW Retail Lease Agreements

NSW Retail Shop Leases

Many Australian state governments have expanded their concept of consumer protection to include small business consumers who are bargaining on a playing field that is far from level, against owners of big shopping centres. They seek to provide this protection by making sure that prospective tenants have sufficient information to make a sound business decision about entering into or renewing a Retail Shop Lease Agreement.

Recent amendments to the Retail Leases Act of 1994 clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions. As a result, the Retail Leases Amendment Act 2005 requires greater responsibility and pro-active behavior from Landlord.

The Act does not apply to a shop with a lettable area of 1,000 square metres or more but will apply to a sub-lease of space in the shop if the space which is sub-let has a lettable area of less than 1,000 square metres. A lease for a term of less than six months (without any option of the lessee to renew) is excluded in NSW. A lease for a term of 25 years or more or with a shorter term but with options to renew which (if aggregated with the original term) is 25 years or more is excluded in NSW. There is some discussion as to whether void areas, such as, for example, stairwell areas and areas adjacent to mezzanine floors, are part of the lettable areas as they are not be used to provide the retail services for which the premises are dedicated even if you pay rent on them. Be safe: use the lease even if areas such as window planter boxes or car parks might extend the actual area over 1000 sq.m.

Disclosure statements
The Law in NSW is very clear: A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.

If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct. At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into. The law requires the landlord to give the tenant a disclosure statement at least seven days before entering into the lease. Tough penalties apply if you don’t, or if the statement is inaccurate.

In particular, the Act renders void lease provisions which require any tenant’s payment for contribution to fit out that has not been disclosed in a disclosure statement. In most states law entitles the tenant, if she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent they do pay they can’t get back).

The only way a tenant cannot end the lease in case of inadequate disclosure is where:
(a) the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
(b) the tenant is in substantially as good a position as the tenant would have been if the failure had not occurred.

If a lease is entered into by way of the renewal of a lease on the exercise of an option, a landlord should make a fresh disclosure statement.

Minimum lease period
To have a lease of less than 5 years In NSW you need a certificate that the tenant has received independent legal advice from a lawyer or conveyancer not working for the landlord about the limited term, otherwise the lease is deemed to be extended to 5 years.

For new leases you have to provide the tenant with a copy of the unsigned agreement (with the names and addresses of the parties included), a disclosure statement, and a government – prepared information brochure, the NSW the Retail Tenancy Guide. when negotiations are commenced, and in no case less than 7 days before the lease is entered into. (That is, negotiations have to go on for 7 days, you can’t just sign a tenant up on the spot).

A copy of the proposed lease has to be provided once it has been signed. The copies can be photocopies. If you don’t supply a full copy of the lease, or don’t do it within 28 days of it being signed, or the disclosure statement is wrong, the tenant can also end the lease.

The tenant doesn’t have to pay for fit-out contributions if the liability to pay them is not disclosed in the disclosure statement.

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time.
This can particularly occur in the case of providing estimates or statements of outgoings. Strata levies are also to be included in the list of outgoings.

Registered Leases
In NSW you need to register a lease of over 3 years (including options) at the Nsw Department of lands – Section 53(1) of the Real Property Act 1900 (NSW) refers to a lease for a term exceeding three years. As the minimum term of a lease subject to the provisions of s16 is 5 years, you should register all leases in NSW.

Section 15 of the Act requires the lessor, in effect, to lodge promptly for registration under the Real Property Act 1900 a retail shop lease which is required to be registered. You don’t pay stamp duty on leases commenced after 1.1.2008. See http://rgdirections.lands.nsw.gov.au/dealing/rpadealingforms/leases/lease07l

In all states, provide the lessee with a copy of the Retail Lease Agreement promptly.

You can’t demand that a tenant pay you key money in NSW.

Rental Increases
In NSW, give the tenant at least 6 months notice of a market review and keep reminding them, in writing. NSW retail leases are limited to one rental increase a year by an amount which can’t be specified in the lease, but you can have as many fixed-sum or fixed-percentage increases as you like.

Outgoings
Landlords are required to provide a written estimate of all outgoings, before entering into the lease. This estimate must also be given to the tenant one month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions) otherwise the tenant doesn’t’t have to pay them. If you want the tenant to pay for a share of your expenses (other than usual outgoings – such as marketing expenses) you have to provide an audited account.

You can’t ask your tenant for capital costs or interest on your loans. In NSW you can ask for some land tax and some (but not all) legal expenses but the calculation method is somewhat complicated. If you can’t calculate it in your base rent when you negotiate the lease, leave it out. In line with other states you can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability as a tenant.

Bond
Landlords or their agents may ask for a bond, or security deposit. In NSW the bond money must be lodged with the Director-General of the Department of State & Regional Development.

The tenant has the option to provide a bank guarantee instead of a security deposit however any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.

Breaches of the agreement
In the event that the tenant breaches the terms and conditions of the Retail lease agreement, the landlord is required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to the landlord entering the premises.

Renewal and Options to renew
In all states, if an option for renewal is not exercised at the right time it will be lost.
The tenant can exercise an option for renewal even if there has been a breach of the lease – generally the lease will set out the provisions for exercise of the option but in NSW refer to section 133E of the Conveyancing Act 1919.

Retail Leases now made easy

Western Australia Retail Leases

Many Australian state governments have expanded their concept of consumer protection to include small business consumers who were bargaining on a far from level playing field, where owners of large shopping centres had all the advantages and all the power. The state governments seek to provide this protection by making sure that prospective tenants have sufficient information to make sound business decisions when entering into or renewing a retail lease.

Recent amendments to the Commercial Tenancy (Retail Shops) Agreement Act 1985 in WA clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions. As a result, the amendments require greater responsibility and pro-active behaviour from the Landlords.

The Commercial Tenancy (Retail Shops) Agreement Act 1985 regulates retail and other commercial tenancies. The principal focus is on the need for transparency of information and fairness in the contract by:

• requiring a disclosure statement by the Owner (lessor) to the tenant (lessee);
• establishing a consistent and fair process for rent reviews;
• giving the tenant an entitlement to a minimum lease period of up to 5 years;
• regulating the distribution of specified landlord expenses to tenants;
• provide access to alternative lower cost mediation and dispute resolution mechanisms offered by the State Administrative Tribunal.

It is important for landlords and tenants of retail premises and other businesses covered by the Act to establish the impact of the Act on their lease agreement.

Commercial Tenancy (Retail Shops) Agreement Act covers parties involved in retail/commercial leases for shop premises which are:

• up to but no greater than1000 square metres in area;
• tenanted by private businesses but not publicly listed companies and their subsidiaries;
• tenanted by non-retail businesses where located in a shopping centre (of 5 or more retail shops or specified businesses);
• the business carried out by the lessee is a specified business such as a dry cleaning, hairdressing, beauty therapy, shoe repair, video store or some petrol station agreements.
• 
  

Disclosure statements:

The Law in Western Australia, is very clear:

A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.

If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct.

At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into. See s6A of the Act.

Tough penalties apply if you don’t provide this guide or if the statement is inaccurate. In particular, Commercial Tenancy (Retail Shops) Agreement Act 1985 renders void, lease provisions which require any tenant’s payment for contribution to fit out, that has not been disclosed in a disclosure statement. In most states the law entitles the tenant, if he/she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent paid is non refundable).

The only way a tenant cannot end the lease in case of inadequate disclosure is where:

a) the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned,

b) the tenant is in substantially as good a position as the tenant would have been if the failure had not occurred.

Commercial Tenancy Forms and Act.

The property owner or their agent is required to provide forms specified by Regulations under Commercial Tenancy (Retail Shops) Agreement Act to prospective tenants to enable a proper assessment of a lease proposal.

Contact the State Law Publishers:

10, William Street,

Perth,

Phone: (08) 9321 7688;

website: www.slp.wa.gov.au

for information on authorised copies of the Act, the Regulations and the Forms see ‘The tenant guide’ (form 6)

If the tenant requires it additions may need to be included in the statement such as;

· After hours access

· Air conditioning

· Air control

· Cool rooms/freezers

· Dedicated parking bays

· Delivery access

· Drainage

· External equipment

· Fire protection

· Floor loading

· Hot/cold water

· Power/lighting

· Security

· Shop fit-out

· Telephone/facsimile/radio

· Tenancy cleaning

· Wall loading

· Wet/dry waste

· Other:

If a lease is subject to the Act, any dispute arising between the tenant and the landlord may be referred to the State Administrative Tribunal. The fee payable is currently $29.00.

If a lease is entered into by way of the ‘renewal of a lease’ on the exercise of an option, a landlord should make a fresh disclosure statement.

For new leases you have to provide the tenant with a copy of the unsigned agreement (with the names and addresses of the parties included), a disclosure statement, and a government prepared Information Brochure available from the Department of Consumer and Employment Protection

You do not need an information leaflet or a disclosure statement in WA for RENEWALS.

The tenant doesn’t have to pay for fit-out contributions if the liability to pay them is not disclosed in the disclosure statement. However, if you alert the tenant to the fact that there will be a requirement for payment of an outgoing, and, specify that it is to be calculated by a third party in a reasonable fashion then that is sufficient (unlike stricter requirements in other states).

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time. This can particularly occur in the case of providing estimates or statements of outgoings. Strata levies are also to be included in the list of outgoings.

The Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 introduces to retail/commercial leases covered by the Act, more than thirty changes which:

• improve disclosure and information for prospective tenants particularly in the form of a new Tenant guide;
• support fairness and equity in rent review provisions including the prohibition of ratchet clauses (which took no account of current market rent levels);
• introduce a rationale to limit tenant contributions to valid landlord expenses;
• prohibit management fees being recovered from tenants by managing agents or owners managing their own properties;
• clarify obligations in relation to contributions to sinking, marketing and promotion funds;
• enhance protection by adopting nationally recognised audit standards; and
• extend the jurisdiction and powers of the Registrar and Commercial Tribunal in support of these initiatives.

In all states, the lessor must provide the lessee with a copy of the Tenant Guide promptly (although there is no specific requirement for this in WA, it goers to the question of unconscionable conduct if you don’t).

You cannot demand that a tenant pay you key money.

In 2007, the Retail Shops and Fair Trading Legislation Amendment Act 2005 (RSFT Act) introduced unconscionable conduct provisions to the Commercial Tenancy Act. The RSFT Act does not include provisions that allow appeal from a Commercial Tribunal ruling.

5 year Minimum term

Section 13 of Commercial Tenancy (Retail Shops) Agreement Act 1985 provides tenants entering a new retail shop for the first time the right to at least five years tenancy to help establish and develop the business, with an option for a further five years.

Section 13(b) provides provisions regarding how renewal notices should be administered when the term of the lease expires. Landlords are not required, under the notice of renewal, to specify rent until 3 months before the expiry of the lease. A tenant may negotiate a shorter lease term with the landlord.

Rent Increases

Section 11(2)(b) of the Act provides that unless specific provision is made in the retail shop lease for the time at which review may be initiated, either party can initiate the market rent review process at any stage. At the end of each lease period the rent should be reviewed. In Western Australia, two rental increases a year are acceptable.

Outgoings

The lessor has to provide a written estimate, before entering into the lease and 1 month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions). Otherwise the tenant does not have to pay them. If you want the tenant to pay for a share of your expenses (other than usual outgoings – such as marketing expenses) you have to provide an audited account.

You can’t ask your tenant for capital costs or interest on your loans. In Western Australia, you also can’t ask the tenant to pay your land tax or your legal or other expenses relating to drawing up of the lease, the disclosure statement or other documents required by the Act.

You can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability, in all states.

Legal expenses

Section 12 of the Act relates to tenants’ contribution to landlord’s regular operating expenses and does not include reference to who pays the cost of preparing and negotiating a lease. WA retail leases generally include provisions making tenants pay the landlord’s legal costs in preparing and negotiating the lease.

Bond

You may ask for a bond, or security deposit. If you get it, in Western Australia you should put it in an interest bearing account and credit the interest to the tenant, but, there is no specific provision for this (however it may go against you if there is a dispute and you haven’t). You must return a security deposit to the tenant as soon as practicable after the lease ends where the tenant has performed all obligations under the lease.

The tenant has the option to provide a bank guarantee instead of a security deposit. Any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.

Breaches

You are required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to the landlord entering the premises.

Renewal – options

In all states, if an option for renewal is not exercised at the right time it will be lost.

The tenant can exercise an option for renewal even if there has been a breach of the lease – generally the lease will set out the provisions for exercise of the option.

.

http://rpemery.com.au/retail_leases.html

Queensland Retail Lease Agreements

Queensland Retail Lease

Many Australian state governments have expanded their concept of consumer protection to include small business consumers who were bargaining on a far from level playing field, where owners of large shopping centres had all the advantages and all the power . They seek to provide this protection by making sure that prospective tenants have sufficient information to make a sound business decision when entering into or renewing a lease.

Recent amendments clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions. As a result, the amendments require greater responsibility and pro-active behaviour from the Landlord.

The Retail Shop Leases Act 1994 (“the Act”) does not apply to a shop with a lettable area of 1,000 square metres or more but will apply to a sub-lease of space in the shop if the space which is sub-let has a lettable area of less than 1,000 square metres. A lease for a term of less than 6 months (without any option of the tenant to renew) is excluded. There is some discussion as to whether void areas, such as, for example, stairwell areas and areas adjacent to mezzanine floors, are part of the lettable areas as they are not be used to provide the retail services for which the premises are dedicated even if the landlord pays rent on them.

Disclosure statements:

The Law in Queensland , is very clear:

A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.

If the landlord now does not provide a statement or provides a statement that is incomplete or contains information that is false or misleading in a material particular, then the landlord is deemed to have issued a defective statement, both which entitle the tenant to terminate the lease by written notice to the landlord within six months after the tenant enters into the lease. The landlord is also liable to pay reasonable compensation for any loss or damage suffered by the tenant because of such non-compliance or defective statement.

If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct. At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into. The law requires the landlord to give the tenant a disclosure statement at least seven days before entering into the lease. Tough penalties apply if it isn’t, or if the statement is inaccurate. In particular, the Act renders void lease provisions which require any tenant’s payment for contribution to fit out that has not been disclosed in a disclosure statement. In most states law entitles the tenant, if he/she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent paid is non refundable).

In Queensland , the disclosure statement requires the landlord to reveal if the relevant local authority has approved plans for future alterations or additions to the shop, and, if so, whether it is presently intended that these works will be commenced during the term of the lease.

The only way a tenant cannot end the lease in case of inadequate disclosure is where:

• the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
• the tenant is in substantially as good a position as the tenant would have been if the failure had not occurred.

Queensland disclosure forms are available HERE:

If a lease is entered into by way of the renewal of a lease on the exercise of an option, a landlord should make a fresh disclosure statement.

Disclosure – tenant’s/assignee’s obligations

The requirement for a tenant to give a landlord a disclosure statement is now mandatory, although there is no reciprocal right of termination for a landlord should a tenant fail to provide one. It will, however, create a retail tenancy dispute at the landlords’ election.

Similarly, the requirement for an assignee to give a landlord a disclosure statement and for an assignee to give an assignor a disclosure statement is now mandatory.

For new leases a copy of the unsigned agreement must be provided (with the names and addresses of the parties included), along with a disclosure statement, In all states, landlords should provide the tenant with a copy promptly.

A copy of the proposed lease has to be provided once it has been signed. The copies can be photocopies. If a full copy of the lease isn’t supplied, or isn’t within 28 days of it being signed, or the disclosure statement is wrong, the tenant can also end the lease.

The tenant doesn’t have to pay for any fit-out contributions if the liability to pay them is not disclosed in the disclosure statement.

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time. This can particularly occur in the case of providing estimates or statements of outgoings. Strata levies are also to be included in the list of outgoings.

The landlord can’t demand that a tenant pay key money.

No Minimum term 5 years in Queensland .

However, where a lease does not contain an option the tenant does have a right to request a renewal and the landlord is under an obligation to respond in an approved form stating the terms on which the lease will be renewed. Refer generally to section 46 of the Act.

Rent Increases.

At the end of each lease period, In Queensland, only one rental increase a year is allowed except in the first year.

Outgoings.

A written estimate must be provided, before entering into the lease and 1 month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions) otherwise the tenant does not have to pay them. If the tenant is required to pay for a share of other expenses (other than usual outgoings – such as marketing expenses) an audited account must be provided, which is generally both too hard and too expensive. Any outgoings statement must be audited by a registered company auditor.

The landlord can’t ask a tenant for capital costs or interest on their loans. In Queensland , the landlord also can’t ask the tenant to pay legal or other expenses relating to drawing up of the lease, the disclosure statement or other documents required by the Act.

The landlord can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability. However, t he Queensland Act seeks to limit recovery for operating expenses by providing that the annual statement of expenditure, which must be furnished by the landlord to the tenant within three months after the termination of an accounting period. This statement must be itemised so that the amount allocated to each item shall not exceed five per cent of the total expenses shown except in relation to any tax, impost or charge levied by the State, or any one component that cannot be dissected so as to comply with the limiting provision.

There may be special additional outgoings, special items of equipment and additional insurance risks that may need to be covered – for example chemicals used in beauty salons may need chemical storage cupboards, extractor fans and special insurance provisions with the additional outgoing of a special fire levy.

Bond.

The landlord may ask for a bond, or security deposit. If received, in Queensland it is not compulsory to put it in an interest bearing account , or otherwise leave it in a lawyer’s or realtor’s trust account… the interest belongs to the tenant. The landlord must return a security deposit to the tenant as soon as practicable after the lease ends where the tenant has performed all obligations under the lease.

The tenant has the option to provide a bank guarantee instead of a security deposit. Any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.

Breaches.

The landlord is required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to the landlord entering the premises.

Renewal – options.

In all states, if an option for renewal is not exercised at the right time it will be lost.

The tenant can exercise an option for renewal even if there has been a breach of the lease – generally the lease will set out the provisions for exercise of the option. At least two months, but no more than six months, before the option date, the landlord must give the tenant written notice of the option date. Failure to comply may result in a maximum penalty of at least $3000.

If a lease does not provide for an option to renew or extend the lease, or it is not the subject of an agreement for renewal or extension, a landlord will be required to give written notice to the tenant as to whether or not it intends offering a new lease. This notice period will vary depending upon the length of the lease term. In the case of a lease longer than one year it must be given at least six months, but no longer than one year, before the lease is due to end. The failure to provide the notices in a timely manner can result in a monetary penalty being imposed upon the landlord or an unexpected lease extension.

Registration .

If the term of the lease is more than three years the Property Law Act 1974 requires that the lease be registered. Although it is not compulsory, leases of less than three years may also be registered. The Department of Natural Resources and Water (Titles Registration) is responsible for the registration of leases.

You can access more information HERE:

The registration process is designed to protect both landlords and tenants by creating an official record of the lease. If the leased premises are sold, the tenant would be afforded protection under a registered lease. A landlord can require the tenant to contribute to the expenses associated with the registration of a lease, including survey fees.

Assigning a lease to someone else? Read this first!

ASSIGNMENT OF LEASE AGREEMENT

How to assign a lease to someone else.

If you are leasing a property such as a house, home unit or commercial premises, you may come to the point where you no longer wish to use the property. Unfortunately you are still obligated to honour your commitment by the terms of the lease to continue paying the rent and maintain the property. If you find yourself in this situation, you may want to consider assigning the lease to someone else. A transfer of lease, although similar to a subletting the property, is a simple contract you can enter with someone else so they accept responsibility for your lease obligations. However before you do, there are a few things you should know;

WHAT IS A LEASE ASSIGNMENT? A lease assignment is an agreement where the current lessee (the person responsible for fulfilling the lease obligations) enters into a contract with a new party “called the assignee”. The assignee essentially agrees to take over the obligations and responsibilities of the original tenant under the original lease. To put it simply, it’s a way to get someone else to take your place in the lease, with the new party taking on all the duties under the original lease.

WHEN CAN I USE A LEASE ASSIGNMENT? You can feasibly use a lease assignment whenever you are leasing a property. Be it an assignment of a real estate lease,an automobile lease or anything else, you can generally assign the rights and duties under the lease to a third party in almost any circumstance. You may or may not have to first get the lessor’s permission before entering into an assignment of lease agreement, but that depends upon the terms of the underlying lease.

WHAT IS THE DIFFERENCE BETWEEN SUBLETTING AND ASSIGNING A LEASE? When you sublet all or part of the premises to another tenant you are still obliged to honour your obligations under your lease contract with the owner of the property. If you choose to Assign all your rights and obligations under the lease to another party, you would use an Assignment of Lease agreement. Under an Assignment of lease agreement, the new tenant agrees to assume all those rights and obligations on your behalf and indemnifies you against any further obligation to the property owner.

HOW DO I ENTER INTO A LEASE ASSIGNMENT? As with any business agreement, to ensure there are no misunderstandings, you are best advised to have your assignment of lease agreement in writing. The agreement should refer to the terms of the original lease, as well as state what each party will or will not be responsible for under the terms of the assignment. For example, you may enter into contract of assignment where by the new party “the assignee” agrees to do everything required by the tenant under the original lease, except pay the rent. The original tenant “the assignor” might agree to pay the rent and accept a smaller (or even larger) payment from the assignee.

WHAT DO I NEED TO KNOW BEFORE I ENTER INTO A LEASE ASSIGNMENT? At a minimum, you’ll need to know the terms of the original lease, including the length of the lease, any legal regulations regarding the assignment and the new terms. You’ll also want to make sure each party reads the Assignment, completely understands their obligations and signs it.

Assigning real-estate or property leases to other people can be a very effective tool in the right situation. Whether you want torelocate your business, travel the world, or simply don’t want the responsibility under the lease any longer, you can use lease assignments to your benefit. A well-crafted Assignment of Lease Agreement will spell out each parties duties and shield you from potential liability.

Sublease Agreement Template
Assignment of Lease Agreement Template