There is often a power imbalance between a landlord and tenant with the landlord generally being in a much stronger position, with deeper pockets and control of the land. For this reason, all Australian states and territories have introduced retail leases legislation with a view to protecting tenants and levelling the playing field.
Notwithstanding that your use may not be for retail purposes, if your surgery or medical facility is located in a shopping centre, the state or territory retail leases legislation is highly likely to apply.
However there are some definitional questions to consider. The following information helps explain whether the relevant retail leases legislation applies and if it does, what kinds of protections are offered.
The owner of the building or shop is known as the landlord or lessor.
The doctor or company actually taking the lease is called the tenant or lessee.
The space being let is known as the premises.
The building in which the premises are located is called the shopping centre.
In a subleasing arrangement, the tenant becomes the sub-lessor, the further tenant the sub-lessee and the premises the sub-premises.
The protections of the retail leases legislation may apply to other premises, even if they are used for non-retail purposes, provided they fit within the definitions of the legislation.
To fall within the definition of a retail shop, your premises must be in a shopping centre.
A shopping centre is usually described as a cluster of five or more retail premises under common ownership or located in the same building.
Satisfying this requirement will depend on what the other premises in the shopping centre are being used for. Each state or territory Act uses a slightly different definition, but it is generally the case that if there is for example, collectively five or more premises such as cafes, restaurants, hair dressers, corner stores or butchers within the same building or structure, then the relevant legislation applies.
There are other criteria that consider floor space, the length of the lease and where in the building the premises are located.
We can provide specific advice on your specific queries as required.
Outgoings – Outgoings are the landlord’s expenses incurred in owning and managing the retail shopping centre. All the states and territories legislation define what outgoings means except Tasmania. Landlords are not entitled to recover certain types of outgoings such as capital costs, sinking fund levies and interest on the landlord’s borrowings. Other outgoings are only recoverable if the lease clearly spells this out..
Key money – Penalties may be imposed on any landlord who asks for money to be paid or a benefit given to procure the grant of, renewal of, or assignment of a lease.
This means for example, that if you are seeking consent to assign your lease, the landlord cannot ask for a payment other than in relation to their legal costs. If they do so, this may be unlawful and you should seek our advice.
Legal costs – Except for Tasmania and NSW in some circumstances, most states and the ACT prohibit the landlord recovering their legal costs for the preparation of a lease from the tenant. However the landlord may be able to recover legal costs in consenting to an assignment of the lease. Tasmania and New South Wales in some circumstances allow landlords to recover expenses for negotiating leases..
Minimum term – All states and territories (other than NSW and Queensland) specify the length of a retail lease must not be less than five years. This requirement can be waived in some instances after receipt of qualified legal advice.
Assigning and subletting – If a tenant wishes to sell their business, they will need to assign their lease or sublet the property. The relevant legislation generally sets out a procedure for obtaining consent to an assignment or sublease of the lease. It is important to make sure clauses are included in your lease dealing with these topics.
Notice of works landlord’s works and landlord maintenance obligations – The legislation generally requires a landlord to give tenants prior notice before carrying out disruptive works. Obligations are also placed on a landlord to maintain the shopping centre and ensure services are operational. Compensation for disruption is also often available to tenants.
Relocation and demolition – Your lease may contain a provision allowing the landlord to relocate you to another part of the centre or to terminate the lease entirely if they are proposing to carry out a demolition. The various legislation provides for compensation in the event the landlord seeks to rely on that clause. It would be preferable to exclude relocation and demolition clauses in your lease as they cause significant disruption to trade if relied upon.
Dispute Resolution – All the relevant legislation contains dispute resolution processes. This usually requires some kind of mediation rather than court litigation. Generally,matters will be considered by the relevant state or territory tribunal rather than the court.
A retail lease must not be entered into without prior disclosure of terms being provided by the landlord. Before a retail lease is even negotiated, a landlord will often need to provide a tenant with the following documents:
Failure by a landlord to provide a lessor disclosure statement can sometimes allow the tenant rights to terminate the lease in certain circumstances.
A lessee disclosure statement is generally also required to be given by the tenant to the landlord. In Queensland this obligation also includes obtaining and providing legal and financial advice certificates.
From there, once the key terms are agreed, a heads of agreement or lease proposal will be issued and the commercial terms of the lease can be negotiated.
Once the heads of agreement document is signed, a lease will be issued for execution.
The tenant may at this stage wish to make further amendments and negotiate the legal terms further. Once agreed, the lease will be signed by both parties and if the lease is for longer than 3 years, it is generally registered on title (except in Victoria).
Whether or not the relevant retail lease legislation applies is an important consideration when negotiating a lease. While it ensures there is more red tape, there can be significant advantages provided to tenants who are covered by the legislation. These advantages could be costs savings or additional requirements being placed on the landlord.
The legislation is slightly different depending on the State or Territory in which the property is located. We can provide specific advice in relation to any particular jurisdiction or query you may have.
Lindsay McGregor is a lawyer and the Head of Property in our Avant Law team. He has been working in property related matters for almost 20 years. He was previously a partner at a highly regarded national firm and has considerable experience in leasing across Australia. He has acted for some of the Country’s biggest landlords and knows how they think. This experience will help ensure you get the best outcome you can.
Disclaimer: The information in this article is general in nature and is current to 15 July. It does not take into account individual circumstances and is not professional legal, financial or taxation advice. Avant Law provides legal services. It does not provide taxation or financial advisory services.
Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.
