Retail leases are very different to other commercial leases and are heavily regulated in most states in Australia.
The Commercial Tenancy (Retail Shops) Agreements Act 1985 regulates many retail shop leases in Western Australia.
An understanding of the Act is essential if it regulates your lease.
- premises located in a retail shopping centre that are used wholly, or predominately, for the carrying on of a business; and
- premises not located in a retail shopping centre used wholly, or predominately, for the carrying on of a retail business.
A retail business is a business that wholly, or predominantly, involves the sale of goods by retail, or is a specified business.
There are certain retail leases which are not covered by the Act, for example:
- leases of premises that have a floor area exceeding 1,000 square metres;
- leases held by public companies or their subsidiaries;
A good commercial leasing lawyer will be able to determine if your lease is a retail lease and covered by the Act.
Since the recent amendments to the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) which came into effect on 1 January 2013, a landlord can no longer claim any legal or other expenses incurred in relation to:
- the negotiation, preparation or execution of:
- the lease; or
- a renewal of the lease; or
- an extension of the lease; or
- obtaining the consent of a mortgagee to the lease; or
- the landlord’s compliance with the Act.
But this does not extend to a tenant’s request to assign or sublet….
A landlord can still claim reasonable legal or other expenses incurred in connection with an assignment of the lease or a sub-lease, including investigating a proposed assignee or sub-lessee and obtaining any necessary consents to the assignment or sub-lease.
Please note that this provision only relates to ‘retail leases’.
Whilst, the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (‘Act’) gives retail tenants a right to a minimum 5 year term, you can negotiate any term you want.
- you may want a term that is longer than 5 years to give you more certainty (for example, a 10 year term, or a 5 year initial term with 2 options to renew for a further 5 years each); or
- you may agree to a term shorter than 5 years, to give you more flexibility to leave if things don’t work out, but this must be your decision and needs to be approved by the State Administrative Tribunal.
The Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) prevents a landlord of a retail shop from being entitled to recover (and the tenant from being obliged to pay) the following costs as an operating expense:
- management fees (including fees in respect of the collection of rent or other moneys or the management of premises); and
- capital expenditures in relation to a retail shopping centre (for example, asset replacement).
The Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) requires that your landlord must give you a disclosure statement at least 7 days before a new retail lease is entered into.
The disclosure statement sets out important facts about the retail shop and the lease and must be in the prescribed form, completed and signed by, or on behalf of, the landlord and the tenant. It should also contain a statement notifying you that you should seek independent legal advice.
If the landlord does not give you a disclosure statement (or gives you a disclosure statement that is incomplete or incorrect) you may have the right to terminate your lease (at any time up to 6 months after the lease was entered into) and, in certain circumstances, claim compensation for any monetary loss you have suffered.
Please note: “This publication is for information purposes only and does not constitute legal advice. If you have any questions about this or any other commercial legal issue, please contact Helen Kay at Rise Legal.”