Whether you’re a landlord or a tenant, or leasing a commercial or retail premises, we can assist you. At RBF Law we focus on understanding your business needs to be able to negotiate and settle lease terms which are fair and to ensure your interests are protected. We will also ensure you comply with your statutory requirements (whether you are a landlord or a tenant) if the lease is governed by the Retail Shop Leases Act.
Our legal services include:
- retail and commercial lease negotiations, drafting, reviewing and advice
- retail lease legislation compliance
- lease and premises due diligence
- renewals of leases
- assignments of leases
- surrenders of leases
- lease management for landlords.
What is a lease?
A lease is essentially a legal contract between the owner of the premises (called the landlord or the lessor) and a person (called the tenant or the lessee) who wants to lease (or use) the premises for the purpose of running a business (which could be either a commercial or retail business) for a set term.
You should contact one of the lawyers at RBF Law before you sign a lease. We will negotiate terms to best suit you and your business and we will explain each lease clause to you so you are aware of your rights and obligations during the term of the lease. If you do not understand what you are signing then you could experience significant financial and legal consequences at a later stage.
What is the difference between a commercial lease and a retail lease?
A commercial lease normally applies to premises that are used for businesses such as a warehouse, an industrial site or an office in a commercial building that has no retail activity and is not used in any form of selling directly to the public. A general commercial lease is governed by the Queensland Property Law Act, the Australian Consumer Law, as well as common law.
A retail lease applies to premises that are situated in a retail shopping centre or used wholly or predominantly for the carrying on of a retail business involving the sale of goods or services direct to the public. For example clothing stores, hairdressers, cafes, restaurants, liquor outlets, newsagents, pharmacies and bakeries are all retail shop leases. There are certain exclusions such as a retail shop with a floor area over 1000sq.m; centre management offices; premises in a theme or amusement park; temporary businesses such as trade stalls; or premises at a flea market or an arts and crafts market. A retail shop lease is governed by the Queensland Retail Shop Leases Act and the Retail Shop Leases Regulations which offer a tenant a higher level of protection than a commercial lease tenant. There are also disclosure requirements on both landlords and tenants to ensure transparent lease negotiations and adequate risk management.
Whilst there are similarities between a commercial lease and a retail lease there are significant differences. Retail landlords and tenants must comply with the Queensland retail shop legislation and understand the consequences for non-compliance. You should contact one of the lawyers at RBF Law to make sure you are entering into the correct lease for your business.
What must a landlord give to a tenant before entering into a retail shop lease?
A landlord (or the lessor) is required to provide a prospective tenant with a disclosure statement, and a copy of the draft lease, at least 7 days before a prospective tenant enters into a retail shop lease.
A lessor disclosure statement is basically a summary of the important terms of the retail shop lease proposed to be entered into as well as setting out the financial obligations the tenant will have under the lease such as:
- Start and end dates of the lease term;
- Rent payable;
- Rent review method (CPI, fixed increases or market review);
- Rent review dates (term and option periods);
- Option periods;
- Estimated outgoings (must be itemised and show proportion payable);
- Promotion and marketing costs;
- Any other costs associated with the lease (as well as any incentives which may apply);
- Permitted use;
- Requirements for redecoration of the premises and frequency;
- What must be done to the premises at the end of the lease;
- Landlord’s works;
- Tenant’s fit-out works;
- Existing structures, services and facilities;
- Number of car parking spaces;
- Tenancy mix (if a shopping centre);
- Trading hours; and
- Any other matters considered necessary by the landlord.
A landlord is also required to provide the tenant with a current disclosure statement on receiving notice of exercise of an option under an existing lease from a tenant.
If a landlord fails to disclose certain information, or the disclosure statement given to the tenant is defective, then the tenant may have a right to terminate the lease even after it has been entered into.
Retail landlords must comply with the Queensland retail shop legislation and understand the consequences for non-compliance. A tenant should review a disclosure statement very carefully before entering into a retail shop lease.
Whether you are a landlord or a tenant, you should contact one of the lawyers at RBF Law to help you understand your rights, obligations and liabilities under the Queensland Retail Shop Leases Act.
What must a tenant give to a landlord before entering into a retail shop lease?
A prospective tenant is required to sign an acknowledgement of having received a disclosure statement from the landlord. Before signing such acknowledgement, and before entering into a retail shop lease, a tenant should consider these key questions:
- Does the planning authority allow for your proposed use for the premises under planning laws?
- Is the security of your occupancy affected by:
- mortgages, charges or encumbrances granted by the landlord?
- rights and obligations under a head lease?
A prospective tenant must also give to the landlord a lessee disclosure statement at least 7 days before entering into a retail shop lease stating:
- Details of the leasing entity and business name;
- Number of other retail shops currently being leased within Australia;
- Ability to meet all financial and other obligations contained in the lease;
- Relevant retail business experience that demonstrates ability to meet lease obligations;
- Any circumstances or issues that may affect ability to meet lease obligations; and
- Details of any statements or representations made by the landlord (or landlord’s agent) which are being relied on to enter into the retail shop lease.
Also, if you are a prospective tenant with less than 5 retail establishments nationally you are also required to provide to the landlord a Legal Advice Report (from your solicitor) and a Financial Advice Report (from your accountant) prior to entering into a retail shop lease.
You should contact one of the lawyers at RBF Law to help you understand the terms of the lease the landlord has provided you with as well as help you understand your rights, obligations and liabilities under the Queensland Retail Shop Leases Act before you enter into the lease.
Will my rent increase under my lease?
Irrespective of whether you are a tenant under a commercial lease or a retail shop lease you should be aware of how the rent will change during the term of your lease. The rent may go up by a fixed amount or adjusted according to the Consumer Price Index (referred to as CPI) or determined according to market rent. Your lease must also specify which method is to be used to increase rent and the rent review dates. If you have entered into a retail shop lease, and market rent reviews apply, then the rent review must be assessed on an ‘effective rent basis’ and clarified by a step-by-step process set out in the Queensland Retail Shop Leases Act.
What is the difference between an option to renew and a renewal of a lease?
Irrespective of whether you are a tenant under a commercial lease or a retail shop lease, an option to renew is a specific clause in a lease which entitles the tenant to renew the lease for a further specified term. Under a retail shop lease, the landlord must give written notice of the option date to the tenant at least 2 months before the option date. There is no such obligation on a landlord under a commercial lease.
On the other hand, if there is no specific option clause in a lease, or all of the options under a lease have been exercised by the tenant, then a renewal of lease will apply. In this instance, a new lease will be required to be entered into between the landlord and the tenant on agreed terms. Under a retail shop lease, the landlord must give written notice to the tenant offering a renewal or extension of the lease on terms (including rent terms) stated in the notice, or tell the tenant that there will be no offer to renew or extend the lease. The required notice period will depend on the term of the current lease. If the current lease is for less than 1 year, then the landlord must notify the tenant at least 3 months before the lease ends. If the current lease is for more than 1 year, then the landlord must notify the tenant at least 6 months before the lease ends.
Whether you are a landlord or a tenant under a commercial lease or a retail shop lease, you should contact one of the lawyers at RBF Law to help you understand your rights, obligations and liabilities under your lease.
I am unable to resolve a dispute with my retail shop lease - what should I do?
Disputes can arise between a landlord and a tenant about their retail shop lease. These disputes are required to be resolved through a two-step process which involves mediation first, and if not resolved at mediation, then either the landlord or the tenant can lodge a notice of dispute with the Queensland Civil and Administrative Tribunal (QCAT) registry for determination.
What are the key changes to the Queensland Retail Shop Leases Act commencing 25 November 2016?
All retail shop leases entered into after 25 November 2016 are subject to these changes and will affect all landlords and tenants. The key changes include:
- the types of tenancies now covered under the Act;
- a definition of when a retail shop lease will be ‘entered into’ for the purpose of a landlord providing a disclosure statement to a tenant;
- head-lessor’s and sub-lessor’s disclosure obligations;
- a new landlord’s disclosure obligation to a tenant when a tenant exercises an option period;
- market rent reviews are to now be assessed on an ‘effective rent basis’ and clarified by a step-by-step process in the Act;
- more stringent requirements have been imposed on landlords for the recovery and reporting of outgoings. All outgoings payable by a tenant must be specified in the lease;
- marketing plans are now required if a landlord wants to charge promotion and advertising expenses to a tenant;
- a landlord’s liability to a tenant for compensation;
- a landlord can now charge a tenant legal costs for the preparation of lease documents if the matter does not proceed;
- a landlord cannot charge a tenant the costs of complying with the Act or mortgagee’s consent costs;
- redecoration and refit clauses are void unless certain details are included in the lease;
- a tenant is no longer required to provide turnover receipts and annual audited statements to the landlord unless specific provision is made in the lease;
- clarification around when an assignment of a retail shop lease is ‘entered into’ for the purpose of providing disclosure statements;
- a new requirement on an outgoing tenant assigning a retail shop lease to give the assignee a disclosure statement and a copy of the current lease before the assignee enters into a business sale contract. The outgoing tenant is also required to provide the landlord with the disclosure statement given to the proposed assignee on the day the landlord is asked to consent to the assignment (the 7 day disclosure obligations may lead to contract signing delays on assignments); and
- guarantors are now released on an assignment of a retail shop lease provided certain conditions are met by the outgoing tenant.
I am a landlord under a retail shop lease - what should I do?
As a landlord (lessor), you should:
- make sure the Queensland Retail Shop Leases Act now applies to your tenancies;
- familiarise yourself with the changes to the disclosure regime to ensure you are able to meet your obligations;
- review all of your retail lease documents, including disclosure statements, and consider how they should be amended to cover the new changes such as recovery of outgoings, market rent review provisions, compensation, relocation and refit obligations, and turnover rent;
- review and update internal systems to be able to comply with the new disclosure regime, outgoings reporting obligations, and if promotion and advertising contributions are to be collected, develop a marketing plan which can be provided to your tenants; and
- ensure that any future works or redevelopment of your centre or building that may affect your tenancies, or the common areas, are adequately disclosed to your tenants in your disclosure statement and are adequately covered in your lease.
You should contact one of the lawyers at RBF Law to see what these changes to the Queensland Retail Shop Leases Act mean for you, your leasing documents and how these changes may impact on your rights, obligations and liabilities under the Act.
I am a retail shop tenant – what should I do?
As a tenant, you should:
- be aware that you may be liable for the landlord’s legal costs if you fail to proceed with the lease if the landlord has prepared the final lease for signing by you at your request;
- be mindful of the new rules around the disclosure regime on an assignment (when you sell your business) as well as your ability to waive the statutory 7 day disclosure period for entering into, or renewing, a lease;
- be aware of the increased limitations on your ability to recover compensation from the landlord in the case of certain disruptions to your business; and
- make sure you understand how your rights will change in relation to an exercise of an option period under your lease.
You should contact one of the lawyers at RBF Law to see what these changes to the Queensland Retail Shop Leases Act mean for you as well as how these changes may impact on your rights, obligations and liabilities under the Act.
Does the foreign resident capital gains withholding tax regime apply to leases?
Despite this regime referring to a 'foreign resident', it is important to note that it applies to everyone. Whilst the focus of this regime is on sale transactions of $2million or more, the withholding obligations of a tenant to withhold 10%, or the need for a landlord to obtain a clearance certificate from the Australian Taxation Office, would be triggered if a lease premium of $2million or more was payable by the tenant to the landlord. This will apply to both commercial leases and retail shop leases. It will also apply if the lease includes an option for the tenant to buy the premises. In this instance, there would be no $2million threshold and the landlord (as seller) would need to provide the tenant (as buyer) with a declaration of Australian residency to avoid the need for a clearance certificate to be obtained, or for the tenant (as buyer) to withhold an amount based on the consideration for the option and pay it to the Australian Taxation Office.
You should contact one of the lawyers at RBF Law if you have any questions about the Foreign Resident Capital Gains Withholding Tax Regime and whether the regime applies to you and your lease.
Is the existence of asbestos in a building required to be disclosed to a tenant?
A landlord with an affected building is obligated to inform a tenant of the presence of asbestos material and provide details of the relevant asbestos management plan before a tenant enters into a lease. An asbestos register will not be required if a building was constructed after 31 December 1989 and no asbestos has been identified and asbestos is not likely to be present.
Is notification of contaminated land required to be given to a tenant?
A landlord must give notice to all tenants that the land is listed on either the contaminated land register or the environmental management register. If the land is listed, then the tenant must be provided with notice before entering into a lease. If the land is listed after the tenant has entered into the lease, then the landlord must give notice to the tenant within 20 business days of the listing. Not only are there penalties if a landlord does not comply, but, it creates a right for a tenant to terminate the lease within 10 days of becoming aware of the land being listed and the landlord’s failure to give the required notice within the prescribed period of time. But, a tenant will not have the right to terminate the lease simply because the land has been listed.
Do I have to provide a tenant with a building energy efficiency certificate?
The provision for a building energy efficiency certificate, or commercial building disclosure, only applies to commercial office space with a net lettable area of 2000sq.m. or more (reducing to 1000sq.m. or more from 1 July 2017). You will be affected if you are:
- a building owner who is selling or leasing office space;
- a tenant who is subleasing part of their tenancy;
- a real estate agent who is advertising office space; or
- a potential buyer or tenant of commercial office space.
Whether or not you are affected will also depend on what type of entity owns or leases the office space. If you are a ‘constitutional corporation’ (a corporate entity) then the disclosure obligations will apply. This means that you cannot sell, lease or sublease commercial office space without providing a building energy efficiency certificate. From 1 July 2017, the energy efficiency rating will also need to be included on advertisements for tenancy’s over 1000sq.m. In most instances, the disclosure obligations will not apply to a natural person, a government department, or members of a partnership who own a building that they wish to sell or lease, but, it will apply to those entities if the prospective buyer, lessee or sublessee is a ‘constitutional corporation’. In that instance, the corporate entity has a right to be provided with a valid and current building energy efficiency certificate.
You should contact one of the lawyers at RBF Law if you have any questions about the building energy efficiency disclosure requirements and whether those requirements apply to your commercial lease.
Does the PPSA apply to leases?
The Commonwealth Personal Property Securities Act (‘PPSA’) can apply to both commercial leases and retail shop leases. Whilst the PPSA does not apply to ‘land’ or ‘fixtures’ there are still important issues for a landlord to consider. For example, ownership of elements of a fitout or ownership of plant and equipment already included in the premises. A security interest will arise to the extent they are not considered ‘fixtures’. However, regardless of whether they are perceived as ‘fixtures’ or not, they may comprise ‘personal property’ which may justify a landlord registering a security interest in that property on the Personal Property Securities Register (‘PPSR’). If a security interest does exist, then it must be registered on the PPSR within strict timeframes. If a landlord does not register their security interest on the PPSR, or fails to register in time, then they run the risk of ownership of their personal property passing to a liquidator or administrator appointed over a tenant’s assets if a tenant becomes insolvent.
Another example to be considered is a cash security deposit paid by a tenant. If those funds are held in a bank account by a landlord (not the landlord’s managing agent), then a security interest may arise which needs to be registered on the PPSR by the landlord. This is because those monies still belong to the tenant which are held as security by a landlord for performance by a tenant under a lease. Again, if a landlord does not register a security interest on the PPSR, or fails to register in time, they risk losing their interest in the cash security deposit if a liquidator or administrator is appointed over a tenant’s assets is a tenant becomes insolvent.
Landlords should ensure that their lease documents and leasing protocols take into account the PPSA regime. You should contact one of the lawyers at RBF Law if you have any questions about the application of the PPSA to your leasing requirements.
Disclaimer: This information is a guide only and is not a detailed explanation of the law. This information should not be used, treated or relied upon as proper legal advice and you should contact a solicitor before making any decisions concerning your requirements.