Entering into a commercial lease is a big decision and one that warrants careful consideration.
There are two different types of commercial leases in Queensland – standard commercial leases and retail shop leases. Retail shop leases are governed by the Retail Shop Leases Act 1994 (Qld) (“the Act”).
In this blog post, we will focus on retail shop leases and why it is important to have a solicitor review your lease before signing.
How do I know if I’m entering into a retail shop lease?
Generally, you will be dealing with a retail shop lease if the premises are used mainly for selling goods or services to customers. This also applies if your business is located in a retail shopping centre with five or more retail shops.
Common examples include bakeries, clothing stores, cafes, restaurants, florists, fruit shops, jewellers, grocery stores, hair and beauty salons, and pharmacies.
However, there are exceptions. For example, leases for premises over 1,000m² and leases of common areas for ATMs and vending machines are not considered retail shop leases.
Benefits of a retail shop lease vs commercial lease
Retail shop leases provide stronger protections for tenants under the Act. They also require disclosure and, in many cases, independent legal and financial advice before signing a lease.
Key protections include:
Disclosure
The landlord must give a disclosure statement at least 7 days before the lease is signed.
Outgoings
The landlord cannot pass land tax or sinking fund contributions to the tenant.
Costs
The landlord cannot recover legal costs for preparing the lease or mortgagee consent costs.
Rent review
Rent can only be reviewed once per year, except in the first year. It must also use one method per review period, not multiple methods.
What must the landlord provide before signing?
The landlord must provide a draft lease and a lessor disclosure statement at least seven days before signing.
The disclosure statement includes key details such as rent, term, options to renew, outgoings, trading hours, parking, and permitted use.
This allows tenants to make an informed decision before committing to the lease.
Key things to consider before signing a retail shop lease
Before signing, tenants should carefully review all lease terms. Each clause can significantly impact business operations and long-term costs.
Term and option to renew
Check the lease length and whether renewal options exist. Security of tenure is important for long-term business planning.
Rent
Review base rent and rent review methods. Consider future increases and any incentives such as fit-out contributions or rent-free periods.
Outgoings
Understand which outgoings apply and how costs are shared.
Trading hours
Some leases restrict trading hours, which may impact business flexibility.
Security bonds and guarantees
Security bonds often equal three months’ rent plus GST and outgoings. Landlords may also require personal guarantees from directors.
Our team at Robbins Watson specialises in Queensland retail shop lease reviews.
Insurance
Check insurance requirements, including business interruption insurance, which can be costly.
Maintenance and repairs
Tenants may be responsible for air conditioning, fire safety systems, and general maintenance.
Car parking
Parking is often not exclusive. If required, this should be negotiated early.
Suitability of premises
Consider location, size, and planning approvals required to operate your business.
Subletting
Check whether subletting is allowed and what approval is required from the landlord.
Demolition and relocation
Landlords may reserve rights to redevelop or relocate tenants within a complex.
Assignment of lease
Check if the lease can be assigned when selling your business.
First right of refusal
Some leases allow tenants the first opportunity to purchase the property if it is sold.
Do you need a solicitor to review your lease?
The Act requires tenants to obtain independent legal advice before signing a retail shop lease.
Even where not strictly required, legal advice ensures you understand your rights and obligations.
Our property and commercial lawyers at Robbins Watson regularly review and negotiate retail shop leases across Queensland.
