A retail lease is not a negotiation between equals. The Act saw to that.
The Retail Leases Act 1994 (NSW) imposes obligations on the landlord and gives protections to the tenant, and most of them cannot be contracted out of. We act for both — which means we know what the other side is going to say before they say it.
Retail leases in New South Wales are governed by the Retail Leases Act 1994 (NSW), which imposes specific obligations on landlords and offers protections to tenants. Commercial leases are more flexible but less regulated. Knowing which applies is critical — and it is not something the parties get to choose.
We act for landlords and for tenants on retail premises, though never for both parties to the same lease. On a retail lease the work is compliance as much as negotiation: the Act sets a floor, and a lease that ignores it does not become enforceable because the tenant signed it.
The disclosure statement
A lessor's disclosure statement must be given to the prospective tenant before the lease is entered into. It is not a formality. It is the document a tenant will point to later when they say the outgoings were never disclosed, or the premises were not what was represented, and the consequences of getting it wrong run in the tenant's favour.
- Give it in time, in the prescribed form, and keep proof of when it was given.
- Disclose every outgoing you intend to recover. An outgoing that is not disclosed is generally not recoverable, no matter what the lease says.
- Describe the premises, the permitted use and the term accurately — including anything about the centre, the trading hours or planned works that a tenant would want to know.
The five-year minimum term
A retail shop lease carries a minimum term, counting options. A shorter term is available, but only where the prescribed certificate is given by a lawyer or conveyancer who has explained the effect to the tenant. Landlords who want a short lease frequently discover this at exchange, which is the worst moment to discover it.
What cannot be passed to a retail tenant
The Act restricts what can be passed through to a retail tenant regardless of the drafting. Land tax cannot be recovered from a retail tenant, and a clause purporting to do so does not cure that. Key money is prohibited. Undisclosed outgoings are generally irrecoverable. Certain rent review mechanisms — in particular a review that can only ever move the rent upward — are constrained.
Landlords: the consequence is in the modelling, not the lease. A retail tenancy priced on a net basis that assumes recovery of land tax is wrong before the tenant moves in.
Tenants: check what you are actually being charged against what was disclosed. An outgoing that never appeared in the disclosure statement is generally not payable, however the lease is worded.
When it goes wrong
Retail tenancy disputes in New South Wales generally go to mediation before they reach the Civil and Administrative Tribunal, and the Tribunal is the usual forum rather than a court. Unconscionable conduct provisions apply to the conduct of both parties, and a landlord's conduct during the term — not only at signing — can be examined.
Related matters
What both sides ask us about retail leases.
Is our premises actually a retail shop under the Act?
It turns on the use and the schedule to the Act rather than on what the lease calls it, and floor area can matter. Premises in a shopping centre are commonly caught even where the use looks like an office. It is worth resolving before the lease is drawn, because the answer changes the disclosure obligations, the minimum term and what you can recover.
Can land tax be passed on to a retail tenant?
No. The Act prevents recovery of land tax from a retail tenant, and a clause drafted to do it anyway does not change the position. Landlords who modelled a return on recovering it need to revisit the number before the lease is signed. Tenants who are being charged it should ask why.
We want a two-year lease. Is that possible?
A retail shop lease carries a minimum term counting options, but a shorter term is available where the prescribed certificate is given by a lawyer or conveyancer who has explained the effect to the tenant. It is a real mechanism, not a workaround, and it has to be done properly and at the right time.
An outgoing was never disclosed. Where does that leave us?
Generally, it is not recoverable. For a landlord this is the most common way money is lost on an otherwise sound retail lease, and it compounds across the term. For a tenant it is worth checking every charge against the disclosure statement you were given. Either way, when it is discovered matters as much as what was missed.
Do retail disputes go to court?
Usually not first. Retail tenancy disputes in New South Wales generally go through mediation before the Civil and Administrative Tribunal, rather than starting in a court. That affects cost, timing and how a dispute is best positioned from the outset.
Tell us what's happened.
Tell us about the premises, which side of the lease you are on, and who the other party is. If the lease has not been signed yet, that is the useful moment to talk.
Information on this site is general in nature and is not legal advice, and may have been overtaken by a change in the law. Contacting us does not create a solicitor–client relationship.