The Retail Leases Act 2003 (Vic) (“the Act”) is an important piece of legislation that business owners seeking to enter into a retail lease in Victoria, should be aware of. Jamal Bakalian, the Practice Head of Melbourne at Streeterlaw explores 5 key tips and facts that future tenants should be aware of, based on Streeterlaw’s experience in advising clients.
1. HAS THE LANDLORD PROVIDED YOU WITH THE VICTORIAN SMALL BUSINESS COMMISSION INFORMATION BROCHURE AND A COPY OF THE PROPOSED LEASE?
a. When you are considering renting a retail space in Victoria, the Landlord is required, under section 15 of the Act to provide you with an information brochure prepared by the Victorian Small Business Commission and a copy of the proposed Lease. Failure to do so is actually an offence!
b. We recommend that once you obtain a copy of the proposed Lease, you engage a commercial Solicitor to review the Lease so that you are made aware of your rights and obligations prior to signing it.
2. HAS THE LANDLORD PROVIDED YOU WITH A DISCLOSURE STATEMENT?
a. 14 days before entering into a Lease, the Landlord is required to provide you with a disclosure statement.
b. Once you have a copy of the disclosure statement, we recommend you provide this to your commercial Solicitor so that they can review this and come back to you with any advice or feedback as to certain details such as:
– The premises set out in the disclosure statement (you should ensure it is the same premises you have inspected and that the size of the area is what you anticipated);
– Structures, fixtures, plant and equipment provided by the landlord- this should be checked as against your expectations;
– The permitted use of the premises;
– The term of the lease along with any options to renew;
– Associated outgoings; and
– Works and alterations.
3. HAS THE LANDLORD SPECIFIED AND ESTIMATED THE CONTRIBUTIONS EXPECTED OF YOU DURING THE TERM OF THE LEASE?
a. Section 20 of the Act indicates that the Tenant is not required to pay undisclosed contributions.
b. This means that a provision of a retail Lease that requires the tenant to pay or contribute towards the cost of any fit out of the retail premises is void – unless the liability to make such a payment was disclosed in the disclosure statement given to the tenant.
c. For this reason, it is important that a commercial Solicitor reviews your Lease and Disclosure Statement to ensure such information like this is included with the relevant degree of specificity.
4. IS THERE A MAKE-GOOD CLAUSE AND IF SO, WHAT DOES IT REQUIRE ME TO DO?
a. It is important that your commercial Solicitor advises you as to your obligations to make-good the premises following any fit-outs or refurbishments you may have attended to when opening and conducting your business during the term of your lease.
b. Your commercial Solicitor will be able to advise you what will be involved under the Lease to bring the premises back to its original state – i.e. painting, cleaning and so on.
c. You should be aware of this information before you enter into the Lease so that you have an idea of the types of costs you can anticipate when the Lease comes to an end.
5. IS THERE A WAY OUT ONCE I HAVE SIGNED THE LEASE?
a. At Streeterlaw we can appreciate that no-one really signs a retail lease expecting that they will need a way out or a “get out of jail free card”. However, business can sometimes be unpredictable and so it is important to consider whether you can end your Lease early.
b. Most retail leases in Victoria contain a provision only for the Landlord to terminate the Lease due to certain things that would constitute a breach by the tenant.
c. In our experience and from the Victorian Retail Leases we have come across, the only provision usually made for a tenant to terminate a retail lease earlier than the end of the lease term is as follows:
– By providing a replacement tenant – this would involve a transfer of the existing lease; or
– Entering into a Deed of Surrender; or
– The Landlord accepting the tenant’s repudiation (termination) of the Lease.
d. In all of the above scenarios, the tenant will need to obtain the express and explicit permission of the Landlord. This is where it is vitally important to have the assistance a Solicitor in negotiating your exit strategy.
If you are contemplating entering into a retail Lease in Victoria, in light of all the tips we have given above, we encourage you to speak with one of our highly qualified commercial Solicitors today to see how we can best assist you on your business journey. Call us today to make an initial enquiry on 02 8197 0105 or email contact@streeterlaw.com.au so that we can assist you.
