Retail vs. Non-Retail Leases

As a landlord or tenant in a commercial lease, you may be aware that your lease is considered “retail” but are unsure what that means. There are practical differences between retail and non-retail leases which are important to be aware of regardless of whether you are a landlord or tenant. If you are unsure as to whether your lease is retail or not, please see our previous blog post: Is my Lease a Retail Lease?

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If your lease is a retail lease, then it is subject to the Retail Leases Act 2003 (‘the Act’) in Victoria. It is in this legislation that you will find what distinguishes a retail lease from non-retail commercial leases. The Act imposes specific duties on the parties that they otherwise would not be subject to.

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The first notable difference is the duty of the landlord to provide a tenant with a Disclosure Statement in the prescribed form and a copy of the proposed lease at least fourteen days before entering the lease. This is important as where a tenant does not receive a Disclosure Statement, they are not liable to pay rent up until the day they are provided one by the landlord.

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A retail lease must be for a minimum term of five years; this includes any options for further terms (i.e., an initial term of one year, followed by two terms of two years each will suffice).

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Rent reviews are also more regulated if the lease is a retail lease. For example, if the lease does not specify the way the rent will be reviewed, then any provision in the lease regarding rent reviews will be void (meaning they are unenforceable).

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If a landlord wishes to be reimbursed by the tenant for the outgoings of the premises, such as council rates, insurance, or water rates, then they must provide the tenant with an estimate of these outgoings. If they fail to do so, they will not be able to force the tenant to pay or reimburse them for outgoings. It is also worthy to note that a landlord cannot recover land tax or some legal costs under a retail lease but can under a non-retail lease if the lease permits them to.

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If it is a retail lease, a landlord is required to provide notice to the tenant for any options of renewals and the expiration of the lease, this includes providing three months’ notice of the latest date by which a tenant may exercise their option to renew the lease. Failing to provide notice could mean the term gets extended past its expiration date until a landlord does eventually provide notice.  In a non-retail lease, there is no obligation on the landlord to remind the tenant of these dates.

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This is not an exhaustive list of the differences, and it is helpful to engage a lawyer to explain to you the various other differences between a retail and non-retail lease.

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If you are looking for assistance in relation to your lease, or are looking to enter a lease, we have an experienced team of lawyers who can provide you with advice and assist you. Please call our Drouin or Warragul offices or email us directly at leases@wvblawyers.com.au if you are interested and would like our advice. Alternatively, you can visit our website and make an enquiry online.

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Disclaimer: The information in this post is general in nature. This does not constitute legal advice and should not be relied on as such. Please contact one of our Lawyers if you are seeking advice about a specific legal matter.