A Lease is a legally binding contract enforceable by law which allows a
Tenant the right to occupy a
premises owned by the
Landlord, for carrying on a business. It sets out the rights and obligations of both parties. Never sign a Lease unless you completely understand and agree with all the clauses. Make sure you get good financial and legal advice before you sign anything. The Lease usually defines:
- the lettable area by describing it (and usually includes a plan where possible);
- annual rent and outgoings;
- the date and method of rent reviews;
- each parties' rights;
- each parties' obligations and liabilities;
- conditions which apply to the use of the lettable area e.g. rent and how long the Tenant can occupy that area.
In South Australia, retail shop leases are governed by the Retail and Commercial Leases Act 1995, Retail and Commercial Leases Regulations 2010 and Landlord and Tenant Act 1936 all of which are administered by the Office of the Small Business Commissioner.
Although there are some exceptions, a retail shop lease is a lease of a premises at which goods are sold, or services are provided, to the public. Generally, the Act does not apply to a Lease to a public company (or a subsidiary of a public company), a bank or building society, an insurance company, the Government, councils or licensed premises, in cases where the annual rent liability exceeds $400,000.00 or to a Lease for a fixed term of less than one month (known as a short term lease). We prepare our Leases on the presumption that the Act applies. Only when it is clear that the Act does not apply, can the parties negotiate terms beyond what is acceptable under the Act, and we would ensure that the Lease is prepared accordingly.
A
"retail shopping centre" means a cluster of premises with the following attributes:
- at least five of the premises are retail shops; and
- the premises are all owned by the same person, or have the same lessor or the same head lessor; and
- the premises are located in the one building or in two or more buildings that are either adjoining or separated only by common areas or other areas owned by the owner of the premises; and
- the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade.
Outgoings are expenses incurred by the Landlord on account of operating, repairing and maintaining the premises and can include, for example:
- administrative and management costs;
- government charges (rates and taxes);
- insurance costs;
- maintenance and repair costs; and
- establishing a sinking fund for major repairs and maintenance (special rules apply to sinking funds and you should seek advice if you propose establishing one of these).
Generally speaking, the following cannot be recovered from the Tenant under the Retail & Commercial Leases Act 1995:
- capital costs of the premises (with certain exceptions);
- depreciation costs;
- land tax;
- expenses not properly and reasonably incurred; and
- finishes, fixtures, fittings, equipment or services which were not included in the Disclosure Statement.
The Tenant is only required to pay for outgoings that relate to the Tenant's leased premises. Where the premises is part of a large property/building the Tenant may also be required to contribute to the general expenses of that larger property/building and would pay a percentage based on the lettable area of the premises in proportion to the whole property/building.
