THE RETAILS LEASES ACT AND HOW IT MAY AFFECT YOU

The Retail Leases Act 1994 was introduced to overcome the perceived problems of the time. The Retail Leases Act came into operation on 1 August 1994 which means that any retail shop lease entered into on or after that date is effected by the Retail Leases Act. What is a Retail Lease? A retail shop is defined to be premises used wholly or predominantly for any business as listed in Schedule 1 or any business carried on in a retail shopping centre. For example, a dental surgery is not defined in Schedule 1. This means that the Retail Leases Act does not apply to this business, unless the dental surgery is located within a retail shopping centre. A retail shopping centre may consist of a cluster of shops including 5 or more retail shops carrying on business as defined in Schedule 1. There are certain premises which are specifically excluded from the operation of the Act. These include: *retail shop premises having a lease term of less than 6 months or more than 25 years (including options to renew) *retail shop premises having a lettable area of 1,000 m2 or more *retail shop leases made before 1 August 1994 *retail shop leases exercising an option to renew, the original lease of which was entered into before 1 August 1994 *retail shops where the lessee carries on the business on behalf of the lessor *retail shops where the principal business being carried on is a cinema, skating rink or bowling alley and the shop is operated by the owner of the cinema, skating rink or bowling alley. When does a Retail Lease Come Into Effect? A retail lease comes into effect when the earlier of one of the following occurs: *the lease is signed by the landlord and the tenant *the date the tenant starts paying rent to the landlord *the date the tenant takes occupation or possession of the premises There are two important aspects of the Retail Leases Act, which has brought about change, that a tenant should be aware of:- 1.Term of the Lease The term of a retail shop lease must be for a minimum of 5 years (including any option periods). For example, a lease which has a lease term of 3 years and a 1 year option automatically under the operation of the Act becomes a lease for 5 years with a 1 year option. In order to avoid the minimum 5 year term a tenant must obtain a certificate from a solicitor which stipulates that the tenant is happy to enter into a lease for a term of less than 5 years. 2.Disclosure Statement The Landlord must provide the tenant with a disclosure statement 7 days before a retail lease is entered into. A disclosure statement is a statement in writing that contains information relevant to the lease. Any failure on the part of the Landlord to provide this statement gives the Tenant a right to terminate the lease within 3 months after the lease is entered into. Some general advice to Lessees: 1.We recommend that you do not take possession or occupy the premises or pay rent until you have signed a lease. 2.Before signing anything, seek legal advice. Nadine Byrne nadineb@gells.com.au

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