For all those Queenslanders that are taking the first step and leasing a retail space, this is an exciting moment. It’s the time where your online business or side hustle from home turns into an actual brick and mortar store – a big step which only demonstrates that your business and your idea is growing.
If this is your first time or even your third time leasing a retail space, it’s important to ensure that you obtain legal advice and financial advice to help confirm your ability to produce the level of profit required to maintain paying your lease rent repayments (amongst other things).
The team at Bolter have collated our experience with retail leases and prepared a checklist with key information to ensure that you can be ready to tackle your first retail lease:
- When does the retail tenancy legislation apply?
There is a definition for what a ‘retail lease’ is and it’s under a key piece of legislation called the Retail Shop Leases Act 1994 (Qld), which is also referred to as the RSLA (the Act) and also the Retail Shop Leases Regulations 2016 (Qld) (the Regs). You should become familiar with the Act and Regs, as it’s important that you know its provisions and how they apply to you.
Firstly, you must check whether your business falls into the scope of the definition of a ‘retail shop’. You can find a long list of retail shops at the back of Regs within Schedule 1, which includes retailing businesses like cafes, clothing shops, electronic shops and restaurants. If your business is listed within the Regs, then you fall automatically under the Act as a retail business. Your lease (within Queensland) will then become a retail lease, unless further exceptions apply.
You still need to be careful even if your business doesn’t qualify as a ‘retail shop’. If your lease space is situated within a shopping centre (with five or more retail shops), your lease will nonetheless fall within the ambit of the Act as the lease space due to its location. - Found a leases space, now what?
Once you understand that your business is a retail lease, you will be able to take certain steps to ensure that you remain protected under the Act.
Assuming you have found a lease space, the next step is to inquire with the leasing agent or landlord directly as to their leasing terms and expectations for rent and outgoings. It may be beneficial at this juncture to ensure that you understand your budgetary requirements so that you are not overextending or would be placed under financial hardship during the lease term. Your accountant and financial adviser can help with this.
Once you have made progress with the leasing agent or landlord, they may require you to sign a letter of offer or heads of agreement document in preparation for the lease. You should be careful as sometimes these documents can be binding, and you will not be able to back out after you sign them. One of our Bolter team members can assist you from here. - Lease Time!
Once you’re 100% committed to the lease space and you’ve had your preliminary discussion about the lease, it is time to pass the ball over to your Bolter team member to handle the lease discussions with the landlord’s solicitors.
There are some important things about disclosure you also need to know. Both you and the landlord have obligations under the Act which require both of you to disclose information about the lease to one another. Failing to do so could give rise to, for example, a free pass to terminate the lease. We’ve broken the disclosure requirements down for you further below:- Landlord must give you a copy of the lease and the disclosure statement at least seven (7) days before the lease is entered into.
There is a requirement that the landlord must give you a copy of the draft lease and their Lessor Disclosure Statement at least seven (7) days prior to you signing the lease. If you sign the lease before this seven (7) day grace period ends, there are consequences for the landlord in that you (the tenant) may terminate the lease in writing at any time within six (6) months after you have entered into the lease.
You or the landlord may wish to sign the lease or Lessor’s Disclosure Statement before the seven (7) day grace period ends. In this case the landlord must provide you with what is called a ‘waiver notice’ under the Act. This notice is signed and provided by you and waives your rights under the Act for this grace period protection and allows you and the landlord to enter into the lease before the grace period ends.
Any waiver of a right should be a calculated decision, so we recommend that you understand and are otherwise comfortable with the terms of the lease before you sign a waiver notice. - You must give a copy of the Lessee’s Disclosure Documents to the landlord at least seven (7) days before the lease is entered into.
You are required to provide the landlord certain disclosure documents at least seven (7) days before the lease is entered into. The Lessee’s Disclosure Documents include a Lessee’s Disclosure Statement, Financial Advice Report and a Legal Advice Report. These disclosure documents assist the landlord to learn about your business, your experiences in business, your capacity to meet the obligations set out in the lease and be comfortable that you understand the lease terms (through professional advice).
If you fail to provide the Lessee’s Disclosure Documents to the landlord, then a ‘retail tenancy dispute’ exists with the landlord, which means that they can take you to QCAT within 2 months after the lease is entered into to obtain the relevant disclosure material from you.
The legal advice report and the financial advice report requires you to engage and obtain professional advice from your own independent lawyers and accountants. The Bolter team can assist with sorting out your legal advice report.
- Landlord must give you a copy of the lease and the disclosure statement at least seven (7) days before the lease is entered into.
- After signing: Landlord to provide you with a certified copy of the signed lease
The landlord must provide you with a certified copy (or an original copy) of the lease. Leases generally are signed in triplicate, which means that there are three original copies of the lease. The first copy is for the landlord, the second copy is for you, and the third copy is required for the state government if registration of the lease on title to the land is required. We will discuss registration later on. - Things you need to sort out before access is granted your leasing space
You need to get your ducks in a row before the landlord will allow you access to your leasing space, and this includes providing to the landlord copies of the following:- correctly signed lease in registrable form, in triplicate (usually)
- Lessee’s Disclosure Statement
- Financial Advice Report
- Legal Advice Report
- the security required under the lease – either a bank guarantee or security deposit (usually)
- certificates of currency for the required insurance under the lease, and
- any required cheques.
- To register or not to register the lease?
If the lease term (and options) are for a period of more than three (3) years, the lease will need to be registered on the title of the property in order for any future buyer of the land (or let’s say the Landlord’s bank in possession) without notice to be bound by the landlord’s obligations under your lease. In simpler words, the title of the property is a noticeboard of leases, mortgages and other registerable documents like easements, so without your lease being displayed on this noticeboard, a buyer purchasing the land can walk in and not be bound by the lease and could kick you out of your leasing space.
Many choose not to register their leases due to the costs involved in registration and preparation of a survey plan of the lease tenancy space to be prepared by a surveyor (in some circumstances). You should feel comfortable to obtain your own quotes for survey plans and not solely rely on the landlord’s surveyor as this may save you some money. We can recommend a few great surveyors.
Registration costs are approximately $230 and survey plans cost around $2,200. Team Bolter recommends registering leases for protection of the tenant’s interests, but a tenant will not breach any law by failing to do so. It is ultimately a commercial decision for you to make. - Costs and Outgoings.
Once you obtain a copy of the lease and the Lessor’s Disclosure Statement, you should check to the costs associated with the lease. If your lease is a retail lease, then you (the tenant) won’t have to pay for the landlord’s legal costs in preparation of the lease (which saves you about $2,200).
Usual fees that can be passed onto you (as the tenant) include the costs the landlord incurs in you exercising an option to renew the lease for a longer term (if there is an option available to you), registration fees for the registration of the lease on title to the property, and survey plan fees.
Additionally, there are certain outgoings that landlord cannot charge you under a retail lease. For instances, they cannot charge you the costs they incur concerning land tax. However, they can charge you reasonable expenses in maintaining the shopping centre or levies and other costs due to their ownership of that shopping centre.
You should get acquainted with the fees that the landlord can pass along to you otherwise you may get a nasty surprise.
The team at Bolter are here on standby if you need our help, guidance and support. We’ve got your legal covered, so you can focus more on your business and making it happen.