Small Business Tips – Leases

If you’re starting out your own business or you work from home, one of the things you may consider at some point in time is to establish a commercial presence by leasing out an office or a retail shop.

A commercial lease is different to a residential lease, so don’t assume that you can deal with it on your own! To do so would be a grave mistake. If you are in any doubt at all you should seek legal advice regarding your lease.

Retail Leases Act

The Retail Leases Act 1994 (NSW) applies to leases which are considered to be “retail shop leases”. A retail shop is defined in the act to cover any shop which is in a shopping centre or any shop which is to be used for retail purposes. There are exceptions, for example, shops which are in excess of 1,000 square metres, leases in excess of 25 years, or offices which are not in a shopping centre.

The Act also requires that all security bonds need to be deposited with the Director-General – however this does not apply to bank guarantees.

Registration

If the term of the lease, including options, exceeds three years, then it should be registered with the Department of Lands. However a lease can still be registered with the Department of Lands if its term is less than three years. Registration reinforces the tenant’s interest in the property and can avoid any conflict with other interested parties.

Common lease terms

While the Law Society has a standard lease document, its use is not mandatory. However, most leases will contain a number of terms that are common between leases. These include:

  • Duration of Lease
  • Options to Renew
  • Permitted Use
  • Rent and Rent Frequency
  • Outgoings
  • Rent Review
  • Security Deposit or Bank Guarantee
  • Insurance

Other Links

The NSW Retail Tenancy Unit may be found at:  www.retailtenancy.nsw.gov.au.