Five Things To Check Before Signing A Retail Lease In NSW

Are you looking to enter a retail lease in NSW? It’s improtant to know whether the Retail Leases Act 1994 (NSW) applies. 

Where the Act applies, landlords and tenants have specific rights and obligations across disclosure, rent reviews, outgoings, lease renewals and extensions, and the assignment of a lease. 

Here are five things you should check before signing a retail lease. 

1. Does the Retail Leases Act apply? 

Not every commercial lease in NSW is covered by the Retail Leases Act. Whether a space is deemed a qualifying retail premises can depend on factors such as the size of the premises, the length of the lease, the type of business being operated and whether the premises are in a retail shopping centre. 

You should establish whether the Act applies from the outset – influencing the information you receive, the costs you may incur, and your rights.

In certain circumstances, the Act may not apply to a lease. It’s important for both landlords and tenants to understand the relevant exclusions.

2. Has the disclosure statement been provided? 

Under the Act, the landlord must provide the tenant with a disclosure statement at least seven days before entering into the lease. The tenant must then provide their own disclosure statement to the landlord within seven days of receiving the landlord’s statement. 

This disclosure process is an important protection under the Act, helping both parties understand key costs, terms and obligations before committing to the lease. 

3. What will the premises really cost? 

Rent is only one part of the cost of occupying a commercial property. 

Outgoings are costs associated with operating and maintaining the property that the tenant may be required to pay in addition to rent. These can include council rates, water charges, insurance, cleaning, security and maintenance costs.  

The Act places rules around the outgoings a tenant can be required to pay, including how these costs must be disclosed and which property expenses can be passed on to the tenant.

Understanding whether the Act applies is essential for setting expectations, appropriate budgeting, and avoiding potential disputes over obligations.

4. How will the rent change? 

Leases can run for several years, meaning the rent payable at the beginning of a lease may not remain the same throughout its term. 

Depending on the lease terms, rent reviews may involve fixed increases, CPI adjustments, market reviews or other agreed methods. 

The Act provides rules around how these rent reviews can be carried out, helping to provide greater certainty for both landlords and tenants as rent changes over the life of the lease. It also sets out a process for determining current market rent where the parties are unable to reach an agreement. 

Current Market Rent  

Under the Retail Leases Act 1994 (the Act), the tenant has the right to ask the landlord what the new rent will be before committing to another lease. This may look like an early determination, or an agreement on the current market rent.  

Current market rent is what the tenant and the landlord agree it is, or what a specialist retail valuer says it is. 

The tenant must request the early determination in writing between six and three months before the last day that the option can be exercised. This is usually between nine and six months prior to the end of the lease. 

5. Know your renewal and end-of-lease rights.

The Act includes important protections for when a retail lease is coming to an end.  

When the lease contains an option to renew: 

In certain circumstances, tenants under the Act are able to request an early determination of market rent before deciding whether to renew. 

If the lease includes an option to renew, tenants should understand when and how to exercise it, particularly where the current market rent determines the rent for the renewed term.

When there is no option to renew: 

Without an option, the landlord must typically notify the tenant whether they will be offered a new lease or required to leave.

How does the Act apply to holding over? 

Sometimes, a tenant may ‘hold over’; remaining in the premises after the lease expires. Depending on the lease terms, the tenancy will often continue month to month. This arrangement is generally governed by the lease, however the Act may still apply where it is a retail lease.

Know what you’re agreeing to. 

A retail lease creates obligations for both parties that can continue for many years.  

A lease can significantly affect the value, viability and continuity of a business. Have your lease and business sale documents reviewed by an experienced commercial or property lawyer, before committing to the transaction.  

If you are considering entering into a retail lease in NSW, your Aintree Group Legal adviser can help. They can review the proposed lease and advise whether the Act applies; helping you understand your obligations before committing.

This is general advice only and has not been prepared with your individual situation or needs in mind. For personalised advice, we highly recommend that you seek professional guidance from a qualified adviser.