Retail vs Commercial Lease: What you need to know
What is a lease?
A lease is a contractually binding document entered into by two or more parties. The first party is known as the Lessor or the Landlord, this is the party that owns the property, and is leasing it out to the second party, known as the Lessee or the Tenant. This is the party that will reside within the property and will be using it for either retail or commercial purposes. These two kinds of leases differ for many reasons, these will be explored more so throughout.
So, what is a Retail Lease?
This is the leasing format that is used when business premises are leased out to a business that is selling goods. This is a defining factor between a Commercial and Retail Leases. Retail Leases are usually located in a cluster of shops, for example a shopping centre, this can become confusing when businesses offer services as well as selling goods. However, if these businesses reside in a shopping centre or cluster of shops, they are automatically protected under state laws. Retail Leases are protected by state laws, and theses differ in every state and territory. The laws are as follows;
NSW- Retail Lease Act 1994 (NSW)
VIC- Retail Lease Act 2003 (VIC)
QLD- Retail Shops Lease Act 1994 (QLD)
TAS- Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (TAS)
SA- Retail & Commercial Lease Act 1995 (SA)
WA- Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA)
ACT- Lease (Commercial and Retail) Act 2001 (ACT)
NT- Business Tenancies (Fair Dealings) Act 2003 (NT)
What is a retail premises?
A retail premises is that where retail activity takes place, namely the buying and selling of goods. If a business satisfies this element then they will most likely be protected under one of the state laws above. If a business both provides a service and sells goods, location is the relevant defining component as to which lease type it will fall under. If the location of the business is in a cluster of shops or shopping centre, the business will be covered under the relevant retail leasing act. However, if the business provides a service and sells goods but is located by itself or in a commercial site surrounded by other commercial businesses, then it will be fall under a commercial lease format.
What is a Commercial Lease?
This type of leasing format is used when the tenant is not selling goods from the location, but rather running a business, industrial site or warehouse. While Retail Leases are protected not only by the contents of the lease but also the state laws listed above, Commercial Leases are a lot less judicially regulated. While Retail Leases have their own state laws, Commercial Leases act under Property and Conveyancing Laws. This provides a lesser and more generalised remedy when sought after.
As there are fewer specific laws in relation to Commercial Leases, the lessee has less bargaining power when it comes to what and how lease provision will be included. All leases will include payment of rent, rent increases and maintained and repairs of the premises, and all other provisions must be negotiated for.
If you or someone you know ever needs help regarding a lease or any conveyancing matter or dispute, Wainwright Legal is always here to provide advice. Contact us today.