Three Important Retail Lease Considerations

Retail leasing today is significantly more sophisticated and has better protections for a tenant than a decade ago. Across Australia, in various jurisdictions, there are many things in favour of tenants nowadays. Examples would be key money and lease duration. Another is the matter of the security deposit.

 

The Retail Leases Act (“the Act”) specifies that a tenant must be given at least a five year lease term. The initial term need not be five years; but the initial term plus the option periods available must add up to five years at least. This represents real security of tenure. This of course will not apply when there is a head lease in place which has anything less than five years to go at the time of the commencement of the new retail lease. In this instance, the term is the length of the head lease less one day, which is only commonsense. It is surprising how many landlords will still try to insert such a clause (yes I have seen many) even with the legislative overriding mechanism; but the tenant always has the Act to fall back on if there is a problem.

 

Key money. This can be defined colloquially as the cover charge to get in the door. In Victoria, at least, this is all no more in retail. The Act simply prohibits it.

 

In relation to bond money or security deposit, this will likely always be there. It is he landlord’s insurance, in case you are unable to fulfil your obligations. The bond must be held by the landlord in an interest bearing account – this is the law. You are generally entitled to your bond at the end of the lease provided you have made good the premises and paid all monies owing. Please note there are contingencies to getting your security deposit back and it often doesn’t come back in full – eg., because the make good was not good enough, so as to be compliant with the lease.

 

Always know what you are signing and get legal advice.

 

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