South Coast Register

Your key retail leasing rights explainedAdvertising Feature

Michael Lewis, Law Society Accredited Specialist, Business Law. Picture supplied
Michael Lewis, Law Society Accredited Specialist, Business Law. Picture supplied

Operating a business is often stressful.

So that you're not left in the dark, here we answer some questions about your fundamental rights.

Can my retail lease be covered by the Retail Leases Act 1994?

The Retail Leases Act 1994 is the principal piece of state legislation which governs retail leases in NSW. A shop less than 1,000 square metres in size, that sells or supplies goods and services, and is a retail business, is covered by this legislation. The lease must be for at least six months and under 25 years.

What cannot be covered by the Act?

The Act does not apply to retail leases of shops larger than 1,000 square metres, or where the business is carried on by the lessee on behalf of the lessor. It also will not apply in matters concerning shops within cinemas, bowling allies, or skating rinks that are under the control of the establishment itself, or to any premises located in an office above a retail shopping centre.

Are there exceptions?

Yes. Even if your store may not be listed as a business type covered under the Act, it may still come under the Act if it's in a shopping centre i.e. a cluster of at least five retail shops owned by the same person and/or company on the same strata plan.

What is key money?

Key money refers to any form of non-refundable benefit paid in exchange for the grant, renewal, extension, or assignment of a retail lease. Under the Act, a landlord cannot ask for key money when entering a retail lease agreement, especially in relation to the granting or assigning of the lease. An agreement requiring the tenant to pay key money will become void and a fine up to $11,000 can apply to anyone seeking or accepting key money.

Why can the landlord ask me to pay money before the lease?

A landlord may ask for a "security" or "bond" of the lease that may take form as a lump-sum payment, a bank guarantee, or a third-party guarantee. If there is a breach in the terms and conditions of the lease by the tenant, the landlord can draw upon this to pay or recover losses incurred by the breach.

What if the tenant and landlord can't agree on the security payment?

When concluding a lease, the tenant and landlord must complete and sign a claim form directing how and where the security or bond is to be paid. When one party has signed a claim form, the other party will receive a Notice of Claim on the bond. If a party disagrees with the conclusions drawn, a dispute can be made. You have to email and post a tear-off slip at the bottom of the Notice of Claim to the NSW government, and to submit an Application for Mediation of a Lease or Bond Dispute Form to the NSW Small Business Commissioner.

What is the role of a specialist retail valuer (SRV)?

Tenants have the right to exercise an option, which involves negotiation with the landlord before entering a lease to obtain another fixed term of the lease, on the same terms as the existing lease, except for rent. If a tenant and landlord are in disagreement, a SRV can be appointed. The SRV will determine the current market rent by balancing reasonable payment of rent by the tenant if the shop was offered to the market, against the normal discounts and concessions offered in that market. They will then present their recommended future steps.

RMB Lawyers has a team of lawyers who specialise in commercial and business law. For advice, call 1800 681 211 or email