Entering into a commercial lease for the first time can be an exciting and overwhelming experience, and without the proper legal advice can lead to costly, unnecessary, binding mistakes. In Queensland, a commercial retail lease is a legally binding contract and is regulated by the Retail Leases Act 1994 (ACT).

In Queensland, any tenant that has fewer than five (5) retail businesses must obtain a Legal Advice Report (which is provided by your lawyer after they have provided you with legal advice regarding the lease) and a Financial Advice Report (which is completed by an accountant after they have advised you of your financial obligations associated with the lease).

Prior to entering into a retail lease a landlord (Lessor) is also required to show the tenant (Lessee) a Lessor Disclosure Statement about the lease. Basically, the Lessor Disclosure Statement provides a summary of the information contained within the proposed lease. The landlord is required to provide the tenant with a copy of the disclosure statement at least seven (7) days prior to the commercial lease being executed. Failure to provide the Lessee Disclosure Statement may result in termination rights for the tenant.

In addition to the landlord providing a Lessor Disclosure Statement to the tenant, the tenant is also required to provide a Lessee Disclosure Statement. This Lessee Disclosure Statement contains all of the information about the tenant’s background, which includes company structures and previous retail experience. The Lessee Disclosure Statement also allows the tenant to record any representations made by the landlord.

Prior to executing a commercial lease, you should seek legal advice about the terms of the lease, as all terms are binding and can have ongoing financial obligations associated with them. Generally, a commercial lease will have the following essential terms:

1. Permitted use – this details the type of business which can be carried on at the premises. It is essential that the definition of the permitted use fits the intended use of the retail premises.
2. Trading Hours – this details when you can trade and must comply with allowable hours under Queensland legislation.
3. Rent – Agreed by the tenant and landlord and may or may not include outgoings. Rental increases should also be reviewed as they are calculated in different ways, depending on the terms agreed.
4. Outgoings – outgoings in a commercial lease are the operating costs associated with the premises and can be included or excluded. The definition of outgoings should be clearly understood so that there are no hidden costs.

Understanding all of the terms of a retail lease is essential, as it will assist in negotiations. Consulting a lawyer early in the negotiation phase, will ensure better terms being agreed upon between the parties. A lawyer should always be consulted prior to executing any legal document.

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The content of this article is intended in the nature of general information, and cannot be relied upon as legal advice. You should seek specialist advice about your particular circumstances.