Securing a retail or commercial lease in Queensland is similar to navigating uncharted waters in the business world. Choosing the right retail or commercial space is a pivotal decision that demands meticulous consideration. Whether you’re gearing up to launch a boutique store, restaurant/café, or scouting for additional office spaces, a profound understanding of the intricacies of both retail and commercial leases is paramount. This article aims to distinguish the two types of leases and illuminate the key issues surrounding them, arming you with the knowledge to make well-informed decisions on your leasing expedition.
What sets them apart?
In Queensland, the Retail Shop Leases Act 1994 (“RSLA”) governs the intricate world of retail shop leases, while commercial leases predominantly fall under the jurisdiction of the Property Law Act 1974 (“PLA”). It’s important to note that common law principles, shaped by numerous court precedents, plays a significant role in governing many commercial leases.
Retail leases cater to businesses that directly engages with consumers. Think of cafes, restaurants, hairdressers – where the public can freely enter the premises. These leases are tailored for selling goods and services to the public only. As governed by the RSLA, retail leases uphold transparency and fairness, but with a distinct emphasis on protecting the interests of retail tenants over landlords.
Commercial leases on the other hand casts a broader net, encompassing a diverse range of businesses, from corporate offices to warehouses and manufacturing plants/facilities. Unlike the RSLA, the PLA does not afford the same level of statutory protection for one party, which necessitates the need for more robust negotiations between the landlords and the commercial tenants.
Key issues to consider for both retail and commercial leases
The structure of the lease and its terms
In any lease, it is essential to understand its structure and terms. Retail leases often involve unique structures depending on the tenant’s business. Picture a boutique retail lease, where a landlord may propose a percentage lease structure. Alongside the base rent, the tenant pays a percentage of monthly sales, ultimately resulting in reduced rent payable to the landlord.
However, commercial leases will allow more flexibility and room for negotiation. A robust negotiation strategy is required for securing the most favourable terms. In most commercial leases, a gross lease is utilised where the tenant ends up paying a flat fee for rent, which includes utilities and insurance for the duration of the lease.
Rent and other costs
Retail leases will typically include additional costs beyond base rent, which can include maintenance fees, utilities, taxes, insurances, and even marketing fees.
Similarly, for commercial leases, additional costs in the form of outgoings will need to be paid by the commercial tenant. These outgoings often vary and are subject to negotiation. Scrutinising lease terms, understanding expense breakdowns, and negotiating each term and crucial to align costs with budgetary constraints.
Repairs and maintenance
Retail leases lack specific provisions outlining repairs and maintenance. Each party must establish their rights and obligations under a retail lease in relation to repairs and maintenance.
Whereas in commercial leases, standard repair and maintenance clauses are an outcome of negotiation between the two parties. For example, a tech company leasing commercial space may need specific provisions in the lease in relation to the responsibility for managing, maintaining, and repairing the specialised equipment.
Termination clauses in leases are critical to understand as it provides a method for both tenants and landlords to end a lease. Some of the reasons for termination includes through mutual agreement, through notice, through breach of contract, or for non-disclosure for retail leases.
For example, you might consider terminating a retail lease due to a shift in the market demand. Understanding the available termination clauses facilitates efficient responses to market changes without incurring unnecessary addition expenses.
These considerations are just the tip of the iceberg when entering into leases. Businesses planning to dive into retail or commercial leases must grasp these essential terms, as they directly impact business performance. Professional guidance and meticulous negotiation are indispensable in these situations as they will ultimately support business success while minimising potential risks.
Want more information on retail or commercial leasing?
At FC Lawyers, we specialise in deciphering the key issues in both lease types, tailoring agreements that benefit you while mitigating risks. If you need any retail or commercial leasing assistance, please contact us today.
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