Commercial and Retail Leasing

Most commercial leases in Queensland fall into 1 of 2 basic categories:

1. A non-retail commercial lease; or
2. A Retail Shop Lease.

If the premises leased or the intended use of the premises do not fall under the Retail Shop Leases Act 1994 (Qld) (“RSLA”) such that it is not a “retail shop,” then the RSLA does not apply. In this circumstance, it is commonplace for the tenant to pay both the landlord’s and their own legal cost for the preparation of the lease.

Moreover, if the premises or intended use falls under the RSLA as a “retail shop,” then the lease constitutes a Retail Shop Lease. Also, there are several circumstances or uses that result in the lease being a Retail Shop Lease. Firstly, the upside to a Retail Shop Lease for the tenant is that the legislation is largely a consumer protection mechanism to attempt to protect small tenants from large powerful landlords. Secondly, the other upside is that the legislation prohibits the landlord from passing on the legal costs of creating the lease to the tenant.

In our example above, even though the commercial premises itself may not fall under the RSLA, the intended use would. Therefore, the landlord must pay its legal costs, and you must pay yours.

You will need legal advice about the lease and to give a certificate from the lawyer. Our Gold Coast leasing lawyers can assist.

Payment of outgoings can depend of a number of factors such as:

• Is the lease a ‘Retail Shop Lease’?
• Is the property being offered as a gross or net rental payment?
• Does the landlord even pay these outgoings?

Under the Retail Shop Leases Act, the landlord cannot pass on certain outgoings to the tenant. For instance, land tax and legal fees for the initial drafting of the lease are not payable by the tenant. Typically, the tenant is responsible for outgoings on the premises unless the rental amount is a ‘gross’ amount that includes outgoings, excluding utilities. For more information, please contact our Commercial Leasing Gold Coast lawyers.

This depends on the circumstances. Tenants which are company entities will often see the landlord requiring a guarantor as it may have little recourse against a corporate tenant in the event of default.

Our leasing lawyers observe circumstances where some landlords waive the requirement for personal guarantees if they receive a higher security bond, such as an amount equivalent to over 6 months’ rent.

Whether a tenant pays a security bond or an individual guarantees the lease depends on several factors: the attractiveness of the premises, the financial position of the proposed tenant, the specific needs of the landlord, and the negotiation skills of the tenant, its agent, or lawyer. A practical approach for tenants with limited resources at the beginning of a lease is to propose personal guarantees that can be waived if there is a specified security bond amount.

As a landlord, it is important to carefully consider who acts as a guarantor and what is the structure of the security. The security bond can be in the form of a cash deposit or a bank guarantee. If it is a cash deposit, it is advisable to register a security interest in the bond monies on the Personal Property Securities Register (“PPSR”) to potentially safeguard that cash deposit from any liquidation or external administration of the tenant.

Our Gold Coast leasing lawyers can provide advice in relation to alternatives for lease security and their risks.

In short, yes, you should register the lease. However, if the lease term is less than three (3) years, it is under the protection of the Property Law Act’s short lease exemption. Nevertheless, this protection could be jeopardized if the property is sold or a mortgagee takes possession. Despite exceptions, as a general rule, registering the lease is advisable.

Typically, the tenant bears the cost of registering the lease, which primarily benefits them. If the leased premises constitute only a portion of the property, a survey plan may be necessary for registration. Once again, since it’s usually the tenant who seeks registration, they would cover the survey costs. Finally, if the entire property is leased, a survey plan isn’t required for lease registration.

Several landlords actively promote the use of confidential incentive deeds that outline rent concessions, fitout contributions, and similar benefits. One plausible rationale for this practice is to maintain confidentiality and prevent competitors of the lessor from matching or surpassing the incentives to attract potential tenants. However, there may be other, less commercially motivated reasons behind this approach.

For example, it might be to conceal the true value of the rent from other tenants, valuers, or prospective buyers of the freehold. Our Gold Coast leasing lawyers have seen extreme examples of this practice attempted, where the lease (as a public document) will say one thing, but the effect of the incentive deed is quite another.

Entering into such transactions carries several potential risks for tenants if third parties are misled about the true nature of the agreements between the parties. Our Gold Coast retail leasing lawyers are available to discuss these risks and recommend alternative approaches for proceeding.