A retail lease is any agreement granting for value a right of occupation of a premises for use as a retail shop irrespective of whether the right to occupy is exclusive, whether the agreement is express or implied, or whether the agreement is oral or in writing. A ‘retail shop’ is a premises used wholly or predominantly for the carrying on of one or more of the businesses prescribed by the Retail Leases Act 1994 (NSW) (“the Act”).
For the purposes of the Act, the businesses prescribed as retail shops are set out in Schedule 1 of the Retail Leases Regulation 2022 (NSW) (“the Regulation”) and include barbers, electrical appliance shops, grocery shops, newsagencies, and many others. Importantly, the Regulation recently expanded the definition of retail shop by adding gyms including yoga, pilates or dance studios, and small bars with a maximum capacity of 120.
Certain leases are specifically excluded from the operation of the Act and are therefore, not retail leases, including:
- Shops with a lettable area of 1,000 or more square metres;
- Shops used wholly or predominantly for the carrying on of a business on behalf of the lessor;
- A shop within premises where the principal business carried on in those premises is a cinema, bowling alley or skating rink and the shop is operated by the same people;
- Leases for a term of 25 years or more (including any term for which the lease may be renewed);
- Leases for a term of less than 6 months without any right for the lessee to extend the lease;
- Retail shops that are a stall in a market unless the market is a permanent retail market; and
- Premises within a retail shopping centre.
From the perspective of a tenant, making the distinction between a retail and commercial lease is important because tenants are provided greater protections under the Act, which does not apply to commercial leases. This includes for example, prohibiting the landlord from charging lease preparation costs to the tenant, lodgement of bonds with Rental Bonds Online rather than having the landlord or their agent hold it and greater disclosure requirements on the landlord.
Prior to entering any retail lease, it is important to seek legal advice so that you understand your rights and obligations as a landlord or tenant.
