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Burning Question: Commercial or Retail? Which Lease do you need?

Question

Just double checking that I have bought the right kit for our Lease.

We have tenants going into our building that is council stated, as a Bulky Goods Warehouse. Our tenants are bulky goods, being carpet and paint, but also sell retail. Should I have purchased a Retail Lease rather than the Commercial Lease. I am confused.
We have previously done this through a Solicitor and their lease does not state either Commercial or Retail. Our tenants want a 5x5 Lease period. Thankyou for answering this query.

Answer

Let me first point out I am not a lawyer, solicitor or have any legal qualifications so don’t interpret my answers as legal advice.

I assume your tenant is also in NSW?

The question is whether the tenancy could be caught by the Retail Leases Act 1994.  

Under definitions within the act
"retail shop" means premises that--
(a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or
(b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre.

A prescribed business is any business that is listed in schedule 1.

If your tenant has retail customers (the end user of the product) coming to the premises for the purpose of buying carpet and paint (not necessarily wholesale customers) then it might be argued that this definition is listed in schedule 1 and therefore a retail business under by the Act.

If however your tenant is providing primarily a service to trade customers and not retail end users, then it might be argued this business is not caught by the retail leases act.

Its not always black and white. Sometimes it’s a bit grey and you might be well served to urr on the side of caution.

If you were to provide your tenant with a landlords disclosure statement in addition to the lease agreement, you would satisfy the landlords responsibility under the retail leases act, but you also have the added obligations imposed on landlords under the Act.
Whether you use the commercial lease document or the retail lease document is not important, it’s the landlords compliance with the act that determines whether your tenant would gain certain rights, such as the right to terminate the lease because of the landlords non-compliance.

At the end of the day you need to make that choice, is it or is it not caught by the act?

I hope that helps and has not provided more confusion.

Resources

Commercial Property Lease Resources

Retail Property Resources

 

 

 



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