There are major differences between a Retail Lease and a Commercial Lease. Landlords and tenants both should be aware of them. Commercial real estate is buildings or lands used to generate profit. Retail is a sub-category. Both of these ensure protection under law. However, both leases do not provide the same rights and obligations.
It is important you determine the kind of lease your business is going to be a part of. Commercial leases have far more potential problems. Below is a breakdown of key differences in Retail and Commercial leases:
This is an agreement between owner of a commercial property, called a landlord, and a tenant. A tenant will be the person who wants to conduct business on the property.
• State-specific property and conveyancing Acts are in charge of commercial leases.
• A Commercial Lease is able to contract out of the property and conveyancing Acts. This means law will not come in between business arrangements made by commercial land leasers and tenants.
• Commercial leases will apply to premises used as warehouses, industrial site, or an office. Office should be in a commercial building with no retail activity.
• Distinction of non-retail lease is somewhat blurred when it comes to businesses that provide services. The deciding factor depends on the location. If premise is located in commercial site, then the lease will be deemed non-retail.
• In commercial leases, extent of tenant’s liability will be dependent on their negotiation skills, unlike retail leases. In retail leases, retail legislation will provide majority of leasing provisions.
• For commercial leases, parties involved can negotiate lease preparation fees.
• Commercial leases need carefully thought out negotiations by the tenant to check that the lease term is not heavily leaning towards favoring the landlord.
• As mentioned, this is a type of commercial lease. The area is used for retail shops and businesses.
• State-specific retail legislation is in charge of retail leases. Retail leasing legislation is for consumer protection. It imposes additional requirements on landlords.
• Landlord must provide tenants with disclosure documents 7 days before leasing, except in South Australia.
• Copy of lease must be provided 7 days before entering a lease. Or it can be provided as soon as landlord and tenant go into negotiations. Failure to provide copy of lease gives the right to a tenant to terminate the lease.
• Retail leasing location receives additional protection related to unconscionable landlord conduct.
• Purpose of tenancy matters for the protection of state-specific retail leasing legislation.
• Area primarily used for wholesaling, manufacturing or storage are not considered retail premises.
• Each state has its own exceptions. Consult a lawyer to find out the exceptions in your state.
• Consequences of not complying with retail legislation can involve right of early termination from tenant. Compensation is also an option.
Conveyancing Sydney has got the right conveyancers for you for any kind of lease. Reach us at (02) 8084 2764 to find out more.