Understanding your stores retail lease

When undertaking a new commercial enterprise selling to the public, a retail lease will be a core component of your business model, and it is important to distinguish between whether the proposed use is a “retail shop” or not.

If the proposed use is a retail shop, the parties involved will be bound by the Retail Shop Leases Act 1994. The Act will even prevail over an inconsistent provision of a retail shop lease.

A retail shop is one that is situated in a retail shopping centre or used wholly or predominantly for the carrying on of one (1) or more retail businesses, which are prescribed in the regulations. Some examples of business goods or services that are retail shops include: pawn broking, the sale of cheesecakes, the sale of sunglasses, fast food shops, selling domestic appliances, selling fabrics and other soft goods, flower retailing, and fruit & vegetable retailing. This of course, is by no means an exhaustive list.

Before entering a retail shop, the proposed tenant must receive a Disclosure Statement from the landlord (Section 22).

The proposed tenant must also make the disclosure to the landlord (Section 22A). It is also usual for financial and legal advice reports to be supplied by the proposed tenant so that the tenant knows what he is getting into.

There are several consequences to consider under a Retail Shop Lease, and Robert Bakker is meticulous to ensure, whether you are the Lessee or the Lessor, that these consequences are always pointed out to you in detail. Equally, there are also some protections under the Act that differs from an ordinary lease.

For example, did you know that Under Section 24 & 48 of the Act, the Lessor cannot charge his legal expenses for preparation of the Lease documents. This differs of course if it is NOT a Retail Shop Lease.

Under a Retail Shop Lease the tenant may be required to pay the Landlord’s outgoings. However, these outgoing must be specifically specified and a formula for determining them must be clearly stated in the lease.

Getting the right advice BEFORE you sign is paramount.

If you need advice or assistance with your new venture, or if you unsure of your rights with your current lease, then contact RB Lawyers