Retail & Commercial Leases in WA

Should my lawyer prepare a commercial lease?

Your lease is likely to represent one of the most important aspects of your business. The quality of the lease is intrinsically related to the value of your property and/or business. It is important to seek quality legal advice from a lawyer experienced in commercial matters before entering into a lease and that you understand your rights, liabilities and obligations.

What should be included in a commercial lease?

In theory, everything is negotiable when it comes to commercial leases. Rent, term of the lease, options to renew, payment of operating expenses, rent-free periods, insurance obligations, redevelopment and relocation and fit-outs can be negotiated and many special provisions can also be included such as ongoing maintenance and repair costs and rights to use common areas and car parking facilities.

What is the difference between a retail shop lease and a commercial lease?

A lease is a contractual arrangement between a tenant (lessee) and a landowner (lessor) in respect of the use of a property. A commercial lease is an agreement for the leasing of commercial property with a specific business purpose such as office areas, warehouses or industrial sites.

Compared to other forms of leases, commercial leases tend to offer less legal protection as the law assumes businesses and business people are more knowledgeable than consumers and laypeople and can make informed decisions that are in their best interests.

A retail lease is a type of commercial lease used for leasing retail shop businesses. Retail shop leases attract additional legislative protections for consumers in accordance with the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA).

Who pays the costs of a commercial lease?

In Western Australia, this can be negotiated. In years gone past it was common for the lessee to bear all the costs of the preparation of the lease including its own costs and the costs of the landlord. For reasons likely to be related to the downturn in the Western Australian property market it is not uncommon for parties to now pay their own costs when it comes to the preparation of a commercial lease. 

Who pays for the cost of a retail shop’s lease?

Section 14B of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) provides that the tenant will not be required to pay for certain legal fees and other expenses of the landlord.

These fees include the Landlord’s legal costs in respect of the preparation, negotiation and execution of the lease, a renewal or an extension of the lease, obtaining any consents that may be required and in the Landlord’s compliance with the Act.

Can I terminate a commercial lease early?

There can be very serious legal consequences if you try to break a lease early and if you are intending to terminate a lease early, whether you are the landlord or tenant, you should first obtain legal advice from a lawyer with some experience in commercial matters.

As a starting point, you should review the lease carefully to see whether there is an early termination clause. Other options may include negotiating an early termination with the other party, assigning the lease or subletting part of the property.

What is a surrender of a lease?

A surrender of a lease is a legal document signed by all parties to a lease once they have reached an agreement to end a lease before the end date. It should set out the key agreements between the parties and ensure that neither party has any further legal responsibilities or obligations under the lease.

What is an assignment of a lease?

An assignment of lease is a legal document used to transfer the rights of an existing lessee to another party. They are commonly signed upon the sale of a business whereby the purchaser of the business takes on the lease of the property in place of the seller.

What happens when a tenant breaches a commercial lease?

It depends on the nature of the breach and the actual provisions of the lease itself. If the breach goes to the heart of the lease, such as failing to pay rent, the landlord may terminate the lease and sue the tenant for damages.

If the breach is less serious, for example, the tenant has erected signage on the property that has not been approved, the lease will remain on foot and the landlord may sue the tenant for damages only.

What happens if a tenant ends a commercial lease early?

If a tenant ends a commercial lease early it is likely the landlord may sue the tenant for damages including for payment of all rent that should have been paid to the actual end date of the lease. Tenants would be wise to obtain advice from a lawyer experienced in commercial matters before ending a lease early in order to mitigate the losses.