What is a Commercial Lease, and isn’t it the same as a Retail Lease?

Some premises that are leased fall under the protection of the Retail Leases Act 1994, these premises are for businesses who are permitted to sell goods (e.g. clothing store, restaurant, florist). In contrast, businesses that provide a service (e.g. lawyers, accountants, mortgage brokers), or if a building is used as a warehouse or industrial site, these leases will fall under the requirements of a Commercial Lease.

Commercial Lease Checklist*

Is the premises?

  • One, has a lettable area larger than 1,000 meters square? 
  • Two, has a term less than 6 months or more than 25 years?
  • Three, within a complex that includes a cinema, bowling alley or skating rink?
  • Four, provides a service as opposed to selling a good?

If you have said yes to one of the four questions, then your lease is a Commercial Lease.*

The table below demonstrates some differences between Retail and Commercial Leases*: 

DetailCommercial LeaseRetail Lease
A ratchet clauseIs not subject to the prohibition on rachet clauses.  A ratchet clause allows rent to increase despite a market rent review recommending that rent be decreased.Prohibition on ratchet clauses.
Transfer or assignment of leaseLandlord can refuse to consent.Landlord can refuse consent only under limited and certain conditions.
Registration of lease on titleNo requirement.Must register lease to protect tenant interest.

The Retail Leases Act 1994 has many tenant safeguarding statutory provisions, even though your lease may be a Commercial Lease you should have terms drafted to have similar safeguards. Landlords and Tenants should understand the key differences within the lease and what is, or what is not, permitted under law. In particular, a Commercial Lease requires careful consideration on the part of the tenant to ensure compliance with the terms and obligations contained therein.

*This list is not exhaustive and other consideration apply, please contact our office to find out more.

All care has been taken to provide the correct information, as of 16 June 2020.  If you have any further enquiries please contact DF Legal 02 9774 3175.

About Us

DF Legal is a boutique law firm with over 15 years of combined experience practicing in a wide range of areas including Property Law and Conveyancing, Commercial Law, Wills, and Estate Planning, Franchise Law, Building Disputes, Commercial and Retail Leasing, and more.

Share This Article