2 August 2024
Tiahna Cassar

The Retail Leases Act 1994 (NSW) governs retail leases in New South Wales.

In accordance with the section 3 definition of a ‘retail shop’, your lease will be classified as a retail lease if:

1. The premises is used wholly or predominantly for carrying on one or more of the businesses prescribed as a Retail Shop Business in the Retail Leases Regulation 2022 (NSW); or

2. The premises is used for the carrying on of any business (whether or not a business identified in the Retail Leases Regulation 2022) in a retail shopping centre.

However, the Retail Leases Act does not apply to any leases with a term of more than 25 years, any businesses which are classified as Excluded Uses, where the business is a cinema, bowling alley or skating rink and the shop is operated by the person who operates those businesses, or any shop which has a lettable area of more than 1,000 square metres.

Lease Preparation Costs

As a Tenant in a retail lease, the Landlord cannot seek or accept payment of key-money or lease preparation expenses in connection with the granting of a retail shop lease (see section 14(1)).

Under section 3 of the Retail Leases Act, lease preparation expenses include legal or other expenses incurred by the Landlord in connection with the preparation of the retail lease including costs associated with obtaining mortgagee consent. Key-money includes any money paid to the Landlord or the Landlord’s agent such as a premium, non-repayable bond or any benefit conferred at the direction of the Landlord or its agent in connection with granting a lease.

Under clause 14(4) of the Retail Leases Act, the Landlord may, however, recover any reasonable lease preparation expenses from a Tenant incurred in connection with making an amendment to a proposed lease.

A tenant will not be required to pay any costs for requesting any of the following amendments:

1. An amendment to insert or vary the particulars of the Tenant entity, the rent or the term; or
2. An amendment to include or omit a term of the proposed lease that was agreed between the Landlord and Tenant; or
3. An amendment requested before the Landlord is given a Tenant’s disclosure statement.

Subject to the provisions of the lease, a Tenant will likely be required to pay lease registration fees.