Commercial Shop Lease
Commercial Shop Leasing
You’ve surely seen “For Lease” signs on shops as you walk around town.
Astute entrepreneurs spot opportunities even in downturns—venturing into new markets or expanding their business footprint by securing prime retail locations. Many steadfastly back brick-and-mortar storefronts. With the post-pandemic recovery underway, more aspiring business owners are joining the fray.
As I’ve noted before, opening your own shop is a common dream here in Australia. Although running a business involves far more responsibilities than being an employee, it offers freedom over your schedule and greater growth potential. The recent rise of novel, specialty boutiques has inspired many to take the plunge into entrepreneurship.
In WA’s well-regulated legal system, leasing retail premises is subject to strict requirements. The first hurdle for most new tenants is deciphering the dense legal terminology and making sense of a lease agreement that can be as thick as a dictionary.
Except in a few cases, shops located within shopping centres qualify as “retail premises” under the Retail Leases Act. There are countless lease terms to consider; here are a few examples:
– The basics: lease term length, rent amount, and annual rent reviews;
– Security (e.g. bond or guarantee);
– Centre refurbishments and their impact on your business;
– Trading hours;
– And more.
Tenants often request a minimum five-year lease, but that term need not be granted in one block. A landlord might offer a “3+2” arrangement—three years plus a two-year renewal option—instead of a straight five-year term.
Most leases include an annual rent review, but you can only choose one review method per lease. Common options are market-based rent reviews, CPI adjustments, fixed percentage increases, or a formula. Note: if you select a market-based review, the landlord cannot include a downward “rent protection” clause to prevent rents from falling if the market declines.
Landlords often require security, which may be an upfront bond, a bank guarantee, or even a personal guarantee in high-demand locations.
Shopping centres sometimes undergo refurbishments. During these works, landlords must assist affected tenants and minimise business disruptions. In some cases, tenants forced to close temporarily must be compensated.
While trading hours cannot be rigidly prescribed, if you wish to open outside the centre’s standard hours, you will generally pay extra fees.
If you’re already operating a shop, you’re likely familiar with some of these points. But if you’re still researching, much of this may come as news.
Prospective tenants: before you sign any lease, be sure to read and understand every clause.
See you next issue.
Editor’s Note:
Mr Ren is originally from Guangzhou, China and has practised for many years. He is now the Principal Lawyer at LJR Legal.
Embracing modern technology, speaking the languages of our Chinese community, and serving as your dedicated legal advisor has been Mr Ren’s mission throughout his career.
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Disclaimer: This column provides general legal discussion only. The text, images, and any content herein do not constitute legal advice, nor does Mr Ren intend by this column to advise its readers. If you require advice tailored to your circumstances, please arrange a confidential one-on-one consultation with Mr Ren. Neither this column, the magazine, nor Mr Ren accepts liability for any loss arising from anyone’s use of its content.