If you have entered a lease or plan to enter one for your business as a tenant or perhaps as a landlord, you may have to consider the question of whether it is a ‘Retail Lease.’
The Retail Leases Act 2003 (‘the Act’) is the legislation which determines what is and is not a retail lease. When a Lease is ‘retail’, the Act can have significant implications for both the Landlord and the Tenant. As such, it is important to understand whether your Lease is retail or if it is not.
So when does the Act apply to a lease?
The Act defines a retail lease as a lease for a premise which is being used predominantly for the sale or hire of goods or the provision of retail services.
To be more specific, the goods and services coming from the premises must go straight to the ‘ultimate consumer’ and the premises must be ‘open to the public.’ This simply means that the customers of the business are the consumer of the good or service you are providing and not a middleman of some kind and that they are purchasing it directly from the premises.
Some leases might expressly say that the Act does not apply to the lease, but this does not necessarily mean that it does not. The Act will apply even where the lease says it does not if the premises is being used for the sale or hire of goods or the provision of retail services.
There are, however, exceptions to this included in the Act where a lease will not be retail. Some of these exceptions include:
- If your occupancy costs (i.e., rent, outgoings, and any other costs the tenant is liable to pay) exceeds $1,000,000.00 per annum excluding GST; or
- If the tenant is a listed corporation or the subsidiary of a listed corporation. This includes corporations listed on the New Zealand stock exchange; or
- If the premises is on the fourth level of a building or higher. So, if your business is not on the ground, first, or second floor of a building; or
- Where the initial term of the lease is for fifteen years or more, and the tenant is required to do substantial work to the premises which would be costly or arduous to undo at the end of the lease; or
- If the retail premises is being occupied under a licence and not a lease; or
- If the premises is used for a charitable or community purpose; or
- If the term of the lease is for less than a year.
Knowing whether your lease is a retail one is important as the Act offers extra protection to the Tenant and places additional obligations on the Landlord (stay tuned for another Blog Post for more on this topic).
If you are unsure about whether your lease is retail, or are looking to enter a lease and want to know if it is considered retail, we have an experienced team of lawyers who can provide you with advice and assist you. Please call our Drouin or Warragul offices or email us directly at leases@wvblawyers.com.au. Alternatively, you can visit our website and make an enquiry online.
Authors:
Josh Groenewaldt – Leases Clerk
Tessa Hoogerbrugge – Partner
Disclaimer: The information in this post is general in nature. This does not constitute legal advice and should not be relied on as such. Please contact one of our Lawyers if you are seeking advice about a specific legal matter.
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