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Key differences between retail and commercial leases

Posted by on 11 Mar 2016

Assisted by Emily Lucas

There are substantial differences between retail and commercial leases that both landlords and tenants ought to be aware of. It is important for businesses not to fall into the trap of thinking that both leasing arrangements protect the same rights and impose the same obligations. 

Here are some key differences that you should consider before entering any lease:

Commercial Leases Retail Leases

At present there is no set legislation that governs commercial leases. 

Retail leases are governed by the Retail Leases Act 1994.

Leases of this nature can vary in duration and are often a point of negotiation between the parties.

A minimum term of five years is granted to the tenant (unless a Section 16 Certificate is signed).

It is normal practice for tenants to be responsible for the landlord’s legal costs.

Tenants and landlords are responsible for their own costs.

In the event of a dispute regarding the lease, each party can instigate proceedings without the need for mediation. 

Parties to a retail lease are obligated to first mediate before seeking the assistance of the NSW Civil and Administrative Tribunal to resolve the dispute.

The landlord’s real estate agent is usually responsible for holding onto the security bond or bank guarantee. 

All security bonds are held by the office of NSW Fair Trading.

In the event that the tenant wishes to transfer the lease to a third party, the tenant must follow the procedure stipulated within the lease.

Part 5 of the Retail Leases Act 1994 provides the tenant with a process of which they must follow should they wish to transfer the lease.

If you’re unsure as to whether you have a commercial or retail lease in place, or would like further information regarding either a commercial lease or a retail lease, please contact:

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