Whether your lease is a retail lease under the Retail Leases Act 2003 or a plain commercial lease changes your rights substantially. It is the first thing to establish, and it is not decided by what the document is called.
What makes a lease a retail lease
Broadly, premises used wholly or predominantly for the sale or hire of goods by retail, or the supply of services to the public. Use is what matters, not the label — a suburban office supplying services directly to walk-in customers may well be caught, and a shop in a retail strip used purely as a warehouse may not be. There are exclusions, including premises above a certain occupancy cost and tenancies held by listed companies or their subsidiaries.
Get this classification wrong and you negotiate the wrong document.
What the Act gives a retail tenant
- A disclosure statement before you sign, setting out the key commercial terms and estimated outgoings.
- A minimum five-year term, including options, unless a certificate is obtained.
- Limits on recoverable outgoings — land tax, for example, cannot be passed on, and outgoings must be estimated and reconciled.
- Restrictions on rent review methods, including a prohibition on ratchet clauses that prevent rent falling on a market review.
- No pass-through of the landlord’s lease preparation costs.
- Access to the Victorian Small Business Commission for low-cost mediation before any VCAT proceeding.
A plain commercial lease
Office, industrial and warehouse leases outside the Act are governed almost entirely by what the document says. There is no statutory disclosure, no minimum term, no cap on outgoings and no restriction on ratchet clauses. Everything you want, you negotiate. That is not necessarily worse — it simply means the drafting carries all the weight.
The clauses that cost real money
- Rent review — fixed percentage, CPI or market, and what happens at option. Compounding fixed increases over a ten-year term add up faster than most tenants model.
- Outgoings — what is recoverable, and whether capital works are excluded.
- Make good — the single most common end-of-lease dispute. Define it precisely, against a photographic condition report taken at handover.
- Assignment — if you might sell the business, how the landlord’s consent works, and whether your personal guarantee is released on assignment. Often it is not.
- Personal and bank guarantees — the amount, and what triggers a claim.
- Options to renew — the exercise window is usually narrow and strictly enforced. Diarise it the day you sign.
The cheapest time to fix a lease
Before it is signed. “Standard and non-negotiable” usually means “drafted by the landlord’s lawyer”. Even where the rent is genuinely fixed, landlords will frequently move on make-good scope, guarantee amounts and assignment terms rather than lose a tenant.