Commercial & Retail Leasing

The first question on any lease is whether the Retail Leases Act 2003 (Vic) applies. The Act applies broadly to premises used for the retail sale of goods or provision of services, subject to specific exclusions including a rent threshold, certain professional tenants, listed-entity tenants and short leases. Where the Act applies, it overrides inconsistent lease terms — most notably the prohibition on passing land tax through to the tenant, capital expenditure recovery limits, and the landlord's mandatory disclosure obligations. Getting the threshold question right is foundational.

Under the Retail Leases Act, the landlord must provide a written disclosure statement at least 14 days before the tenant enters the lease, with detailed disclosure of rent, outgoings, fit-out and centre information. A late or defective disclosure statement gives the tenant a statutory right to terminate within the first seven days of occupation. The same disclosure framework applies on lease renewals and on assignments — landlords routinely overlook this, and the consequences for the lease can be severe.

Most commercial leases provide for periodic rent reviews — fixed percentage, CPI-linked, market review, or a combination. Each mechanism has distinct risks. Market reviews in particular require careful drafting of the valuation process, ratchet clauses (in non-retail leases) and dispute resolution. Outgoings recovery is similarly technical: the lease should identify recoverable outgoings clearly, and retail tenants are entitled to annual estimates and an audited statement of actual outgoings.

A well-drafted option to renew is one of the most valuable clauses in a tenant's lease. Exercising the option requires strict compliance with the notice window — typically between six and twelve months before expiry. Missing the window is a common and costly mistake. We diary option windows for our clients, advise on whether to exercise, and negotiate the renewal terms including any updated rent, outgoings and make-good provisions.

When a business is sold, the lease is usually assigned to the buyer. The landlord's consent is required and cannot be unreasonably withheld, but the landlord may impose reasonable conditions. Under section 60 of the Retail Leases Act, an outgoing tenant can be released from future obligations if the prescribed disclosure procedures are followed — without that release, the seller remains on the hook for the buyer's defaults. We coordinate lease assignment with the underlying business sale transaction to close the deal cleanly.

Make-good obligations at end of term can amount to substantial sums. We negotiate clear, capped make-good provisions at the start of the lease, and we act for tenants exiting leases where the landlord's make-good claim is excessive. We also assist with recovery of bonds and bank guarantees where the landlord has wrongfully called on security.

Retail tenancy disputes in Victoria are heard in the Victorian Civil and Administrative Tribunal (VCAT). Common disputes include outgoings recovery, repair obligations, exercise of options, redevelopment terminations and end-of-lease claims. The Small Business Commission also offers mediation. We act for clients at each stage — informal negotiation, mediation, and contested VCAT hearings — with a focus on resolving the matter on commercially sensible terms.