Commercial Leases in Victoria – what you need to know!

Did you know that for your lease to be governed by the Retail Leases Act 2003 (“the Act”) the lease period needs to be for a minimum of five (5) years?

You can only seek a lesser lease period if you apply for a waiver with the Victorian Small Business Commissioner.

For example, you can have a lease for three (3) years and an option for two (2) further years or you can have a lease for five (5) years, regardless of the way the lease is drafted, the total number must be a minimum of five (5) years.

If the lease is not for a minimum period of five years and the usage is Retail – you, as the Landlord could be in breach of your legal obligations.

The definition of retail is defined under section 4 of the Act which states the basic definition as being:

  • “… premises, not including any are intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for the sale or hire of goods by retail or the retail provision of services…”

If you are unsure whether you believe you are required to be covered under the Act or not, it is best to seek legal advice.

The lease itself will set out the terms and conditions in which you enter the lease. These can be negotiated prior to entering the lease. Once the lease is signed it is very hard to re-negotiate the terms of the lease – it is a binding contract. Amendment can only occur with the consent of each party.

The lease documentation is to be accompanied by a disclosure statement. This disclosure statement must be provided to you seven (7) days before the lease is entered into. The disclosure statement is a very important document as it sets out the details of the building including:

  • Square meters of the lettable premises and a plan of the premises, if this is available;
  • Number of car parks available;
  • Structures, fixtures and plant and equipment installed by the landlord;
  • Permitted use of the premises;
  • Works, fit out and any alterations to be conducted;
  • The term of the lease and the option dates for renewal;
  • Estimate of outgoings for the premises and any possible foreseeable outgoings; and
  • Rent free period.

Key things to look for prior to entering into a lease agreement:

  • The rental payment and the method of rent being increased;
  • How is the deposit to be paid and when is it due?
  • Do you require council permits or licences to run your business from the proposed premises?
  • Diarise the dates for renewal and the timeframe of when you need to give notice as to whether you wish to renew.
  • If there is a mortgagee on title, they are required to consent to the lease agreement

It is always best to obtain legal advice prior to entering into a lease as once you have signed the lease, unless it is agreed upon and varied by the parties, you are bound by the terms.

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