If you're about to sign a commercial lease for a business premises in Victoria, you may be asked whether the lease is a retail lease. The answer to this question is not always as obvious as it may seem. However, it is important to know the answer, especially because the legal obligations differ depending on whether the lease is a retail or a non-retail commercial lease.

Read on to understand more.

What is a “retail” lease in Victoria?

In Victoria, a retail premises lease is defined by the Retail Leases Act 2003 (Vic), generally as one where the premises are used wholly or predominantly to sell or hire goods, or offer services, directly to the end consumer or user. This is not just supplies to individuals. This can include supplies to a business that is an end consumer.

It's important to know the difference because retail leases must comply with the Retail Leases Act 2003 (Vic).

Some common examples of retail leases include:

• Professional services firms, like accounts or mortgage brokers;
• Hair salons and beauty clinics;
• Cafés, restaurants, bakeries;
• Retail clothing or technology shops; and
• Mechanics or car service businesses. 

It's not just traditional shop-front type businesses either; some industrial-looking businesses, like cold storage facilities or a business supplying equipment or parts to another business, have been found to fall under the “retail” umbrella.

The distinction between a retail lease and a non-retail commercial lease requires an understanding of the law in Victoria and application to the circumstances and tenants each time. That is why it is a good idea to ask for help from a commercial leasing lawyer before entering into or negotiating a lease for your business and commercial premises.

Do all retail premises leases need to comply with the Act?

The Retail Leases Act 2003 (Vic) does have a number of exceptions that apply to retail premises leases to exclude them from the operation of the requirements in the Act. Some of these, for example, are where:

• The total occupancy costs of the lease are over $1,000,000 per year (excluding GST);
• The lease is shorter than 1 year;
• The tenant is a listed corporation in Australia (or a subsidiary of one);
• The tenant is a body corporate whose securities are listed on a stock exchange, outside Australia (or subsidiary of one); and
• The use of the premises is one that the Minister has determined is a business to which the Act does not apply (this includes barristers' chambers and certain charitable or community purposes).

If your retail lease is excluded from the Act or the premise does not involve the supply of goods or services to the end consumer or user, then the lease is treated as a non-retail commercial or industrial lease in Victoria and isn't covered by the Act.

What is different in a retail lease vs non-retail commercial lease?

In Victoria, retail leases come with specific requirements for landlords and additional legal protections for tenants due to the Retail Leases Act 2003 (Vic). These are not always included in non-retail commercial or industrial leases unless the parties negotiate their inclusion as lease conditions.

Ensuring you have a lawyer who understands the law in Victoria and the typical (and unique) conditions that can be included due to your circumstances can significantly improve your rights as well as the costs of the lease during the term.

Here are some key differences:

Why is it important?

If you're a tenant in Victoria, the Retail Leases Act 2003 (Vic) protections are valuable and cannot be contracted out of. However, if you do not have a retail lease you will need to be careful to negotiate and review the commercial lease to make sure you are not paying hidden costs during the lease term you were not expecting.

If you're a landlord in Victoria, you need to be extra careful to meet your legal obligations and ensure that you do not breach the Retail Leases Act 2003 (Vic) when you enter a retail lease. You also need to know when the Act will not apply so that you can get the maximum value and costs recovery rights you can negotiate in your commercial lease.

Need Help Understanding Your Lease?

Whether you're a landlord or tenant, it's worth speaking with a Victorian commercial leasing lawyer who understands the fine print. They can help you:

• Identify if the Retail Leases Act 2003 (Vic) applies
• Draft or review and negotiate the lease terms to better protect you and your pocket
• Protect your unique rights and customise conditions based on the use of the premises

Don't risk a costly mistake. Contact us at SLB Legal if you need help to draft or review a Victorian commercial lease.