Many Landlords are unaware that they are required to have a draft copy of the Lease and a copy of the Retail Tenancy Guide available
to prospective Tenants before advertising retail premises for lease (Section 9 – Retail Leases Act).
We strongly recommend that all agreed lease terms be set out in the Heads of Agreement or a Terms and Conditions Letter. Whilst it
usually does take a lot of time for Landlords, Tenants, Centre Managers and Leasing Executives to reach agreement and prepare these
terms in written form, we cannot over-emphasise how much time and confusion is saved further down the track. Frequently in discussions
one party thinks one thing and another interprets this as something else. If the Agreement is set out in point form under appropriate
headings in writing before the Disclosure Statement or the final Lease is prepared and the parties sign off on this document, then
it greatly assists the entire Lease negotiation process. We find that it assists the parties in communicating between themselves
and in clarifying what each party actually understands. Don’t forget to continually update these Heads of Agreement if they
change. Another problem can occur when the Landlord forwards to their Solicitor an outdated Heads of Agreement and then all the
Lease documents get prepared on that basis with errors flowing throughout.
With Retail Leases there are certain essential requirements which the Landlord must comply with otherwise serious consequences and
problems can arise. A most relevant one for Retail Leases is the requirement to issue the Lessor’s Disclosure Statement seven
(7) days prior to the Lease Commencement Date. Section 8 of the Retail Leases Act states that a lease commences once the Tenant
takes possession or pays rent or the Lease is signed. Frequently Landlords are under pressure to allow the Tenant in so that rent
can start to be collected. This is particularly so if the Premises have been vacant for quite some time. Having said this though,
it is essential that possession is not given until all the Terms are agreed to. Otherwise a Statutory Lease is formed. Further,
the Tenant obtains various rights under the Retail Leases Act which cannot be negated by the Landlord in such circumstances. For
the sake of a few days much damage can be done.
It is important that the Lessor’s Disclosure Statement is comprehensively and carefully prepared.
For Retail Leases, if the Term is less than five (5) years it is essential that the Tenant’s Solicitor provide the Landlord with
a Section 16 Certificate. Failure to do so will mean that notwithstanding what the Lease Term is, the Lease is automatically extended
to be a minimum of a five (5) year term.
Leasing agents must be careful in what representations they make to the Tenant. Unfortunately with enthusiasm to finalise a deal, things
can be said which might in truth be an overstatement of what really is happening. The problem is a Tenant could rely upon such
a statement. It is imperative that leasing agents only represent what they know to be true and correct.
Unfortunately there are times when a Landlord must terminate a Lease because of a tenant’s failure to pay rent. It is important
that this process is handled carefully otherwise it may constitute a breach of the Lease by the Landlord or unconscionable conduct
on behalf of the Landlord.
When a party enters into the Lease it is imperative that the Landlord sensibly considers the financial standing and retail experience
of the proposed Tenant. If there are concerns, it is imperative that the Lease provide for the appropriate Bank Guarantee and/or
Security Deposit and/or Personal Guarantees.
It is essential to check that the appropriate entity signs the Lease – this sounds like a basic thing to say – but how
often is a lease improperly executed and most particularly a guarantee improperly executed. If the Guarantee is not properly signed,
the Guarantor no doubt will escape liability under the Lease.
Remember to give the appropriate notice prior to the Lease Term if for a Retail Lease you intend not to renew it, or if you do intend
to renew it that you provide the Renewal Offer within the time required under the Retail Leases Act. Failure to do so can permit
the Tenant to extend the Lease term by up to six (6) months.
Act swiftly if a Tenant is in default. Some managing agents allow debts to accumulate. The longer this goes on the harder it is to
resolve the problem. Communicate and deal with rental arrears promptly.
Do not allow a Tenant to take possession until you have obtained all the necessary documents, for example the Bank Guarantee. If a
Lease is allowed to commence without the Bank Guarantee or Security Deposit being obtained it is so much harder to obtain it later
on. Likewise in relation to certificates of currency.
When dealing with a defaulting Tenant be consistent. Be fair but at the same time be consistent. If you say you will terminate in 14
days then terminate. If a Landlord says one thing and does another it can give rise to the Tenant having certain actions or estoppel
or waiver can arise.
Think very carefully before you terminate a Lease and turn it into a monthly tenancy. In our view in so doing the Landlord can waive
the right to claim all rental arrears until the end of the Lease term yet we see that this is a common practice among certain Landlords.
Once again, act decisively and act in accordance with the law to protect the Landlord’s interests.
“Anthony Herro from Herro Solicitors is the pre-eminent retail leasing lawyer in NSW. His experience, passion and commitment are unrivalled.”