There are various types of arrangements governing entry into retirement villages in New South Wales.
While the Retirement Villages Act and regulations set out the basic rules, each village operator can decide what form of contract it wishes to use.
More often than not, in New South Wales, retirement village operators use a lease/loan arrangement whereby a lease is given to the resident and the operator has the use of the resident’s money, or “ingoing contribution” while ever the resident lives in the village.
When leaving the village, there is usually a fee, or a “deferred management fee” payable by the resident to the village operator. These fees can amount to a significant proportion of the ingoing contribution.
People looking at entering a retirement village should consult a solicitor before signing any retirement village documents as there are many fees which a village operator can charge during the lease and when a resident leaves a retirement village.
A commercial lease is a document that sets out the rights and obligations of the owner of a commercial property (known as the landlord or lessor) and a third party that has agreed to occupy the property (known as the tenant or lessee). When entering into a lease negotiation, you should understand your obligations and obtain legal advice before signing anything. Commercial premises contain additional obligations compared to residential leases for proviate tenants. Thse include zoning, permits and building requirements. Moreover, consumer laws that apply to residential leases do not cover commercial leases.
New South Wales has specific retail leases legislation (the Act). The Act specifies which premises are considered to be retail premises. If a business is located in a retail shopping centre and/or wholly , or predominantly carries on a retail business, it is likely that lease will be governed by the provisions of the Retail Leases Act. Generally speaking, the Act aims to ensure retail leasing arrangements are fair and that there are built in mechanisms to resolve disputes between landlords and tenants.
Commercial lease terms are usually negotiable between parties. When negotiating a lease, the rights and obligations of both parties should be on the table for negotiation. The types of rights and obligations set out in a commercial and/or retail lease can include signage, fit out of premises, using common areas, the rules of the building, use of public facilities and so on. As a tenant, pay attention to your specific circumstances before you make a commitment to a lease. An inexperienced tenant will sometimes accept the first lease they receive, to their detriment. This is poor negotiation practice – there is no requirement or obligation on a prospective tenant to accept the first lease. A better practice would be to have a lawyer review your lease and advise on any unfair provisions and negotiate amendments with the landlord or the landlord’s lawyer.
A condition report of the premises should be obtained before entering into a lease. This report will provide information on the fixtures, fittings and services installed at the premises. The various retail leases legislation requires that a disclosure statement be provided by the landlord.
In addition to ongoing rent costs, there are a number of costs to be borne by the tenant, including:
It is important to obtain advice on these matters before agreeing to a lease. For example, lease preparation costs cannot be passed on under the Retail Leases legislation. However, there is no such restriction with respect to commercial leases.
A lease may allow tenants to assign the lease or sublet the whole, or part, of the premises to another tenant. This can be exercised in cases where a business decides to sell or can no longer operate the business. In most cases, assignment will be subject to a landlord’s consent and/or the various retail leases legislation if it is a retail lease.
Term of Lease
The length of the term of the lease will affect the goodwill of your business. The term of the lease will be security of tenure for the desired time. It should be a period where business operations will not be interfered with by the landlord.
Preliminary documentation
A lease is just one document required in a suite of documents in leasing a premises. Preliminary documentation can comprise a heads of agreement, an agreement to lease, a lease incentive or contribution deed (if the landlord will be contributing to your fit-out costs) and the lease itself.
If it is a retail lease, a landlord is required to give a tenant various disclosure documents before the lease documents are entered into.
Dispute Resolution
In entering a commercial lease, disputes may arise between tenants and landlords. The lease will usually be the first document referred to in resolving any disputes. In resolving disputes, options will include informal negotiations, mediation, litigation (court) and various state based tribunals in certain circumstances.
Q: What is an anchor tenant?
A: An anchor tenant generates significant foot traffic for other premises in the building (such as a supermarket or department store). A lease provision can be incorporated to terminate a lease if an anchor tenant departs.
Q: What can a landlord do about a tenant in default?
A: A landlord with a right to evict a tenant can request formal eviction if rent has not been paid. Written notice must be given of non-payment before any consequences can be faced by the tenant. The landlord must comply with the lease and any legislation in this regard.
Q: Is a redevelopment clause valid?
A: A redevelopment clause entitles the landlord to terminate a lease, before the end of the lease, in order to carry out major works. Whilst it is valid, a tenant should be compensated for redevelopment. Leases may include both redevelopment and demolition clauses.
A retail lease also referred to as a retail, commercial lease, is a legally binding document that sets out the rights and responsibilities of a retail tenant and a landlord, in respect to retail premises. Compared to commercial leases, retail leases have more rules about how the lease works and more protection for tenants.
Each state or territory has its specific retail leasing legislation. There is no single definition of a retail lease. Generally, if property being leased has a shop front, is in a shopping centre and/or is used for primarily selling retail goods and services to the public, then it will be considered a retail lease. However, this must be verified on a case by case basis and it is always a good idea to obtain legal advice as to the application of the retail leases legislation.
Disputes that arise between tenants and landlords from time to time can be resolved through informal negotiation. Mediation and the State Administrative Tribunal can also be avenues to resolve leasing disputes, noting that the lease and the retail leases legislation sets out specific dispute resolution procedures for the state or territory that the retail premises are located in.
Lease clauses should be reviewed and negotiated before signing a retail lease. This includes the terms of the lease and any options to renew, the amount and payment of the rent and any methods to review and increase the rent, as we as the permitted use of the premises and the facilities.
For a new retail lease, both parties must agree and sign off the written lease and the landlord is required to give a copy of the proposed lease and other disclosures required under the Retail Leases Act (disclosure statement) as soon as the lease negotiations start.
The lease should clearly state which party will cover costs incurred in the lease, including costs of preparing the lease, legal fees, outgoings, tax and promotion and advertising. Security bonds, insurance costs and repairs and maintenance costs are also likely to be included. The Retail Leases Act contains provisions to restrict the landlord claiming key money and lease preparation expenses from the tenant. This prohibition often does not extend to amendments as a result of lease negotiations or the costs of the landlord on any subsequent assignment of lease.
Certain lease documents contain restrictions such as types of business activity, prohibition of the offering of certain services and permitted use changes during the lease term. It is essential that, before you sign a lease, you ensure that the premises can be put to the use that you intend and that the lease allows for this.
Rent clauses contain terms on how changes to rent payments can be made, rent reviews, turnover rent (where applicable) and annual increases. Rent can only increase once every 12 months and only in the way specified in the lease (i.e. Consumer Price Index, fixed percentage or review to market).
Insurance obligations include whether or not the landlord insures the property and the tenant’s insurance obligations. The tenant will always require public liability insurance as a minimum requirement.
Q: When does a retail lease start?
A: A retail lease commences on the date specified on the lease after it is signed by both the landlord and the tenant.
Q: What is a registered lease?
A: A registered lease is a lease that is registered on the title of a property. This provides greater security for the tenant.
Q: Who handles security bonds/bank guarantees?
A: A lease will usually state that a tenant must provide a security bond or bank guarantee.
Q: What is an assignment of lease?
A: A lease assignment is a transfer to another party. The lease will contain clauses about whether the assignment is possible and the conditions necessary for an assignment to take place.
Q: Can a landlord refuse assignment?
A: The landlord can refuse assignment on certain limited grounds. However, where retail leases are concerned there are specific matters in the Retails leases Act which govern this and advice should be sought from a lawyer.
Michael Daly Solicitor & Conveyancer is available to provide expert legal advice and assistance.
Michael and the team would be happy to answer any questions you may have.
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