Retail and Commercial Lease Lawyers in Victoria (Tenants and Landlords)

A shop lease is often a small business's largest long-term commitment: a five-year term plus options, fit-out costs and a personal guarantee can add up to far more than the price of the business itself. For a tenant, the most effective protection is to have a lawyer review the lease clause by clause before signing and settle the rent, outgoings, options, make-good and guarantee terms; after signing, when rent increases, repairs, assignment or leaving early come up, first work out what the law and the lease each say, then decide how to approach the landlord.

As Mandarin and Chinese speaking retail lease lawyers, we also act for landlords on preparing and reviewing retail leases, assignments and lease disputes.

At a glance

• Most Victorian shop leases are governed by the Retail Leases Act 2003, but offices, warehouses and factories are generally outside it and depend on the lease terms alone.
• An option must be exercised within the period and in the manner the lease specifies; missing the deadline can mean losing the renewal.
• Personal guarantees, bank guarantees and make-good obligations are often the biggest costs when a lease ends.
• Retail lease disputes generally go to the Victorian Small Business Commission (VSBC) first, before the Victorian Civil and Administrative Tribunal (VCAT).
• A tenant cannot unilaterally leave early; a negotiated surrender should be put in writing.

Who this service is for

• Restaurant, bubble tea, beauty and nail, retail and clinic operators taking their first shop.
• Existing tenants whose lease is ending and who need to exercise an option or renegotiate with the landlord.
• Buyers of a business that comes with a lease, who need the lease reviewed and assigned.
• Tenants in dispute with a landlord over rent increases, outgoings, repairs, deposits or leaving early.

What we do

• Reviewing the letter of offer, disclosure statement and proposed lease, and setting out in writing the unfavourable clauses and anything inconsistent with what was negotiated.
• Negotiating amendments with the landlord or its lawyers, including rent-free periods, fit-out contributions, guarantee caps and permitted use.
• Providing the independent legal advice needed to apply to the VSBC for a certificate when a shorter term is wanted.
• Handling renewals, assignment or subletting, surrender and return of security, and representing tenants in VSBC mediation and VCAT proceedings.

How the process works

• Before signing anything or paying, send the lawyer the letter of offer, floor plan and the agent's summary of terms.
• Confirm whether the lease is covered by the Retail Leases Act and calculate the statutory timeframes.
• Provide written review advice listing the clauses to change and the order of negotiating priorities.
• Once agreed, check the final version and arrange signing, guarantees and delivery of the deposit or bank guarantee.
• Diarise the option exercise window, rent review dates and insurance renewals.

Legal issues tenants most often face

Before signing: coverage and documents

Whether the Retail Leases Act applies depends on the actual use of the premises, not the label on the lease; a listed-company tenant, or one whose rent plus outgoings exceed a set amount, can be excluded. For covered leases, the landlord must give the disclosure statement and proposed lease at least the statutory number of days before signing, and if this is not done the tenant has certain rights within a set period. The law sets only a floor; commercial terms still depend on negotiation.

Rent reviews, outgoings and options

Tenants should watch the method and timing of each review: where a market review is agreed and the landlord does not start it within the set time, the tenant may start it, and disputes can be decided by a specialist retail valuer arranged through the VSBC. Outgoings must be budgeted and reconciled annually, and the tenant can ask to see the detail. For options, the law requires the landlord to remind the tenant in writing six to twelve months before the option expires, but tenants should not rely on the reminder; the safest course is to exercise in writing, in the manner the lease specifies, within the period, and keep proof of delivery.

Repairs, demolition and make-good

Under a covered lease, the landlord generally must repair the structure and the plant and equipment it provides unless the tenant caused the damage; if the landlord delays urgent repairs, the tenant may in some circumstances arrange them and claim the reasonable cost. A landlord ending the lease early for demolition must give advance written notice and details of the proposal. Take particular care with make-good at the end of the lease: removing fit-out, restoring the premises and professional cleaning can be costly, so agree the standard at signing and keep photographs from the start of the lease.

Guarantees, assignment and leaving early

Landlords usually ask for a security deposit or bank guarantee and a director's personal guarantee; the amount and duration of guarantees can be negotiated, and once a lease is assigned in compliance with the Act, the outgoing tenant and guarantors are generally released. When a business is sold, the landlord may refuse consent to assignment only on statutory grounds; subletting also needs prior consent. If the business is failing, the tenant cannot simply walk away, or it may have to pay rent for the remaining term and re-letting costs, although the landlord must also take reasonable steps to re-let and reduce its loss. The more workable routes are usually a negotiated written surrender, finding an assignee, or assigning the lease as part of selling the business.

Buying a business that comes with a lease

When buying a business you take over the seller's lease, generally on its existing terms. The buyer should first work out whether the remaining term plus options is long enough to recover the price and fit-out spend, check that the permitted use covers its plans, and find out whether the seller has rent arrears, breach notices or outstanding make-good obligations. Before consenting, the landlord usually assesses the buyer's finances and experience and may ask for new guarantees; if the terms are not workable, a new lease or an extension can be made a condition of the business contract.

When a dispute arises

Retail lease disputes over rent increases, outgoings, repairs, deposits and consent to assignment generally must go to VSBC mediation first, and reach VCAT only if mediation does not resolve them or the matter is urgent. Before mediation, gather the lease, correspondence and payment records, and be clear about the outcome you want and your bottom line; any agreement reached should be written up and signed by both sides.

What to prepare

• The letter of offer, disclosure statement, proposed lease and all annexures and plans.
• Emails and messages with the agent or landlord, especially any promises about rent-free periods, fit-out and outgoings.
• A description of the intended business and council planning permit or use confirmation.
• Tenant company details and guarantor identification; existing tenants should also bring past rent review notices, outgoings reconciliations and repair correspondence.

Who handles your matter

Commercial lease matters are handled by Tan Chua, who looks after property and commercial work; where a business with a lease is being bought, Justin Chua draws on his experience running restaurant businesses and working as a real estate agent to assess whether the rent burden and term make commercial sense. The firm communicates with landlords and their agents in Chinese and English, and can attend VSBC mediation with tenants.

More about Justin Chua, lawyer and mediator

Related reading

• Commercial leases
• Property litigation
• Loan advice

Frequently asked questions

Are office or warehouse leases protected by the Retail Leases Act?

Generally not. These leases depend mainly on their own terms and the general law, which makes review and negotiation before signing even more important.

What if the landlord will not return the bank guarantee?

Check the lease clauses on return and deductions, and ask the landlord in writing to explain any claim; for leases covered by the Retail Leases Act, apply to the VSBC for mediation.

I forgot to exercise my option. Is there anything I can do?

It depends on whether the landlord gave the reminder the law requires and on the lease terms. If the landlord did not, the tenant may still be able to exercise it, so seek advice promptly.

When buying a business with little time left on the lease, should I take an assignment or a new lease?

It depends on the remaining term, any options and the landlord's position. If the remaining term is too short to recover your investment, make a new lease or an extension a condition of the business contract.

Can a lawyer negotiate with the landlord for me?

Yes. A lawyer can put proposed amendments in writing and can represent or accompany the tenant at VSBC mediation, keeping discussion focused on the lease terms.

Contact us

For help, call 03 9602 3988 or contact us online. We can meet at our Melbourne CBD office or by video. Initial consultations are charged.

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This page is general information only and is not legal advice.

More frequently asked questions

Can the landlord refuse to let me assign the lease?

Only in the circumstances the law allows, for example if the proposed new tenant lacks the financial resources. The tenant must follow the statutory procedure to request consent.

Do I pay outgoings during a rent-free period?

It depends on the lease. Many leases waive rent but not outgoings, so make it clear before you sign.