Retail Lease Review (Tenant Side).

Disclosure statement timing and accuracy

Where the retail Act applies, the landlord must give the tenant a disclosure statement a set minimum period before the lease is entered into (generally seven days in both NSW and Victoria), setting out rent, outgoings, incentives and other key terms. A late, missing or materially inaccurate disclosure statement gives the tenant a right to terminate within an early period of the lease and, in NSW, can trigger a right to claim compensation for loss suffered. We check the disclosure statement line by line against the actual lease terms, because discrepancies here — an outgoings estimate materially understating actual costs, or an incentive not properly recorded — are often the tenant's strongest leverage point in negotiation.

Outgoings and how they're actually passed through

Outgoings clauses look similar across leases but differ enormously in what they let a landlord recover. We check whether the outgoings are capped, whether capital works and structural items are improperly bundled into recoverable outgoings (something the retail Acts restrict), whether land tax is being passed through where the retail Act prohibits it, and whether the landlord is required to provide an annual outgoings estimate and reconciliation. A lease silent on reconciliation timing lets a landlord present a large true-up bill with little notice, which is a cash-flow risk worth negotiating out before signing rather than disputing later.

Ratchet clauses and rent review mechanics

A ratchet clause — one that allows rent to increase on review but never decrease, even where a market review would otherwise produce a lower figure — is void in relation to retail leases under both the NSW and Victorian Acts, but non-retail commercial leases can still validly include one. We identify whether a ratchet is lawful for the deal in question and, where it isn't caught by the retail Act, negotiate the review mechanism (CPI, fixed percentage, market, or a combination) so the tenant isn't locked into an artificially rising cost base with no corresponding downside protection.

Make good, bank guarantees and exit costs

Make good obligations are frequently drafted broadly enough to require the tenant to strip fit-out back to a base building condition that may not have existed when the lease started, or to reinstate items the landlord actually wants to keep. We pin the make good standard to a defined baseline (ideally photographic condition reports at commencement) and check the bank guarantee amount, the conditions for its release, and whether the landlord can call on it for disputed amounts without a determination first. These are the terms that most often cost tenants money on the way out, long after the rent negotiations are forgotten.

What the fixed fee covers

• Retail Leases Act coverage check against premises use, floor area and tenant structure
• Disclosure statement review against the actual lease terms
• Outgoings clause review including caps, exclusions and reconciliation timing
• Ratchet clause and rent review mechanism assessment
• Make good and bank guarantee risk review
• Negotiation points memo and mark-up of the lease for your landlord

Mistakes we see

• Assuming a lease is 'commercial' without checking the floor area and use against the retail Act threshold
• Signing before checking the disclosure statement against the actual lease clauses
• Accepting an uncapped outgoings clause that bundles in capital works
• Agreeing to a make good standard with no defined condition baseline
• Not checking whether the bank guarantee can be called on unilaterally

Who this is for

• Retail, hospitality and service businesses taking a shop or shopping centre premises
• Tenants renewing or renegotiating an existing retail lease
• Franchisees whose franchisor requires a specific site
• Businesses relocating or opening a second location

Frequently asked questions

How do I know if my lease is covered by the retail Act?

It depends on the use of the premises (broadly, whether goods or services are sold to the public), the floor area (generally under 1,000 square metres in NSW, with different tests in Victoria), and whether the tenant is a listed corporation or its subsidiary. We check this against the actual premises and tenant structure rather than the label on the lease.

What happens if the landlord's disclosure statement was late or wrong?

Under both the NSW and Victorian Acts, a tenant can generally terminate within a set early period of the lease term if disclosure was not given, was late, or was materially misleading or incomplete, and in some cases claim compensation. Whether it's worth exercising depends on how far into the lease you are and what the alternative premises situation looks like.

Can a landlord include a ratchet clause in a retail lease?

No — ratchet clauses that prevent rent decreasing on review are void under the retail Acts in both NSW and Victoria. They remain lawful in leases that fall outside the retail regime, which is one reason coverage is checked first.

What's a reasonable make good standard to negotiate for?

Ideally, reinstatement to the condition recorded in a photographic or written condition report at lease commencement, rather than an open-ended 'base building condition' standard that can be interpreted broadly by the landlord years later.

Can outgoings include land tax in a retail lease?

Generally no — both the NSW and Victorian retail Acts prohibit landlords from recovering land tax from retail tenants, even where the lease purports to include it, though this doesn't apply to non-retail commercial leases.

Is it too late to negotiate if I've already received a lease from the agent?

No — a lease document from an agent or landlord's solicitor is a starting position, not a final offer, and most of the terms we flag in a review are genuinely negotiable before execution, particularly outgoings caps, make good baselines and guarantee release conditions.