Commercial Leases in Tasmania
Commercial leases in Tasmania are essentially a contract between the owner of premises and a tenant to lease the premises for the purpose of running a business. Commercial leases can be divided into two categories: retail leases and non-retail leases. This article deals with commercial leases in Tasmania.
Commercial leases generally
General commercial leases in Tasmania are subject to common law. They essentially are contracts between two parties who are free to reach any agreement they wish. There is however some important Tasmanian legislation which governs these contracts, namely, Part III of the Conveyancing and Law of Property Act 1884 and the Australian Consumer Law (Tasmania) Act 2010. General commercial (non-retail) leases include warehouses, distributors and manufacturers which might be running a commercial enterprise, but are not retail as they do not sell directly to the end consumer.
Retail leases
Retail leases are essentially leases which involve the sale of goods and services to the end consumer; for example a hairdresser or a grocery store. Similarly premises used for parking or storage are not consider retail leases, nor are offices generally. If a lease is a retail lease, then the Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (CPRT) also should be read in conjunction with any retail lease. The CPRT essentially form part of the contract between the landlord and the tenant. In some cases, a licence to uses part of the common area of a shopping centre will also be considered a retail lease, if that licence is for a period of no less than six months. A lease will not be a retail lease if it is for premises of more than 1000 square metres.
Things to remember regarding retail leases:
- Minimum term: The minimum term of a retail lease under the CPRT is five years. However, the landlord and tenant can agree on a lesser term. In this case, the tenant should seek legal advice and a certificate provided by the tenant’s solicitor stating that the tenant has had the effect of a reduced lease period explained to them.
- Money collected from the tenant: Key money and ratchet clauses are both prohibited by the CPRT. Key Money is money (or other benefit) that a landlord asks for in return for the grant, assignment or renewal of a lease.However, property owners can ask for a payment in relation to an assignee of a retail lease. Like the ACT, Tasmanian landlords cannot require a security deposit to be more than 3 months’ rent and unlike other states, Tasmanian landlords can negotiate the payment of stamp duty and mortgagee’s consent with the tenant, as long as this is contained in the lease. Under the CPRT, each party is generally required to pay their own costs in relation to the preparation of lease documentation. Tenants should note whether land tax is payable under the lease, as unlike a number of other states, there is no provision for this under the CPRT.
- Disclosure statements and proposed leases: The landlord to a retail lease must provide the tenant with a disclosure statement which outlines important things like the estimate of outgoings (expenses). This disclosure statement must be provided to the tenant at least 7 days before entering into the lease. Likewise, the landlord must give the tenant a copy of the proposed lease as soon as practicable after entering into negotiations.
- Options and renewals: Unlike some other states, a tenant’s right to an option can be lost if they fail to notify the owner by the required time under the lease. If there is no option under the lease, the landlord must notify the tenant within three months (as opposed to six months in other states and territories) whether the landlord will offer a renewal of the lease, and if so, on what terms. If this is not provided, the tenant can holdover (remain in the premises) for a further three months until the landlord provides this information.The tenant has two weeks to notify the landlord that they will accept the terms of the renewal if one is given.
- Rent clauses and reviews: Tenants and landlords should also be aware of how the rent is to change during the term of the lease. The rent may go up by a fixed amount or adjusted according to the Consumer Price Index (CPI) but the lease must specify which method. At the end of the lease term, the parties will usually have to try and agree on a new rent themselves; if the lease is a retail lease, a Specialist Retail Valuer (SRV) may need to determine the market rent of the premises. Parties should be aware that valuers are not cheap and can cost thousands of dollars to determine the rent. The valuer’s rental figure is normally binding on the parties.
- Repairs and Maintenance: It is important to remember that the CPRT does not include provisions relating to repairs and maintenance; tenants and landlords should check the lease for any provisions in relation to this.However, the CPRT does state that a tenant is not required to pay rent and outgoings if the property is unusable or inaccessible due to damage which is not the fault of the tenant.
Disputes
Under the CPRT, parties should try to resolve the matter themselves. If this fails, the parties can refer the matter to the Office of Consumer Affairs. If this is unsuccessful, the parties can refer the matter to court.
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