A good lease for your business premises is vital and could mean the difference between success or failure.

A poor leasing decision can be a costly mistake as a lease is usually central to the goodwill, value, and future sale of the business.

1. What is a lease?
2. Retail premises legislation
3. Which leases are regulated by the Act?
4. Seven steps to leasing commercial premises
5. Dispute resolution

What is a lease?

A lease is a legally binding contract, so while leases may be complex and difficult to comprehend, it's essential that you fully understand the terms and conditions before making a commitment.

It's also important that you understand your rights and obligations in relation to the lease in order to deal with any disputes that may arise, and to know who to contact for help.

Legal and commercial advice should be obtained before:

• making any commitments to buy, lease, take on an assignment or incur any other obligations;
• signing an offer to lease or any other lease related document;
• payment of any deposit or other monies; and
• occupying the leased premises.

Together with legal and financial advice, you should also seek business and property advice in order to ensure the lease is based on sound business and property principles.

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Retail premises legislation

The Commercial Tenancy (Retail Shops) Agreements Act 1985 regulates many retail shop leases in Western Australia.

An understanding of the Act is essential if it regulates your lease. Even if your lease is not regulated by the Act it's a good idea to make sure you're familiar with it as you might wish to negotiate some of the provisions of the Act into your commercial lease.

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Which leases are regulated by the Act?

The Act covers leases for:

• premises located in a retail shopping centre that are used wholly, or predominately, for the carrying on of a business; and
• premises not located in a retail shopping centre used wholly, or predominately, for the carrying on of a retail business.

A retail business is a business that wholly, or predominantly, involves the sale of goods by retail; or is a specified business. Specified businesses are currently:

• drycleaning
• hairdressing
• beauty therapy and treatments
• shoe repair (which may include key cutting and engraving)
• sale or rental of video tapes, DVDs, electronic games or other similar amusements.
• Prescribed leases that would otherwise not be covered (none currently) excluded however are:
  • leases of premises that have a floor area that exceeds 1,000 square metres;
  • leases held by public companies or their subsidiaries;
  • a lease held by a listed corporation on the New Zealand Stock Exchange Limited or a subsidiary of such a corporation;
  • a lease of premises for the purpose of operating only a vending machine or automatic teller machine; and
  • certain persons, retail shop leases or retail shops that are exempt by regulation (currently exempted is a landlord, in respect of a retail shop lease, who is unable, because of the short lease period, to give the required notice notifying the tenant of the option to renew the lease. However, the landlord must comply with alternative notice provisions set out in the exemption).

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Seven steps to leasing commercial premises

Leasing generally involves the following seven stages. Each of these activities can be extensive so ensure you allocate adequate time to deal with each step properly.

• Step 1: Consider your leasing needs
• Step 2: Inspect and research premises
• Step 3: Obtain preliminary documentation
• Step 4: Obtain professional advice
• Step 5: Negotiate the lease
• Step 6: Preparation of final documentation
• Step 7: Fit-out of the premises

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Dispute resolution

Disputes arise between tenants and landlords from time to time and should be resolved as cost-effectively and with as little damage to the relationship as possible. Whatever method you use to resolve the dispute, you must be logical and clear about the facts and prepare your case well. Be prepared to argue your case calmly and organise the evidence to support your position.

First, read the lease and other associated documents to clarify the rights and obligations of each party about the issue in dispute. In many cases, a well-written lease will set out what both parties have agreed, and the action required will often be obvious.

If the lease or other lease documents do not clarify the issue, then obtain business advice from us, or legal advice.

There are four options available to resolve your leasing dispute:

• informal negotiation
• mediation
• the courts
• the State Administrative Tribunal

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What's next...

• Step 1: Consider your leasing needs
• Step 2: Inspect and research premises
• Step 3: Obtain preliminary documentation

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