Whether you are a Landlord or a Tenant leasing Tasmanian property, it is important to know whether the Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (Code) will apply to the lease. This is because the Code imposes a range of obligations on the Landlord. Some of the obligations must be attended to prior to the parties entering into a retail lease.
The Code will apply to the following:
1. Agreements for occupation of retail premises not exceeding 1000m2. Retail premises are premises used:
(a) for any business in a shopping centre;
(b) if not in a shopping centre, wholly or predominantly for a business listed in Appendix C to the Code (click http://www.cormistonlegal.com.au/uploads/files/Annexure_C_to_the_Tasmanian_Retail_Code.pdf to see the list in full).
2. A licence or other agreement to use the common area of a shopping centre for more than six months.
The Code does not apply to:
1. Leases entered into before 1 September 1998 or pursuant to an agreement for lease entered into before that date.
2. A lease pursuant to an option in an original lease entered into before 1 September 1998 which is not varied otherwise than as provided for in the original lease.
3. Leases of premises with a lettable area of more than 1000m2.
4. Premises used for businesses conducted by the tenant on behalf of the Landlord.
5. Premises within venues such as cinemas and bowling alleys if the business in the retail premises is run by the same person who runs the principal business (ie the cinema or bowling alley).
Where the Code applies to a lease, the minimum lease term is five years unless a solicitors certificate is given. The specific wording of the Code is:
"A lease may be for a period of less than five years if a prospective Tenant obtains a certificate from his or her legal advisor certifying that the legal advisor has explained to the prospective Tenant the effect of a reduced lease period."
The effect of this provision of the Code is that if the lease is for a term of less than five years and a solicitors certificate has not been given to the Tenant, then by operation of the Code the Tenant will have the right to a lease for a term of five years despite what is stated in the lease.
Accordingly, it is important for a Landlord to ensure that the Tenant obtains a solicitors certificate where they are entering into a lease which the Code applies to for a term of less than five years.
As stated in the Code, the Tenant’s solicitor is to explain to the Tenant the effect of a lease period of less than five years. The main issue for a Tenant is that if they have long term plans for establishing their business at the premises the subject of the lease, they should not over capitalise and spend a lot of money when the Landlord is only prepared to offer them a lease for one year.
The Code provides protection for a Tenant against a Landlord who entices the Tenant to take a lease of their premises for a short term, the Tenant then spends money improving the Premises on the understanding that they will be in the premises for a long term but the Landlord does not renew the Lease once the Tenant has improved the premises and established their business at the premises.
Cormiston Legal has extensive experience in acting for both Landlords and Tenants in all types of leasing matters. For Landlords in a retail lease matter, Cormiston Legal will:
For Tenants in a retail lease matter, Cormiston Legal will:
If you would like more information on the requirements of the Code or how we can assist you with your lease, whether it is retail, non-retail, commercial or industrial, please contact us on 03 6332 9353.
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