5 things to know about commercial leasing in the ACT
22 Nov 2017
- Business Law
Landlords and tenants new to commercial leasing in the ACT may not be aware that the leasing environment differs from NSW.
Emily Shoemark, Senior Associate at Snedden Hall & Gallop, highlights 5 key things to be aware of when entering a commercial lease in the ACT.
1. Bond or bank guarantee limit
The landlord cannot require a security deposit or bond more than the equivalent of 3 months’ rent.
2. Disclosure statement
Landlords must provide a disclosure statement at least 14 days before giving the tenant the lease to review, unless the tenant obtains a solicitors certificate waiving the time period, in which case the disclosure statement must be provided at the same time as the lease. The disclosure statement sets out the key terms of the lease and an estimate of the outgoings that will be payable.
Any discrepancy between the terms in the disclosure statement and the lease will be read in favour of the tenant.
3. Minimum term
Under the Leases (Retail and Commercial) Act 2001 (Act) a tenant has a right to a minimum term of 5 years. If the lease is for less than 5 years and the tenant did not obtain independent legal advice before entering the lease, then tenant has the right to extend the lease so the total term is 5 years.
In practice, a tenant may not want 5 years. This can only be done by way of solicitor’s certificate stating that independent advice has been given and the tenant is aware of the implications of waiving this right.
4. Termination rights
The Act provides the tenant with certain rights related to termination, including:
(a) the right to challenge the landlord’s termination in circumstances and sets out the process which must be following in the Magistrates Court before a landlord can retake possession; and
(b) termination rights in certain circumstances if the landlord has not complied with its obligations in providing a disclosure statement.
5. Landlord’s cost
It is unlawful for a landlord to pass on to the costs of preparing a lease regulated by the Act to the tenant. The landlord can pass on the fee charged by Access Canberra to register the lease.
What is the difference?
In NSW, only those leases governed by the Retail Leases Act 1994 are regulated in relation to the terms that are imposed on landlord and tenant. While the Real Property Act 1900 provides some regulation about the form of all commercial leases, leases which fall outside the retail sector have relative freedom in relation to the terms.
In the ACT, the Act covers a broader range of leases. In addition to retail leases, the act covers premises for serviced offices, child care centres, art galleries, garden supply centres, and small commercial premises less than 300m2.
The Act and its state equivalents were introduced to level the playing field of the landlord/tenant relationship.
How can Snedden Hall & Gallop assist?
Getting a commercial lease right, and understanding the rights and obligations under the lease, is important for both landlords and tenants. Snedden Hall & Gallop can assist parties on either side of the transaction to makes sure that their rights are protected and they understand the contract being entered into. Please call us today for assistance with any aspect of your business, including commercial leases, on (02) 6285 8000 or by email.