Retail lease or commercial lease: which law applies in NSW

The tests for a retail shop lease

The Act generally applies where all of these are met.

1. The business is a retail business that sells or supplies goods or services, and the type of business is listed in Schedule 1 of the Retail Leases Regulation. A business not on the list may still be covered if it trades in a retail shopping centre.
2. The premises have a lettable area of less than 1,000 square metres.
3. The term of the lease is at least six months and less than 25 years.

Businesses added in 2023

From 1 January 2023, the Regulation added gyms and fitness businesses, including yoga, barre, pilates and dance studios.

It also added small bars with a maximum patron capacity of 120.

These are covered wherever the premises are, including in industrial zones.

For leases of these businesses entered into before 1 January 2023, only the mediation provisions of the Act apply.

When the Act does not apply

The Act does not apply where:

1. The premises are 1,000 square metres or more.
2. The business is run by the tenant on behalf of the landlord.
3. The shop is in a cinema, bowling alley or skating rink run by the same person who runs that venue.
4. The use is one excluded by Schedule 1A of the Regulation.
5. The term is less than six months or more than 25 years.

Offices, warehouses and factories that do not run a listed retail business are generally outside the Act.

What changes if the Act applies

If your lease is a retail shop lease, these are some of the rules that apply:

1. The landlord must give a disclosure statement before the lease is entered into.
2. The tenant does not have to pay outgoings that were not disclosed.
3. The landlord must pay the cost of preparing the lease, subject to the tenant paying for changes it asks for.
4. A cash security bond must be lodged with NSW Fair Trading.
5. A lease of more than three years must be registered.
6. There is a set process for assignment and for options.
7. Disputes must go to mediation with the NSW Small Business Commission before most claims can be made to the tribunal.
8. The NSW Civil and Administrative Tribunal can hear retail tenancy claims up to $750,000 for leases entered into on or after 1 July 2017, and up to $400,000 for earlier leases.

What applies to a commercial lease outside the Act

A lease outside the Act is governed by what it says, and by the general law of contract and property.

There is no statutory disclosure statement, no cap on recovering lease costs, and no statutory assignment process.

That means the drafting carries more weight. Read every clause before you sign.

Common questions