Commercial lease vs retail lease: what's the difference?
The difference between a commercial lease and a retail lease is which law applies. A retail lease is a commercial lease of premises used to sell goods or services to the public, and it is governed by your state’s retail leases Act as well as the lease itself. A general commercial lease, such as an office, warehouse or factory lease, is mostly governed by what the lease says.
What makes a lease a retail lease
Each state has its own test. Most of them look at:
- whether the premises are used wholly or mainly to sell or hire goods, or to provide services, to the public
- whether the business is on the list of retail businesses in the Act or its regulations (NSW and Queensland use a list)
- whether the premises are in a retail shopping centre
- whether an exclusion applies
What counts is how the premises are used, not what the document is called. A lease headed “commercial lease” is still a retail lease if the premises meet the test.
Common exclusions
The Acts don’t cover every lease of a shop. Common exclusions are:
- in some states, such as Victoria, the tenant is a listed public company or a subsidiary of one (NSW and Queensland have no such exclusion)
- the premises are large (for example, shops with a lettable area of 1,000 square metres or more in NSW, or more than 1,000 square metres in Queensland)
- the rent or occupancy costs are above a set amount (Victoria and South Australia use a threshold)
- short leases and licences, in some states
The details differ between states and change from time to time. Check the current Act for your state, or ask us.
The main differences
| Issue | Retail lease | General commercial lease |
|---|---|---|
| Disclosure statement | The landlord must give one before the lease is entered into, in most states 7 or 14 days before | Not required by law |
| Minimum term | In Victoria and SA, at least 5 years unless an exception applies, such as a waiver certificate from the Victorian Small Business Commission. In WA, a shorter lease gives the tenant an option to renew up to 5 years. NSW and Queensland have no minimum | Whatever the parties agree |
| Rent reviews | Ratchet clauses (rent can’t go down) are void in most states, and some states limit how reviews are worked out | Whatever the lease says |
| Outgoings | The landlord must give estimates and annual statements, and some items, such as land tax in several states, can’t be passed on | Whatever the lease says, often including land tax |
| Landlord’s legal costs | In most states the tenant can’t be made to pay the landlord’s costs of preparing the lease | Often passed to the tenant |
| Assignment | The Act sets out the process and how long the landlord has to respond | Whatever the lease says |
| Disputes | Mediation through the state’s small business commissioner, then the state tribunal or court | Usually the courts, or the lease’s dispute clause |
Why it matters
If the Act applies, it overrides lease terms that conflict with it. A tenant can rely on those rights even if the lease leaves them out.
For landlords, the Act sets steps you have to follow, such as giving the disclosure statement on time. Missing a step can give the tenant rights against you, including, in some states, the right to end the lease early.
Leasing a shop or other retail premises? We tell you whether the retail leases Act applies and what it means for your lease. Get retail lease advice.
How it differs by state
Every state and territory has its own retail leasing law, and the tests, thresholds and timeframes are not the same. For example, the disclosure period is 7 days in NSW and Queensland and 14 days in Victoria, and NSW and Queensland have no minimum term. See retail lease laws in Australia by state for a side by side table.
If your premises are in one state and your business is in another, the law of the state where the premises are applies.
How to work out which applies to your lease
- Look at what you will use the premises for. If you sell goods or services to the public from them, the Act may apply.
- Check whether your state lists your type of business as retail.
- Check your state’s exclusions, such as floor area and, in some states, rent thresholds or listed company tenants.
- If it is close, get advice before you sign. It is easier to get the paperwork right at the start than to fix it later.
Some leases fall in a grey area, such as a showroom that mainly sells to trade customers, or a mixed use site. In those cases the answer depends on the facts and the wording of your state’s Act.
Questions
Something else? Enquire online or email us.
Can a landlord and tenant agree that the retail leases Act won't apply?
Generally, no. If the premises meet the test in the Act, it applies whatever the lease says. Most states make clauses that try to avoid the Act void.
Is an office lease ever a retail lease?
Sometimes. An office used to provide services to the public, such as a travel agent or a beauty clinic, can fall within some states' Acts. It depends on the state's test and its list of retail businesses.
Does a retail lease have to be on a special form?
No set lease form is required, but the landlord must give the tenant a disclosure statement in the form the state requires, and in some states the tenant must sign other forms before the lease is entered into.
Not sure if your lease is retail?
We tell you whether your state's retail leases Act applies and what it changes, for landlords and tenants Australia-wide, on a fixed fee.
Sources
General information only, not legal advice. Every lease is different, so get advice on yours before you sign.