Retail lease minimum term in Victoria

The retail lease minimum term in Victoria is five years. Under the Retail Leases Act 2003 (Vic), a retail premises lease, including any options to renew, must give the tenant at least five years. If the lease is shorter, the term is extended to five years, unless the tenant gets a waiver certificate from the Victorian Small Business Commission (VSBC) and gives the landlord a copy.

How the five years is counted

The Act looks at the total period the tenant can stay, which is the initial term plus any further terms under options.

It doesn’t matter whether the tenant actually exercises the option. What counts is that the lease gives the tenant the right to stay for at least five years.

What happens if the lease is shorter

If the total term is under five years and there is no valid waiver certificate, the Act extends the term to five years. The landlord can’t rely on the shorter term written in the lease.

This can catch out landlords who use a short lease to keep flexibility, or who sign a lease prepared for another state. The tenant ends up with a longer right of occupation than the landlord intended.

For tenants, the rule gives security. You have time to build the business and recover the cost of your fitout.

How the waiver works

A landlord and tenant can agree to a shorter term, but only through the process the Act sets out:

1. The tenant (or prospective tenant) applies to the VSBC through its online application. There is no fee.
2. The VSBC issues a certificate saying it has explained the effect of the five-year rule and of waiving it.
3. The tenant gives the landlord a copy of the certificate.

The VSBC must consider a request made before the lease is entered into or up to 90 days after. A certificate from a lawyer doesn’t count. The certificate is about the term only. It doesn’t change any other right the tenant has under the Act.

Agreed to a term under five years? We advise you on the shorter term and help with the VSBC application. Advice on a five-year waiver.

When the minimum term doesn’t apply

The five-year rule applies to retail premises leases covered by the Act. It doesn’t apply where the Act doesn’t, such as a lease where the tenant’s occupancy costs are more than $1 million a year, or where the tenant is a listed public company.

A renewal of an existing lease, including a renewal under an option, is generally treated differently from a new lease, so a further waiver isn’t usually needed. Some short-term arrangements are also treated differently. If your situation is unusual, check before relying on the term in the lease.

See Retail Leases Act 2003 (Vic) explained for which leases the Act covers.

What landlords should do

If you want a term under five years, raise it early. Tell the tenant they will need a waiver certificate from the VSBC, and allow time for them to apply.

The Act lets the tenant apply after signing, but it’s safer not to sign until you have a copy of the certificate. Keep a copy with the signed lease, as you may need to rely on it years later.

Also check that the disclosure statement shows the shorter term. The disclosure statement and the lease should match.

What tenants should do

Think about how long you need. A fitout, equipment finance or a business loan may run longer than a short lease. If the business needs five years to pay back, a shorter term may not suit you.

If you’re asked to waive the five-year minimum, get advice on the whole lease, not just the term. A short lease with an option to renew can sometimes give you flexibility and some security at the same time.

Other states

Not every state sets a minimum retail lease term, and those that do handle it differently. See retail lease laws in Australia by state for how the states compare.