Yukio Hayashi 23 Oct 2018
Q: In order to start a cafe, I decided to rent a store. What should I keep in mind when entering into a lease contract? (A man in his 30s, working at a restaurant)
A: For this case, we will focus on the law in relation to retail lease and explain the NSW "Retail Lease Act". For reference, similar laws exist in other states.
Generally, a lease contract is drafted in favour of the Landlord. The Retail Lease Act was created and developed for situations in which there are disputes between Landlord and Lessee that have led to various social issues. Accordingly, the Retail Lease Act was enacted to bring fairness to retail store leases.
Before concluding a lease contract, the Landlord is required to submit a document called a "Disclosure Statement" to the Lessee for the purpose of communicating all important matters related to the lease of the stop. If the Disclosure Statement is incomplete or contains false information, the Lessee may later be entitled to terminate the lease, and the Landlord may be fined.
The contents of the Disclosure Statement include:
The Disclosure Statement should be given to the Lessee at least seven days before the lease contract is executed. Also, after receiving the Disclosure Statement, the Lessee is required to notify the Landlord and return it within seven days. In the Disclosure Statement, the L essee must confirm that "the terms of this lease will be fulfilled". It is important to note that if the parties orally agree on terms of the lease, such terms should be incorporated into the Disclosure Statement. Otherwise, the parties may not be able to make such oral claims at a later date.
Payment of contract costs
In the case of a typical commercial lease (such as an office), it is often found that tenants are responsible for all legal costs of the owner involved in entering into a lease agreement. However, in the case of retail lease, it is basically prohibited to impose such costs on the lessee. Similarly, it is forbidden to ask the lessee to pay for "key money" (equivalent to "reward" in Japan, which is not refundable unlike bonds and security deposits).
If you live outside of NSW, please check with lawyers registered in your state about each state's Retail Lease Act.