Commercial Tenant Rights 101

August 6, 2018
retail store

As a commercial tenant, it is important to have a good understanding of your rights in order to identify unfair treatment by the lessor and avoid noncompliance with your lease.

In a commercial tenancy arrangement, your rights are outlined in a commercial lease.

What is a commercial lease?

Group of commercial tenants in meeting

A commercial lease is a legally binding contract between a landlord and tenant, otherwise known as the lessor and lessee.

It lists the rights and responsibilities of the owner and tenant for the period of the contract and must be accepted and signed by both parties.

So, whether you’re running a business from a rented house in NSW or another state, you are technically a commercial tenant.

Commercial leases vs. Residential leases

Commercial leases are different to residential leases as they vary greatly between commercial premises and include obligations relating to zoning, building requirements and permits.

Generally, commercial leases have longer terms than residential leases as this allows businesses a longer security of tenure.

As each commercial lease is so different and contains complex regulations and strict terms and conditions, it is easy to become confused and misunderstand your rights and obligations set out in the lease.  

For this reason, it is crucial that you seek legal advice before entering into a commercial lease agreement to avoid getting yourself into any legal trouble.

One of the common concerns of commercial tenants is that their lease will change if their building is sold and purchased by a new owner.

However, a buyer who purchases a commercial premises with an existing lease owns that building subject to the terms outlined in the lease and subsequently, they cannot make changes outside of the lease terms.

They can, however, negotiate these terms with you should you be willing.

Repairs and maintenance

The commercial lease also outlines where responsibility lies when it comes to building repairs and maintenance. This can be a heavily disputed area and one which is not always black and white.

In most cases, the tenant is responsible for repairs and maintenance on the premises, however, the tenant is not usually responsible for carrying out major structural repairs such as those concerning the roof or walls of the building.

It is important that your lease is very clear about who is responsible for carrying out repairs and maintenance on the property structure and its inclusions, especially with items such as air conditioning and refrigeration, which are not always clear in the lease but can be extremely costly to fix.

Retail tenants

Retail tenants fall under different regulations to commercial tenants. Retail tenants are governed by state legislation in addition to their lease.

In NSW, retail legislation can be found in the Retail Leases Act 1994. This legislation differs between states and territories so it is important to become familiar with the regulations specific to your state.

The Acts also determine which businesses are considered to fall under the ‘retail’ category as this is also something that varies between the states and can have major implications on tenancy.

As a general rule, if the premises is located within a shopping centre and is based on the selling of goods or services, it is classified as a retail premises.

However, some businesses fall into a grey area, for example, a dental practice located within a shopping centre is generally considered retail while a practice outside of a shopping centre is not.

There are certain legal obligations involved in commercial tenancy which can be difficult to understand and have major consequences if not complied with.

Before signing a commercial or retail lease, you should seek legal advice to understand your rights and responsibilities.

For commercial tenants, a lawyer will be able to assist in the lease negotiation stage and highlight any unfair provisions while negotiating amendments.

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