For landlords, it might seem like a very simple distinction between what is a retail lease and what is a commercial lease.
Most know that if the permitted use under the lease is one of those uses that are ‘prescribed’ under Schedule 1 of the Retail Leases Act 1994 (NSW)(Act) as a retail use, then that lease is deemed to be a retail lease and accordingly the Act applies.
But what if the permitted use under the lease is, say, that of a commercial office and the premises is situated in a retail shopping centre? A commercial office use is not a prescribed retail use for the purposes of the Act. However, because the premises is located in a retail shopping centre, the Act will apply. This will mean that, amongst other things, the landlord will need to prepare and issue a disclosure statement to the tenant in accordance with the Act. A failure to do so may entitle the tenant to terminate the lease.
A ‘retail shopping centre’ is defined in the Act to mean a cluster of premises (not being stalls in a market) that has all of the following attributes:
- At least 5 of the premises are used wholly or predominantly for the carrying on of one or more listed (retail) businesses;
- The premises are all owned by the same person, or have the same lessor or same head lessor, or comprise lots within a single strata plan;
- The premises are located in one building or in 2 or more buildings that are either adjoining or separated only by common areas or other areas owned by the owner of the retail shops; and
- The cluster of premises is promoted or generally regarded as constituting a shopping centre, shopping mall, shopping court or shopping arcade.
The key take-away is that even if your tenant does not carry on a retail business, that is irrelevant, if the premises is situated in a retail shopping centre. Landlords need to be mindful of this.