A retail lease disclosure statement WA landlords are required to give has to reach the prospective tenant at least seven days before the lease is entered into. It is not a formality to be signed alongside the lease on the day. Get it wrong and the tenant has a right to terminate the lease within six months of entering into it, which makes this the single most consequential piece of paper in a retail leasing deal.
Which leases need one?
Retail shop leases covered by the Commercial Tenancy (Retail Shops) Agreements Act 1985. That is premises with a lettable area of 1,000 square metres or less, including shops in a retail shopping centre of five or more retail premises, standalone retail premises, and specified businesses such as dry cleaning, hairdressing, beauty therapy and shoe repair.
Leases held by a listed corporation that would not be eligible to be a proprietary company, or by a subsidiary of one, sit outside the Act. So do premises used only for a vending machine or an ATM.
If you are leasing an office floor or a warehouse that does not fit those descriptions, the disclosure obligation does not apply, and the tenant is relying on what they negotiate rather than on the Act.
When does it have to be given?
At least seven days before the lease is entered into.
The purpose of the seven days is to give a tenant time to read it, price it and take advice before committing. A statement handed over with the lease for signature has not done that, whatever the tenant signs to say otherwise.
What happens if it is late, missing or wrong?
Section 6 gives the tenant a remedy. Within six months after the lease was entered into, the tenant may give the landlord written notice terminating the lease.
Read that as an owner and the risk is obvious. A tenant who signs, fits out, trades for four months and then decides the location is not working has a route out that has nothing to do with the merits of the deal, simply because the disclosure statement was late or inaccurate.
There is a second consequence that bites more often and more quietly. Costs that were not notified in the disclosure statement cannot be recovered. If the landlord intends the tenant to contribute to fitout, fixtures, fittings, equipment or services and does not notify it, the tenant is not required to contribute.
What it covers, broadly
The proposed terms and conditions of the lease, set out so a tenant can understand what they are agreeing to and what it will cost. That includes the commercial terms, the outgoings the tenant will be asked to contribute to, and any landlord costs the tenant is expected to pay towards.
The Small Business Development Corporation publishes the form and guidance on completing it. Using the published form is the sensible course, because the risk of an inaccurate statement sits entirely with the landlord.
The five year minimum, which surprises people
Worth knowing alongside the disclosure statement, because it shapes what is being disclosed. A tenant entering a new retail shop lease is entitled to a minimum tenancy period of up to five years. Where the term specified is more than six months but less than five years, the Act deems the lease to include an option for the tenant to renew so the total reaches five years.
It can be set aside, but only on the tenant’s own application to the State Administrative Tribunal, and only where the Tribunal is satisfied the application was made of the tenant’s own free will.
So a three year retail lease in WA is, in effect, a five year commitment from the landlord’s side unless that step is taken.
Practical points
Work backwards from the signing date. Seven days is a minimum and deals move, so build in a buffer.
Complete the statement from the lease that is actually going to be signed, not from the heads of agreement. If the deal changes after the statement is issued, the statement has to change with it.
List every cost you intend to recover. Anything not notified is not recoverable, and that includes items an owner considers obvious.
Keep proof of when it was given. The date is the whole issue.
The short version
Seven days before the lease, on the published form, accurate, and listing every cost you intend the tenant to contribute to. Late or wrong gives the tenant six months to walk. Undisclosed costs are not recoverable.
If you are leasing retail premises in Perth and would rather not carry that risk yourself, our commercial property leasing team prepares the disclosure statement against the lease being signed and issues it in time, before the deal is committed.
The requirements above come from the Commercial Tenancy (Retail Shops) Agreements Act 1985 and the guidance published by the Small Business Development Corporation. This article is general information and not advice.
