When a "commercial" lease is really a retail lease

Landlords in Victoria often assume that a lease negotiated at arm's length with a business tenant sits outside consumer-style regulation. In many cases it does not. The Retail Leases Act 2003 (Vic) applies to a broad range of premises used wholly or predominantly for the sale or hire of goods or the supply of services, and it applies regardless of what the parties choose to call their arrangement. Whether the Act governs a lease turns on the use of the premises, not the label on the document.

This distinction matters because the Act imposes obligations that override contrary terms in the lease. A landlord who drafts around them, or who simply overlooks them, can find that key provisions are unenforceable and that the tenant has a right to compensation. The obligations below are the ones we see missed most often.

The disclosure statement is not optional

Before entering into a retail lease, a landlord must give the tenant a disclosure statement and a copy of the proposed lease at least seven days beforehand. The disclosure statement sets out the essential commercial terms: rent, outgoings, the term, and other matters the tenant needs to assess the deal. Where the statement is not provided, is provided late, or is materially incomplete, the tenant may have the right to withhold rent until it is given, and in some circumstances to terminate the lease within the first months of the term. This is one of the most common oversights, and one of the most costly.

Obligations landlords most often overlook

The following recur in disputes at the Victorian Civil and Administrative Tribunal (VCAT), which has jurisdiction over most retail lease disagreements:

  • Passing on land tax: a landlord cannot require a retail tenant to pay or reimburse land tax. Any provision purporting to do so is void, even where the tenant agreed to it.
  • Minimum five-year term: unless the tenant obtains a certificate from a lawyer or conveyancer waiving the entitlement, a retail lease must run for at least five years including any options to renew.
  • Outgoings estimates: the landlord must give a written estimate of outgoings before the lease and for each accounting period, then reconcile it against actual expenditure. A tenant is not liable to contribute to outgoings that were not disclosed in the estimate.
  • Repairs and maintenance: the landlord is responsible for maintaining the structure, fixtures, plant, and equipment in a condition consistent with their state at the start of the lease, and cannot contract out of this duty.
  • Recovering the cost of capital works: the landlord generally cannot recover the cost of capital or structural works from the tenant through the outgoings mechanism.

What non-compliance actually costs

The consequences are not merely technical. Provisions that conflict with the Act are treated as void, so a clause shifting land tax or capital costs to the tenant simply does not operate, and any amounts already collected may be recoverable by the tenant. Failure to disclose outgoings correctly can leave a landlord unable to recover a significant portion of building expenses across the life of the lease.

Beyond lost recoveries, a landlord may be exposed to a claim for compensation where the tenant has suffered loss because of a misleading disclosure statement or a breach of the landlord's obligations. These disputes are usually resolved at VCAT, which can order repayment, compensation, or rectification, and the process consumes time and legal cost that early attention would have avoided.

"Calling a lease commercial does not make it one: the use of the premises decides which rules apply."

Practical steps before you sign or renew

The threshold question is always whether the Act applies, and that assessment can be finely balanced. Some premises fall outside the Act because of the nature of the tenant, the rent, or the way the space is used, while others that look plainly commercial are caught. Getting this wrong at the outset shapes every obligation that follows, so it is worth resolving before terms are agreed rather than after a dispute arises.

Landlords should have the lease and the disclosure statement reviewed before they are issued, confirm that no prohibited costs are being passed through, and ensure the outgoings and term provisions comply. Reviewing an existing lease at renewal is equally important, because obligations continue to apply and errors carried forward can compound. Early advice is far less expensive than a contested claim, and it gives a landlord confidence that the provisions they are relying on will hold.

This article is general information only and does not constitute legal advice. Cohen Lawyers recommends that you obtain specific legal advice in relation to your circumstances before taking any action. If you require assistance with a commercial or retail lease, contact our office on 1300 610 669.