Retail News & insights

The process of entering into a Retail Lease is complex. Not only is the negotiation process across numerous commercial terms intense, but ensuring the accuracy of the paperwork that needs to be dealt with.

A large majority of issues that arise between Retailers and Landlords is not at the beginning of the lease but more so well into the lease term.

These issues are about the expectation or assumptions made by Retailers during the negotiation phase. For example: the Centre was to re-develop, the other shops would be open (leased), the air conditioning was going to be upgraded, and the list could go on forever!

When these issues arise, the first place the parties’ reference is the Disclosure Statements (both Lessor and Lessee).

Too often we see Lessor Disclosure Statements accepted by Retailers that have no representations made by the Agent, when in fact the Lessee was led to believe otherwise. The importance of taking meaningful meeting/conversation file notes can never be understated.

pexels-photo-261664.jpegAnd before handing over the lease document package to your advisors you (the people present at the negotiations) need to cross check your notes to ensure that if you have assumed, understood, or relied upon something the Lessor/Agent has implied -these must be stated in the Disclosure Statement(s).

All States and Territories have some form of Lessor Disclosure Statement which will include a section for representations made. Some have a further Lessee Disclosure Statement which sets out a similar section for what representations have you as Lessee relied upon.

When we see all too often one, or both sections left blank, or with a nil/ not applicable, and a dispute is identified, it is very difficult to “un-churn the butter.”

Over the past 20 years we have strived to improve the transparency and level the playing field when it comes to dealing with Retail Leases. It is far better to document all these representations at the beginning before the parties are legally bound to a lease.

And yes, while listing these representations may cause some deals to fall over, it is better this happens early if something said or negotiated wasn't documented.

We can review and amend legislation until the cows come home but if Retailers and Landlords don’t avail themselves adequately use the tools provided by the respective Acts then disputes will arise and more often will not be satisfied adequately for one of these parties.

Take a tip, make notes, confirm details in writing (email), and always check and review all parts of Disclosure Statements (an empty representations section should be a Red Flag).

Need leasing advice or management services? The ARA has partnered with Lease1 to save retail tenants time, money and stress in their lease negotiations. To learn more about ARA Leasing Services call 1300 368 041 or email membership@retail.org.au.

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