Feature Article: TRADER TENANCY

Michael Lonie, the Australian Retailers Association’s tenancy expert, has some tips for tenants…

In recent months, a number of members who have elected not to renew their leases in shopping centres due to the unreasonable expectations of the landlord as to what the rent will be for the new lease, have been confronted with what should happen at the end of a lease.

What happens if your are vacating If you intend to vacate the premises at the end of the lease or the lease has expired and you are on a “holding over” provision, you are only required to give the landlord one month’s notice in writing of your intention to vacate the premises. If you have elected to extend the term of the lease for six months under Section 44 of the Retail Leases Act because the landlord failed to notify you of his intentions at the end of the lease, you can terminate the lease at any time during that extension by giving one month’s notice in writing. You should be aware that having given the landlord notice, he will advertise the premise as being available to lease and most leases will give him the right to bring potential lessees through the premises.

Return of premises The question that is most frequently asked is how the store should be left at the end of the lease. Two matters are of importance. The first is the store must be vacated by the close of business on the last day of the lease or the last day stipulated in the termination notice. A tenant cannot trade until the last day and then spend a week stripping the shop. The keys are required to be handed back to the landlord on that last day and the shop should be returned in the state that it was accepted at the commencement of the lease subject to fair wear and tear. If you go beyond that date, you will charges another month’s rent. The tenant is expected to make good any damage that may have occurred to such things as walls, as a result of installing fittings or lights etc. Any alterations that have been carried out to the premises may need to be removed and any damage made good. This will include floor covering, signs both internal and external, all fixtures and fittings and in the case of shopping centres could include the ceilings and shop fronts. The cost of making good shops at the end of the lease can be as high as $30,000. In the case of a strip shop of would only be expected to return to the landlord in the same state as it was at the commencement of the lease. The lease may also place additional conditions to these upon the tenant and they should be clearly understood. These conditions could require the tenant to repaint the whole of the premises upon vacating.

Bank guarantee or security bond Most leases require that you lodge with the landlord a bank guarantee or security deposit. Any failure to undertake any of the make good provisions or any of the requirements in the lease relating to vacating the premises could see the landlord use the guarantee or the deposit to undertake the work.