Australia: Looking into retail leases

Last Updated: 31 August 2017
Article by Corinne Attard

If you are buying a retail franchise business, the lease is a critical element. Here are 10 questions to ask about your lease...

Leases can be held in the name of the franchisor or the franchisee as tenant. Whether you or your franchisor is negotiating a new lease with the landlord or you are taking over an existing business and lease, there are basics you need to know beyond the usual commercial terms.

Just like the franchise agreement, the lease is a binding long-term commitment and needs to be treated with as much care and due diligence.

Here are the 10 questions to ask when reviewing a lease...

  1. Is the lease term long enough?

It is important to have a lease term (or potential lease term with options) that is long enough to at least match the franchise term. Your bank will also want to see a lease term that allows you enough time to recover your/its investment. If you are buying an existing business and there is not enough lease term left, you may need to approach the landlord for an extension. There is also a risk the lease may end early through demolition or relocation, if those clauses are in your lease or in the head lease, though the lease or the law may give you rights to compensation for your fitout or other expenses. If at all possible, demolition or relocation clauses should be removed or limited so you have a guarantee of an initial term of sufficient duration.

  1. What is my right to occupy?

If the franchisor holds the head lease they need to grant you a sublease or a licence to occupy. Typically a retail lease prevents a tenant from subletting, licensing or "parting with possession" without landlord consent. So in that situation the head lease should allow a franchisee of the tenant to occupy the premises as sub-tenant or licensee.

Failure to include this right in the lease will mean occupation by a franchisee without landlord consent is a breach of the lease. Whether sub-lease or licence, it is usual for the franchisor to simply "pass through" its same obligations as tenant to the franchisee. It is therefore important to review the head lease - your right to occupy is based on this continuing. If you are to have exclusive access rights to areas outside the premises such as store room, parking bays or outdoor dining area, these rights need to be in the lease or in another licence agreement.

  1. What does the lease disclosure statement say?

Every state and territory across Australia has different retail leasing legislation. In most places, tenants, including subtenants and licensees, must receive a lease disclosure statement from the landlord. This document includes important information about the lease such as outgoing obligations, redevelopment plans and details about the shopping centre if the shop is located in one.

Read through the disclosure statement. If it tells you building works are planned for the shopping centre, you may not be able to later claim any compensation if those works disrupt your business.

  1. Can I transfer the lease if I sell my business?

Whether a lease is held by franchisor or franchisee, it should contain the right to assign (transfer) the lease (or the licence) to any approved franchisee or potential franchisee of the same franchise system without needing landlord consent (or at least the landlord should not be able to unreasonably withhold consent).

In some states and territories there are also laws prohibiting retail landlords from refusing consent to a transfer in certain cases, which may protect you from being held liable for breaches after the transfer.

  1. Are there any refurbishment obligations?

Franchisors and landlords may have separate refurbishment requirements, and making sure these are consistent is in everyone's best interest.

Refurbishments - usually at the end of term or every five years - will typically be at the cost of the franchisee, and if a relocation occurs there will be extra fit-out costs.

  1. What incentives or fit-out contributions are provided?

Landlords often provide fit-out contributions or lease incentives to their tenants. Franchisees of new sites should ask if a lease incentive has been received by the franchisor, particularly a contribution to the fit-out, and how this has been accounted for. Franchisors must disclose this in any event. If you breach the lease, then part or all of an incentive paid may be repayable to the landlord. You should also advise your financing bank and your accountant if a fit-out contribution is received, as parts of the fit-out and fittings paid for by the landlord will belong to the landlord and not be available as security for a bank loan or for depreciation.

  1. Is my permitted use broad enough for changes?

As a general rule, a broader usage favours the tenant. It is common for landlords to try to restrict food-court retailers in particular to a set menu, to avoid conflict between retailers and possible exclusive rights.

Rather than having a menu attached to the lease, it is preferable to have a usage such as "takeaway food outlet selling pizza, drinks and any other menu items of a Joe's Pizza franchise", which leaves it open for further items to be added without seeking landlord consent.

  1. How much security or bank guarantee do I need?

Most leases will require financial security in the form of a bank guarantee for several months' gross rent, and this is usually provided by the franchisee. Ensure you make your bank aware of the need for the bank guarantee as early as possible, as this is a common source of delay in securing access to the premises. You may also need to provide a personal guarantee for the lease obligations either directly to the landlord or to the franchisor.

  1. What are a landlord's insurance requirements?

The lease usually requires the tenant to take out certain insurances – public liability for a stated minimum amount and insurance of the tenant's property are standard. Franchisors often require the insurance to be taken out by a franchisee, noting the interest of both landlord and franchisor. Do this early and obtain the certificates of currency for the landlord, or you will not be allowed to take occupation.

  1. Are other expenses payable to the landlord on top of rent?

As well as the rent and outgoings there may be extra costs in a retail lease, particularly if the premises are in a large shopping centre. There are extra outgoings if you trade outside the shopping centre's core hours, additional cleaning if you are in a food court, centre promotion contributions, charges for extra waste removal and amounts payable if you fail to open during the required hours. If you aware of these you may be able to take steps to avoid some charges being imposed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.