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.

Similar Articles
Relevancy Powered by MondaqAI
Carroll & O'Dea
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 Topics
Similar Articles
Relevancy Powered by MondaqAI
Carroll & O'Dea
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions