Guide to retail tenancies
Small business owners and operators should read the Retail Tenancy Guide available through the Small Business Commissioner, together with a copy of the proposed lease, before starting lease negotiations.
The guide includes information about:
- starting a lease
- changing the rent
- transferring a lease
- dealing with disputes.
It’s important to understand the terms set out in the proposed lease and the Retail Leases Act 1994 (NSW) which covers the rights and responsibilities for retail tenants and landlords.
Securing a retail lease
Your landlord might ask you for some money upfront when you are negotiating a retail lease. This is called a security.
A security might be a fixed amount or an amount equal to a certain number of months' rent. It can often be negotiated.
If you break any of the terms and conditions of your lease or damage the property, your landlord can use the security to cover what you owe.
3 ways to give a security
Cash bond
The main advantages of a cash bond are:
- it’s held by the NSW Government's Retail Bond Scheme
- it’s for a specified amount
- there are no fees involved
- there are rules for paying out the bond at the end of the lease
- if there's a dispute, you can access mediation through the NSW Small Business Commission to help resolve issues quickly.
If you decide to use a cash bond, your landlord or agent must deposit it into the Retail Bond Scheme within 20 business days. They must also give you a receipt.
Bank guarantee
A bank guarantee is a promise by a bank to pay the “favouree” (usually the landlord) a certain amount of money if they need it.
Most of the time, your bank will ask for a term deposit of the same amount to be held at the bank.
If your landlord decides to claim the bank guarantee, the bank will claim your term deposit. Your landlord does not need to tell you they are going to claim the bank guarantee before they do it.
Once a lease is finished, your landlord must return your bank guarantee within 2 months of you leaving the premises unless you owe money.
Third-party guarantee
A third-party guarantee is a promise given by a guarantor to pay the landlord if the tenant owes any money under the lease. The individual directors of a tenant company are often asked to be guarantors of the lease obligations in their personal capacity.
A guarantee may or may not have a financial limit. It can be given for the term of the lease or for any additional amount of time agreed.
Dealing with retail tenancy disputes
Retail tenancy disputes may arise over a number of issues such as making changes to a rental property, rent increases or disputes over a bond claim.
Contact Rental Bonds if you have a dispute about a Notice of Claim, or any other questions about your bond lodgement under the Retail Bonds Scheme.
If you need help resolving your dispute prior to court, you can opt for mediation through the Small Business Commissioner.
The NSW Government introduced the Retail and Other Commercial Leases (COVID-19) Regulation on 14 July 2021, which lapsed on 30 June 2022. However, commercial tenants will continue to be protected by certain provisions in the Regulation.
For more information, visit Commercial Leasing and COVID-19 FAQs.
"Make good” means returning the property to the agreed condition when the tenant moves out.
Your lease should specify what this means, but it may not always be clear. For example, removing internal partition walls that have improved the appearance of the property.
You can change what is required as a “make good” if you and your landlord agree. Start by having a friendly conversation. Your landlord might agree that future tenants could benefit from any changes you made.
Find out more about "make good" arrangements at the end of a retail lease.
If your landlord can prove that you are behind on rent or outgoings, then they are allowed to access your bond to cover these costs.
However, you can try to negotiate with your landlord. You might be able to agree to a resolution such as a payment plan.
Mediation through the Small Business Commissioner
The Small Business Commissioner provides information and mediation services for retail and commercial tenants, agents and landlords for disputes, including bond disputes.
If you and your landlord cannot reach an agreement, or communication becomes too difficult, you can speak to the Small Business Commissioner about their mediation service.
In most cases, negotiation and mediation will resolve the dispute. However, some cases may need to go to a court or tribunal. If this happens, you might need to seek legal advice.