This guide provides information on renting premises for your café, restaurant or small bar. It includes issues such as the type of lease covering the premises, regulations and restrictions that may apply, and how you can access specialist assistance if you have any questions or problems.
Retail leases and commercial leases
Leases are legally binding agreements made between landlords and tenants. They set out the rights and obligations of both parties.
A lease for a retail space like a café, restaurant or small bar is usually either a ‘retail lease’ or a ‘commercial lease’. It's important you know which type of lease applies to your business premises, as different laws apply to each type.
A retail lease is technically a type of commercial lease, but there are some critical differences between the two. Generally speaking, tenants who hold a retail lease enjoy stronger legal protections than those on a commercial lease, which tends to favour the landlord.
Retail leases are regulated by the Retail Leases Act 1994 (NSW).
The Retail Leases Act applies when:
- the lease is for a shop selling and supplying goods and services
- the size of the shop is 1,000 square metres or less
- the lease's duration is at least 6 months but less than 25 years.
The Retail Leases Act also covers what you must do when:
- you start a lease
- you transfer a lease
- the amount of rent to be paid changes
- there is a dispute between you and the landlord.
This legislation grants you legal protections, including:
- the right to terminate the lease if the landlord does not disclose certain details
- the right to compensation if your business is disrupted by your landlord
- access to dispute resolution via the low-cost NSW Civil & Administrative Tribunal (NCAT)
- safeguards for you regarding landlords’ misleading, deceptive or unconscionable conduct.
Under the Retail Leases Act, landlords must give retail lease tenants a Landlord’s Disclosure Statement at least 7 days before the lease is due to begin.
This disclosure statement sets out important facts about the lease and the shop such as:
- how much rent you will be paying
- any outgoings you must pay (such as council rates, land tax, water and electricity)
- the duration of the lease.
It is very important that you check that the information included in the disclosure statement matches what you agreed to in your lease.
In NSW, commercial leases are regulated by common law (that is, law stemming from judicial decisions in court cases).
This means it is up to the landlord and tenant to set the terms of the lease.
Some common problems to look out for with commercial leases are:
the rental agreement does not include a renewal clause, meaning you cannot choose to continue the lease when it expires
the rental agreement includes a refurbishment clause, meaning that the landlord is allowed to renovate the premises during the lease, potentially disturbing your business operations
the repairs and maintenance clause in the rental agreement is not clear regarding what the landlord will pay for, during the lease
the property is mortgaged, and the landlord hasn't been granted permission to lease the premises from the mortgagee (for example, the bank). If this consent has not been granted, and the landlord defaults on their mortgage, the mortgagee might be able to terminate your lease.
‘Permitted use’ and other restrictions
When you're choosing premises for your café, restaurant or small bar, and before you sign a retail or commercial lease, it's important to check if any restrictions apply on the type of business you can conduct on the site.
The purposes you're allowed to use your retail premises for will usually be listed in your lease, but local government restrictions can also apply. (This is known as ‘permitted use’.)
It is your responsibility to check with your local council whether you need any permits or licences to run your type of business, or if there are any zoning restrictions regarding consumption of alcohol.
You cannot legally deviate from the permitted uses of your premises as set out in either your lease or local council regulations.
It's a good idea to request a planning certificate from the council about your business premises, as this certificate will list what is allowed and what is prohibited on the premises.
The NSW Government Business Concierge program provides free assistance for business owners about licences, approvals and permits you may need.
More information about permitted use is available on the NSW Government's Small Business Commissioner's (SBC) website.
Before you sign a lease
Get legal advice before you sign a lease. A lawyer can help to ensure that your rights are protected and that the lease itself meets all legal requirements.
Speaking to a lawyer can also help you negotiate the terms of the lease with the landlord, to ensure that you come to an agreement that is fair and balanced.
Thoroughly review the lease before you sign it and make sure that everything you and the landlord have agreed to in initial negotiations is included. Take notes of all your conversations with your landlord.
Also complete a condition report for the premises before the lease commences. This is a general summary of the condition of the premises, including any damage. Take date-stamped photographs that show the general condition of the premises.
If you have a dispute with your landlord, it's important to get some independent legal advice from a lawyer.
If you have a retail lease, you can access low-cost mediation services from the SBC. The SBC can also provide you with advice on how to resolve a dispute with your landlord.
If mediation fails, as a retail lease tenant you can also seek orders from NCAT to try and resolve the problem. You can represent yourself at NCAT, or you can engage a lawyer. If you would prefer to represent yourself, you should get legal advice first.
Where to get legal assistance
If you need help understanding or negotiating your lease, you should seek professional advice from a lawyer. This is particularly important if your business premises falls under a commercial lease, and not a retail lease.
Speaking to a lawyer ensures you are fully aware of both your rights and your obligations. Contact LawAccess NSW for guidance on the best place to seek legal advice.
If you need assistance in resolving a dispute, contact the NSW Small Business Commissioner (SBC). The SBC can also provide you with general information about leasing a business premises, to make sure you are prepared, and protected as a tenant.
Depending on your circumstances, you may be able to access free and low-cost legal assistance in NSW through the following services:
You can also contact the following services for legal assistance, or for a referral to the appropriate service: