Western Australia Commercial Lease Requirements

Drafting a commercial lease in Western Australia requires careful attention to both statutory requirements and commercial best practices. For retail premises, the process is strictly governed by the Commercial Tenancy (Retail Shops) Agreements Act 1985, which commenced on 1 September 1985. A well-structured lease protects the landlord's investment while providing the tenant with the certainty they need to operate their business.

Retail vs. Non-Retail Commercial Leases

Western Australia distinguishes strictly between retail shop leases (governed by the Commercial Tenancy (Retail Shops) Agreements Act 1985) and non-retail commercial leases (governed by the Property Law Act 1969 and general contract law). The Retail Shops Act imposes mandatory protections for retail tenants that override any conflicting terms in the lease agreement.

Minimum Tenure for Retail Leases

Under Section 13(1) of the Act, a retail shop lease is taken to include a provision granting the tenant an option to renew such that the total term is at least 5 years (combining the initial term and any option periods). If the landlord does not offer this, the lease is automatically extended by law. This statutory option can only be waived if the tenant receives a certificate from the Small Business Commissioner or an order from the State Administrative Tribunal (SAT) under Section 13(6).

Prohibited Clauses

Retail shop leases cannot include terms that:

• Require the tenant to pay the landlord's legal costs for preparing the lease (Section 14B).
• Charge the tenant for outgoings that exceed their proportionate share (Section 12).
• Impose "key money" or premiums for the granting of a lease (Section 9).

Mandatory Pre-Lease Process

Before signing, the landlord must have provided the tenant with:

1. A disclosure statement (Section 6).
2. A copy of the proposed lease.
3. The Tenant Guide (Section 6A).

These must be provided at least 7 days before the lease is signed by the tenant. Under Section 6(4), failure to provide the disclosure statement gives the tenant a right to terminate the lease within 6 months after the lease was entered into. If the Tenant Guide is not provided, the termination right is limited to 60 days.

Essential Clauses for All Commercial Leases

Whether the lease is retail or non-retail, the following elements should be clearly defined:

1. Parties and Premises

• Full legal names and ACN/ABN of both parties.
• Detailed description of the premises, including a floor plan exhibit.
• Common areas and shared facilities included.

2. Term and Options

• Lease commencement and expiry dates.
• Any option to renew periods and the process for exercising options.
• Holdover provisions (what happens if the tenant stays beyond the lease term).

3. Rent and Outgoings

• Base rent amount and payment frequency.
• Rent review mechanism and timing (fixed, CPI, market, or combination).

• Outgoings (council rates, water rates, insurance, management fees) and how they are apportioned.
• GST treatment.

4. Permitted Use

• The specific purpose for which the premises may be used.
• Any restrictions on changes of use.
• Exclusive use rights (if applicable).

5. Fit-Out and Make-Good

• The tenant's fit-out obligations and any landlord contribution (TI allowance).
• Make-good requirements at lease end (strip-out to base building condition, or otherwise).
• Ownership of fixtures and fittings at lease end.

6. Assignment and Subletting

• Whether assignment or subletting is permitted.
• For retail leases, the landlord's consent cannot be unreasonably withheld (Section 10).
• Continuing liability of the original tenant after assignment.

7. Insurance

• Minimum insurance requirements for the tenant (public liability, plate glass, contents).
• Landlord's building insurance and how premiums are recovered.

8. Default and Termination

• Events that constitute a default.
• Notice periods and cure rights (governed by Section 81 of the Property Law Act 1969).
• Forfeiture and re-entry provisions.

Guarantees and Indemnities

For leases with business entities (Pty Ltd companies), landlords commonly require:

• A personal guarantee from the company directors.
• A bank guarantee or cash security deposit.
• An indemnity for any breach of the lease terms.

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