Western Australia Commercial Lease Requirements

Drafting a commercial lease in Western Australia requires careful attention to both statutory requirements (for retail shop leases) and commercial best practices (for all lease types). 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 general contract and property law). The Act imposes mandatory protections for retail tenants that override any conflicting terms in the lease agreement.

Minimum Tenure for Retail Leases

The Act does not mandate a minimum 5-year term. Instead, it grants retail tenants a statutory right to an option that extends the lease to at least 5 years (combining the initial term and option periods). If the lease is for less than 5 years, it requires specific disclosures and the tenant may waive this right via the State Administrative Tribunal (SAT).

Prohibited Clauses Retail shop leases cannot include terms that:

• Require the tenant to pay the landlord's legal costs for preparing the lease.
• Charge the tenant for outgoings that exceed their proportionate share.
• Impose penalties that are unconscionable or misleading.

Mandatory Pre-Lease Process

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

1. A disclosure statement.
2. A copy of the proposed lease.
3. The Tenant Guide.

All at least 7 days before the lease is signed.

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.
• The landlord's consent requirements (cannot be unreasonably withheld for retail leases).
• 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.
• Forfeiture and re-entry provisions (for non-retail leases).

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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