Introduction
This page has information about signing a lease for a business premises in the Northern Territory (NT).
A lease is a contract between a landlord and a tenant.
It sets out the terms and conditions for the tenancy and the rights and obligations of both parties. It is legally enforceable.
A retail lease will describe the premises in detail and all of the following specifies:
- the formula for calculating rent
- whether the rent will be reviewed during the lease
- options for renewing the lease
- any contributions you as the tenant may be expected to make to the landlord's expenses
- what the premises are allowed to be used for.
Retail shop leases
Before you sign a retail shop lease, the landlord must have a copy of the proposed lease available for your inspection. The landlord must give you a copy as soon as you enter into negotiations concerning the lease.
If the shop is in a shopping centre, it is a good idea to get a plan showing the specific premises to be leased.
Searching for a premises
Before starting your search for a business premises you should do all of the following:
- research the kind of business you want to run
- identify where the market for your business is located
- register a business name with the Territory Business Centre (ph: 1800 193 111)
- apply for relevant licences and permits with the Territory Business Centre
- set a budget with advice from your accountant.
Draft lease
Once you start your search for a
business premises, inspect several potential sites and compare the pros and
cons of each.
When you’ve selected the right premises for your business, you’ll receive a
copy of the draft lease.
Before you sign a lease
This page has information about responsibilities under a business lease.
The landlord
Your landlord must supply a Landlord Disclosure Statement at least seven days before a lease is entered into.
The Landlord Disclosure Statement should list all of the following:
- the identification and location of the shop
- the approximate area for lease
- the proposed lease term and any option periods
- the rent payable or the method of calculating the rent
- the timing and method for rent reviews
- the tenant's share of outgoing expenses
- the permitted uses of the leased area
- the details of any work to be carried out on the leased premises
- the expected date of occupancy or the availability of the leased premises.
Your responsibilities
You must give the landlord a Tenant's Disclosure Statement within seven days of receiving the Landlord Disclosure Statement.
Taking on an assigned lease
When taking over a lease from another tenant, that tenant (known as ‘the assignor’) must give you a copy of both of the following:
- the most recent Landlord's Disclosure Statement with any changes noted
- an Assignor’s Disclosure Statement.
Landlord's Disclosure Statement DOCX (100.8 KB)
Landlord's Disclosure Statement PDF (179.4 KB)
Assignor’s Disclosure Statement DOCX (95.6 KB)
Assignor’s Disclosure Statement PDF (113.4 KB)
The assignor may also ask you to provide information about your financial standing and business experience to be passed to the landlord when seeking consent to the assignment of the lease.
For more information, contact NT Consumer Affairs on 8999 1999 or 1800 019 319 if calling from outside Darwin.
Entering into a lease
A lease is considered to have been entered into when one or more of the following have happened:
- the lease is signed
- the tenant takes possession of the leased shop
- the tenant starts to pay rent under the lease
Lease preparation expenses
You may be expected to pay fees for any of the following services that are incurred during the preparation of the lease:
- the negotiation, preparation and execution of the lease
- obtaining consents from mortgagees or government agencies
- any surveys or compliance with a requirement made by or under an Act
Also check the landlord’s disclosure statement for further charges, or the method of calculation.
Lease terms
The term of a retail shop lease including extensions or renewals must be at least five years.
If you want the total lease term to be less than five years, you must have written certification from a legal practitioner.
Exemptions
The Business Tenancies (Fair Dealings) Act does not apply to retail shop leases less than six months, where there is no right for the tenant to extend the lease, or to leases for 25 years or more.
Option to renew
An option to renew a lease gives the tenant the right to remain in the retail premises after the original or previous lease term expires.
For example, you may be offered a 3 x 3 x 3 lease. This means the first lease term is for three years, but you have the option to renew it for second and third three-year periods, for a total of nine years.
Lease costs
This page has information about the costs associated with a business lease in the Northern Territory (NT).
Bonds and rent
Bonds
Some leases may require you to lodge a security deposit, which should be held by solicitors or real estate agents in a trust account.
Rent
A landlord may require you to pay rent in advance. This is usually the amount payable for one rental period under the lease.
Calculating rent
There are several different ways to calculate the amount of rent payable.
Turnover rent
One way to determine the amount of rent to be paid under a lease is to decide on a percentage of the turnover of your business. This is known as turnover rent.
Current market rent
The current market rent is based on the rent that would reasonably be paid for a vacant shop on the open market.
If you disagree with the landlord’s assessment, the Commissioner of Business Tenancies can nominate a specialist retail valuer to determine the current market rent.
Index of price or wages
In this case the rent is tied to a formula that is based on the movement in the Consumer Price Index (CPI).
Fixed percentage of base rent
The base rent in a retail shop lease can be varied by any percentage negotiated and agreed to by the landlord and tenant.
Fixed annual amount
The base rent in a retail shop lease can be varied by any fixed amount as negotiated between the parties.
Rent reviews
The lease must specify when a rent review will be conducted and how it is to be done.
Other considerations
Outgoings
Under some leases, you may be required to contribute to the landlord’s outgoing expenses in addition to rent, as specified in the lease.
Typical outgoing expenses include all of the following:
- lighting
- cleaning
- air conditioning of common areas
- centre management costs
- rates, taxes and levies
- insurance premiums.
Key money and goodwill
The Business Tenancies (Fair Dealings) Act prohibits a landlord from seeking or accepting any payment to secure the granting, renewing, extending or assigning of a lease.
Sinking funds
The landlord may require you to contribute to a sinking fund for maintenance and repairs to the premises.
Sinking funds are subject to strict auditing provisions.
Permitted use
The permitted use clause of a lease determines what type of business you can operate from the leased premises.
Promotion and advertising
A landlord cannot require you to undertake advertising or promotion of your business.
However, if the shop is in a shopping centre, you may be required to contribute separately to the promotion and advertising of the shopping centre in which the leased premises are located.
Other payments
Your landlord is able to require that you pay for any the following, if specified in the lease:
- damages for breach of a term of a lease
- an indemnity for loss or damage the landlord suffers as a result of your actions or omissions
- interest on arrears of rent and outgoings
- the landlord’s reasonable expenses incurred in investigating a proposed assignee
- the landlord’s reasonable expenses of and incidental to an assignment of a retail shop lease and any consents to the assignment
- amounts spent by the landlord in fitting out the leased shop
- granting a franchise in relation to the granting of a retail shop lease
- payment for plant, equipment, fixtures and fittings sold by the landlord in connection with the granting of the lease.
Business Tenancies (Fair Dealings) Act
The Business Tenancies (Fair Dealings) Act 2003 provides contemporary retail tenancy legislation to give small business operators a fair go.
This legislation gives small retailers a more balanced bargaining position when they negotiate their leases with landlords.
Key features of the act
A ban on ratchet clauses
Ratchet clauses mean rents can go up but never down, which sometimes maintains rents at unrealistic levels.
Banning ratchet clauses means rents should reflect market value by rising and falling in line with the economy.
Mandatory disclosure statements
Mandatory disclosure statements will keep dealings between tenants and landlords open and fair. The statements will include details such as costs and expenses for tenants, rent calculations and reviews and outgoings to be paid by the tenant.
Five-year leases
The minimum five-year lease provision brings the Northern Territory into line with other jurisdictions. Five-year leases improve security of tenure for tenants, and provide certainty to landlords.
Mediation
The Act provides an impartial Commissioner of Business Tenancies to mediate disputes between tenants and landlords.
Compensation claims
If landlords disturb or disrupt trading - for example carrying out renovations without adequate notice - tenants may claim compensation.
The legislation covers most businesses providing retail goods or services. The Act applies only to:
- leases for less than 1000 m2
- leases lasting between six months and 25 years
- leases entered into after the Act began on 1 July 2004
- leases where the tenant is not a listed Corporation.