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Disclosure Statements in Commercial Retail Leasing.

1 min read

09 May 2024

What are Disclosure Statements in retail leasing?

Disclosure statements are mandatory legal documents provided to tenants in commercial retail leases which provide important details about a property. A properly made disclosure statement ensures that both parties to a lease record their complete understanding of its terms.

Failing to properly prepare a disclosure statement can have serious consequences, particularly if the statement does not include important information which the tenant should know.

Understanding the legalities, obligations and rights you have when you are entering into a commercial lease will help you make well-informed and commercially sound decisions about your business. If you are the landlord of a retail lease premises you should have a clear understanding of the disclosure statement obligations to ensure compliance.

What retail tenants need to know

Before entering any lease, you should be provided with a disclosure statement which informs you about the property you are about to rent. The owner of the property, or a property manager is responsible for providing you a copy of the disclosure statement and a copy of the proposed lease no  later than 14 days before the lease is entered into.

The disclosure statement should include the following details:

  • Essential terms: a disclosure statement will give you a clear and concise overview of the lease’s essential terms, including the rent, term, renewal options, permitted use and your responsibilities as tenant.
  • Financial obligations: the statement should outline all lease financial obligations, and state which party is responsible for payment of that obligation, including rent, outgoings, utilities and other fees which may be associated with the property. This will allow you to roughly budget your finances for the life of the lease.
  • Condition of the property: a disclosure statement will inform you of any existing structure or fixtures present at the property.

If you have received a disclosure statement and it does not make the above items clear to you, it may not have been properly prepared, and you may enter into a lease which contains provisions unknown to you to your disadvantage. It is important that you seek legal advice before entering a lease to ensure that you understand all of the obligations placed on you as a tenant.

If you have signed a lease and find that the disclosure statement was not accurate, or there are matters which the landlord should have disclosed and did not, you may seek relief from certain obligations under the lease, or even terminate the lease. PCL Lawyers can advise you on your circumstances and the best options available to you if you receive a disclosure statement which is inaccurate or defective.

What retail landlords need to disclose

As a landlord, you must give a disclosure statement to any potential tenant. Failing to prepare an accurate disclosure statement properly informing a potential tenant about the nature of the lease and the condition of a property can give rise to the risks that a potential tenant will not enter the lease, or that a dispute will arise during the life of the lease due to inadequate disclosure.

It is important that a disclosure statement unambiguously states the respective parties’ obligations, particularly in respect of payment, repairs and maintenance and permitted use. A well-crafted disclosure statement made before the commencement of a lease prevents the litigation that a poorly worded statement can cause once a tenant begins making use of the premises. Ensuring that your tenant understand each of its obligations is not just a legal obligation, but makes for a successful tenancy and professional relationship.

You should be aware of the following matters when preparing a disclosure statement:

  • the condition of the property and any damage or latent conditions;
  • the result of any recent inspections and safety checks;
  • how you intend for the tenant to pay for outgoings, utilities and any other costs associated with the property;
  • whether you or the tenant will be responsible for the maintenance and repair of  items like plumbing and air conditioning; and
  • when and how you intend to calculate any increases to the rent or outgoings.

It is useful when preparing a disclosure statement to adopt the approach that as much detail as possible about the property should be disclosed to the tenant, to avoid disputes during the life of the lease that certain conditions were not properly disclosed.

Our team of leasing experts at PCL Lawyers can assist you in preparing disclosure statements and ensure your statement covers all essential terms, contains no ambiguity, mitigates future issues and complies with all existing regulations.

If you are unsure about your obligations or rights it is best to get clarity before an issue arises as leasing disputes can unsettle your business as a tenant or impact your investment as a landlord. Our lease lawyers assist both tenants and landlords with quality advice and representation in retail and commercial leasing matters.  Speak to one of our team we have extensive knowledge and practical experience to help protect your position.

Disclaimer: This article has been prepared for general information purposes and may not apply to your situation. This information should not be relied upon for legal, tax or accounting advice. Your individual circumstances will alter any legal advice given. The views expressed may not reflect the opinions, views or values of PCL Lawyers and belong solely to the author of the content. © PCL Lawyers Pty Ltd.

If you require legal advice specific to your situation please speak to one of our team members today.

About The Author - Chris Karatselios

Chris is an Accredited Commercial Law Specialist and a Partner at PCL Lawyers. Chris has approximately 30 years’ experience in commercial and property law. Chris has extensive expertise in complex...

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