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Retail Lease Agreements - Up for Review

Tuesday, February 25, 2014   By Mike Reddy


I took some time out to attend a Chamber of Commerce function to discuss the Retail Lease Act which is in the final stages of a review in NSW.

As a business advisor I recognise the apparent imbalance between landlord and tenant when it comes to entering into lease agreements.

For that reason, I thought it was important to be part of the discussion. I will also be making a submission on behalf my clients.

Probably one of my greatest concerns centres on the the tenants requirement to submit turnover figures to the landlord.

Why a landlord should have this right above any other party who supplies goods and services to a business, I just don't get.  The official line is that it is not used to set rents, but rather, is a statistical tool.

Yeah, right.

Although it is common to furnish financial information to finance companies who stands to lose significantly should the customer fail, this is not the case with the landlord who merely rents space.  Their losses will be limited to opportunity cost.  It's disproportionate to the statutory rights available to other vendors of goods and services.

And the argument that landlords should have access to sales turnover figures so that they can grant struggling tenants rent concessions sounds a little like the Japanese government justifying whaling as being necessary for research.

And I don't get why clauses should be written into an agreement which entitle the landlord to a rent increase if turnover increases by a certain amount.  Chances are that increase is a result of the business owners own wise decisions. And if it is the result of activities conducted by the landlord wont that be reflected in the market rent as supply and demand kicks in?

Landlords, like almost every other business in almost every other industry, should price their product based on market knowledge. Their price should reflect the attractiveness of their product to the market place and the quality of the customer (business owner) experience.

How well they effectively manage the performance of their property determines how well they will succeed.  Business 101.  Therefore, as with most other businesses in most other industries, they should employ the right people, know-how and technology to achieve that goal.

The same principle should ensure landlords absorb their usual operating costs rather than be passed on to a tenant as an "extra" when that business owner has little control over both how the money is applied and the value that is ultimately derived from it.

It's time to make life a little easier for business.

Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.