Differences between a retail lease and a commercial lease are not limited to just name; there are a myriad of reasons a lease may be a retail lease or may be a commercial lease; location of the premises being only part of the broader consideration.

Retail Lease v Commercial Lease?

For a lease to be considered a retail lease it must fit within the specifications and requirements of the Retail Shop Leases Act. If a lease does not fit within the Retail Shop Leases Act specifications and requirements then it will not be a retail lease.

Commonly for a lease to be a retail shop lease it has to be in either a shopping centre that is retail or the business being conducted from the premises is a retail business.

What are some of the differences between a Retail Lease and a Commercial Lease

Apart from use, major differences exist between retail leases and commercial leases notably around costs, obligations and responsibilities.

For instance, under a retail lease, certain costs recoveries and actions are prohibited by the Retail Shop Leases Act (and/or certain steps are required first). With commercial leases, the Property Law Act carries less onerous costs recovery requirements or none at all. Other differences exist around the parties 'pre-entry' obligations. For instance, under retail leases both the lessor and lessee are required to give each other disclosure. Under commercial leases there is no such requirement for disclosure to be given.

Further, under retail leases certain 'outgoings' that can be (and often are) charged under commercial leases are prohibited by the Retail Shop Leases Act.

Which is better?

The better question to ask is which applies to my situation. This is because using a commercial lease when a retail lease is required can be problematic and sometimes result in termination rights to a lessee. Therefore, the best lease to use is the lease that applies to your specific situation based on the permitted use and the actual location of the premises. The mechanics of the lease can then be tailored and adapted to your intrinsic needs thereafter.

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