The two main types of non-residential leases: Commercial and retail

In Queensland,non-residential leases generally fall into two categories: commercial leases and retail leases. The primary difference between the two is the business activity being conducted on the premises.

If your business falls within the types listed in the Retail Shop Leases Regulation 2006 (Qld) or if it operates predominantly within these categories, your lease will likely be classified as a retail lease. Similarly, if the premises are located within a retail shopping centre, certain conditions must be met to qualify under the Retail Shop Leases Act 1994 (Qld).

A commercial lease is more broadly applicable and covers premises used for non-retail commercial activities. Because this type of lease is not regulated by the Retail Shop Leases Act, both parties have greater freedom in negotiating terms and conditions.

What qualifies as a retail lease?

Businesses covered by the Retail Shop Leases Act generally include those offering goods or services directly to the public—such as cafes, clothing stores and hairdressers. If your business falls within this category, the lease will be subject to strict disclosure and operational requirements to protect tenants. Additionally, any lease involving a property within a recognised retail shopping centre may also qualify as a retail lease, provided specific criteria are met.

Disclosure obligations and tenant protections for retail leases

One of the key differences between retail and commercial leases is the disclosure obligations.

The Retail Shop Leases Act mandates that both landlords and tenants provide comprehensive disclosure before entering into a retail lease agreement. This includes full disclosure of costs, conditions, and terms ensuring both parties are well-informed. The goal is to create a level playing field and avoid any hidden surprises that might disadvantage one party, particularly the tenant.

In addition, the Act has specific requirements relating to turnover rent, options to extend, outgoings payable and recovery requirements, rent review mechanisms, trading hours, relocation and demolition procedures, dispute resolution and tenant compensation rights.

There are other conditions associated with a retail lease. For example, landlords are prohibited from passing on the costs associated with preparing the initial lease, although negotiation-related costs may be charged to the tenant.

Why are retail leases more regulated than commercial leases? These inbuilt protections aim to create a fairer leasing environment, particularly if you are a small retail business that lacks the resources to navigate complex legal arrangements.

What is a commercial lease?

A commercial lease covers premises that are not defined as retail under the Retail Shop Leases Act. This includes office buildings, warehouses and industrial properties.

Commercial leases are generally more flexible than retail leases. There is no mandatory disclosure requirement, which gives both parties more freedom in negotiating terms. When you enter into a commercial lease, factors like rent reviews, repair obligations and termination terms can all be negotiated and customised.

While this flexibility can be beneficial, it also means you must approach signing a commercial lease with caution. Before you make a commitment, reach out to a property lawyer in Queensland from NPR Law who can walk you through the terms and ensure the conditions are fair to your business.

Get the support you need

Now you understand the difference between a commercial lease and a retail lease, you’ll see why it is important to get advice from a professional who will help you negotiate, review the terms and ensure your agreement is compliant with regulations.