Dictionary of some common terms and their definitions

Date

Assign

‘Assign’ means the transfer of the rights and obligations of the tenant to a new tenant who accepts them. For example, if you sell the business you carry out from the premises, you will need to assign your lease to the buyer of your business to enable them to also carry out the business from the premises.

Disclosure statement

A ‘disclosure statement’ is a statement required by some retail tenancy legislation. It is usually given by the landlord to the tenant. It contains important details about the premises, the estimated outgoings payable by the landlord and how the tenant has to contribute to these as at the date it is signed. These details may change. In some States/Territories you must also provide a disclosure statement to the landlord.

Fit out

‘Fit out’ is not a precise term but will usually refer to the property of the tenant within the premises. What is part of the fit out will vary. They usually contain fixtures and fittings. They may include equipment or services. A fit out usually includes counters, shelves, display areas, painting and decorating.

Fittings

‘Fittings’ usually include fixtures, partitions and equipment fixed to the premises in such a way as to become a part of the premises.

Goodwill

‘Goodwill’ is usually used to refer to the benefit and advantage of the good name and reputation of a business. The time left to run before the lease expires is sometimes considered to be part of the goodwill

‘value’.

Key money

This generally means a payment or benefit given to a landlord for considering a new lease, its renewal, extension or assignment. Your retail lease legislation may have a special definition. Taking key money is not allowed in some States and Territories.

Lessee

The word ‘lessee’ means the same as ‘tenant’.

Lessor

The word ‘lessor’ means the same as ‘landlord’ or ‘property owner’.

Make good

‘Make good’ refers to the works that must be undertaken and the condition that the landlord requires the premises to be put in at the end of the lease. It may include requirements to remove shop fittings, false walls and signs, repair flooring, wiring, painting, cleaning etc. It should be made clear within the make good

clause what works you are actually required to do.

Option

An ‘option’ is a right to be granted another lease for a new term when your current lease expires.

Outgoings

‘Outgoings’ are the landlord’s expenses relating to the retail lease space. Here are some examples:

  • rates and land taxes
  • levies and charges under strata, community unit title or similar laws
  • insurance
  • cleaning
  • indoor and outdoor gardening and landscaping
  • caretaking
  • security
  • regulating traffic
  • management, administration and marketing
  • supplying, maintaining, repairing and replacing services and
  • building maintenance.

Your retail tenancy legislation may have a special definition and also special rules about outgoings. In some

States, land taxes are not included in outgoings.

Ratchet clause

If a lease has a ‘ratchet clause’, when a rent review happens the rent cannot decrease. Note that ratchet clauses are illegal in some States and Territories.

Relocation

‘Relocation’ means moving from one retail space to another during the term of the lease. Your retail tenancy legislation may have special rules about when the tenant can be asked to move and what happens when they do.

Security bond/ Security deposit

A lease might require a tenant to pay a sum of money or provide a bond as security against default. If you have carried out all your obligations under your lease this will be returned to you. Your retail tenancy legislation may fix a maximum amount for the bond or deposit. It might also tell you how and when the landlord can have access to that money.

Sinking fund

A tenant may be required to pay into a fund which the landlord uses for major repairs and maintenance. Your retail lease legislation may apply strict rules to these funds.

Turnover rent

‘Turnover rent’ is rent that is calculated as a proportion of a tenant’s turnover.