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                           Location, Location, Location!!!!!!!!
Where will you locate your business?
 
The location of your business is a very important decision. The wrong location could jeopardise the success of your business. Points to consider are:
 
Do you need to be located close to customers, or are you able to service your clients remotely via the telephone or over the internet?
 
Do you need to be located close to suppliers? i.e. consider the delivery costs for raw materials and supplies.
 
What features must your premises have? i.e. consider size, street frontage, show rooms, parking, loading bays, special facilities.
 
Do you intend to lease or purchase your premises?
 
Do you plan to operate your business from home?
 
 
A variety of factors will influence your selection of location and premises. Ensure you make a wise decision, keeping in mind the costs and inconvenience of relocating.
 
Choosing the right location
 
There are a number of useful contacts to help you determine the best region or suburb for your business.
 
The Department's Business Resource Centre can provide industry and market information packages tailored to your particular business type and proposed location. Information packages contain demographic data for at least two suburbs to help you determine whether you are maximising access to your target market, without providing too much competition.
 
Have you considered climate change issues when choosing a location for your business? Complete the Department's Climate change quiz for suggestions on how you could reduce your business' impact.
 
Your relevant industry association is a good place to start to obtain further information on your selected industry and to help you determine where opportunities exist.
 
Your local council's website can provide further information on suburbs within your chosen region, or alternatively, you might like to visit your local library or the State Library of Queensland. Visit the Local Government Directory to find out which council is responsible for your proposed suburb or region.
 
Yellow Pages can help you to find out about your competitors and help you to determine the best location for your business.
 
Use the location assessment checklist available from the 7 steps to business success or through Smart Skills to help you assess the merits of your location.
 
Choosing the right premises
 
Depending on your business type, you may decide to establish a home-based business. Starting a home-based business can be appealing - lower overheads, less travel time and greater flexibility with balancing work and family life. Improved information and communication systems mean that working from home may be a viable option for many business operators.
 
Alternatively, your business venture may require a specific type of accommodation such as a serviced office or warehouse. If you take out a lease in a serviced office, you will be able to share office facilities, such as administrative, phone, fax and computer networks, email and cleaning services. Serviced offices are available throughout Queensland by visiting Yellow Pages.
 
 
If you require a large amount of storage room you may like to consider leasing or buying a warehouse. In choosing the right warehouse location it's important to look at nearby transportation facilities. For instance, are you able to transport your products easily and cheaply? Is the warehouse in an accessible location and can it cater to the future needs of your company? Contact a commercial real estate agent for information on warehouses in your chosen suburb.
 
Other assistance
 
The Industry Location Scheme - this scheme ensures Queensland businesses have access to suitably zoned, fully serviced and strategically located land which is accessible to major transport routes. Eligible businesses are able to purchase or lease land at market value through a network of industrial estates throughout Queensland.
 
Technology incubators - if you are entering a start-up business, particularly in the information and technology industry, you may like to consider the option of renting space in a technology incubator. The Queensland Government's technology incubator (i.lab) is situated at Toowong and offers space for between 10 and 15 emerging growth ventures at any one time.
 
The Retail Shop Leases Registry and Tribunal - to ensure you understand the rules governing Retail Shop Leases.
 
 
Government Business Information Service (GOBiS) - to obtain information on State and Commonwealth Government support services available for Queensland business.
 
Renting or Leasing a Business Premises
Every reference to the Act means the Retail Leases Act 1994. You can find a link to the full text of the Act by going to www.retail.nsw.gov.au 
 
Any reference to a landlord includes the real estate agent or managing agent who represents the landlord in the leasing relationship. Agents are the landlord's employee and may only act on the instructions they are given. 
 
Important Points
It is good business practice for a landlord to drive a hard bargain. This is not unconscionable or unfair. Wise tenants will review the lease offered and make a commercial decision about the offer. Emotional decisions about lease agreements are often regretted. Unless you can make the deal work, look for another deal that meets your business needs. You are better not starting a business than signing an unworkable lease that may eventually result in the loss of your business and current assets. 
 
Get advice about how to best structure your business to protect your personal assets. If you give a personal guarantee, the landlord can reasonably insist that you sell your assets to meet your lease obligations. Many landlords are responsible to shareholders or have their own financial commitment to a mortgage on the premises. 
 
Once a lease begins the parties are captive to the deal. The landlord has many competing priorities to consider and is not responsible for ensuring the tenant's success and profitability. 
 
Develop a sound business plan and have it reviewed by experienced retail professionals or your accountant. They can advise you whether your plans are realistic or not. 
 
Get advice
Starting a business is risky. Don't risk what you can't afford to lose. Unless you have extensive experience in commercial leasing, get advice from an expert to save money and prevent problems. The Government does not have a standard lease agreement. Some conditions are set down by law, but generally the parties negotiate to make the best deal possible for themselves. 
 
A commercial agreement is a serious commitment that can not be changed once it begins, unless the other party agrees. If you enter a lease, even if you did not read or understand the agreement, your financial obligation continues. You need to know that a lease can begin even before you sign the agreement. 
 
Due diligence (finding out for yourself)
The research you do before starting a lease will greatly increase your likelihood of business success. The assumptions you make increase your chance of business failure. Consider investing in the services of a retail advisor when negotiating your lease. They are often highly skilled negotiators that can save you a lot of money on the rent and help you understand the important things to consider when setting up your business. Remember that the landlord or leasing agent may negotiate leases every day, while most tenants negotiate a lease once every five years. 
 
Before Signing a Lease
Prepare a realistic business plan and consider if the business concept will generate enough revenue to pay all the bills and provide you with a profit. When considering the investment, remember you have no right to a further term, so you need to make a reasonable return in the first lease period. 
 
Explore basic questions: Is the proposed business attractive to the local community? Will competition be a problem or a benefit? Sometimes being located with shops selling similar products increases your customer numbers (i.e. furniture, renovation services, bridal wear). Sometimes, this competition is too strong. Try to find out what similar shops pay for rent. This will help you understand if you can price your products competitively. Our PDF document Business issues - location basics can help you understand how to choose a location for your shop and assist in preparing a realistic business plan. 
 
Find out if council approvals are in place. These can take some time to arrange. Think about how to deal with delays or what will happen if the council does not approve your application. Get a building inspection to ensure the premises are suitable for your intended use. Simple things like knowing how much power is available will allow you to negotiate about which costs the landlord will cover and those you will have to pay. If you need changes made to the building, it may be at your cost, if not discovered until after the lease starts. 
 
The work you do before the lease is signed can make the difference between the success and failure of your business. 
 
Buying an existing business
If you buy a business with only a short time left on the lease, the return on your investment must happen quickly. Without a legally binding commitment from the landlord for a further term of lease, expect the lease to end or the rent and lease to change significantly when the term expires. 
 
If you buy a business without an assigned lease, you must realise that the landlord can probably ask you to leave the shop with one month's notice. The lease is one of the most valuable assets that a business has to sell. With no lease, no goodwill of the business is likely to exist. 
 
Make sure your accountant reviews the business records and you have an advisor to help you assess the investment. Many tenants say that the business they have purchased is not what they were led to believe it would be because they failed to fully investigate the business prior to purchase. Find out information about the shop for yourself. It is dangerous to rely on advice from someone who has a personal interest in your decision. Inform yourself about the arrangement and get impartial advice. 
 
Documentation
Documentation is important. Start a notebook to record all discussions about the shop. Note when and where discussions occur and who is present. Good records will provide you with more options if problems arise in the future. 
 
The landlord must give you information: 
At negotiation, you should get the proposed lease and the Retail Tenant's Guide, which summarises the Retail Leases Act.
At least seven days before the lease begins you should get the 'Lessor's Disclosure Statement' which summarises the lease requirements.
Seven days later, you should give the landlord a 'Lessee's Disclosure Statement'. In this document, record promises or commitments that influenced your decision to take the shop. If you leave question 5 blank, it is very hard to later prove you relied on any promises.
 
Think ahead to the end
Check to see if the lease says you must remove the fit-out at the end of the lease. This can cost several thousand dollars. To limit problems at the end of a lease, document the state of the shop by taking photos and make a record of the condition of the shop at the time you take control. 
 
The time to take advice is before you sign anything! 
The Lease Agreement
A retail shop lease
A lease is a legal agreement that gives a tenant control of a shop, to run their business. A retail shop lease can be written or oral or only partly written. If your lease is not fully written, consider how you can prove the oral terms of the agreement. If you have kept good notes, it will help. 
 
A licence agreement for more than six months is often considered a retail lease when it is for the use of a retail shop or for premises in a shopping centre. 
 
Different rules for retail shop leases
A retail lease starts before the lease is signed, if you start to pay rent or take possession of the shop. 
 
If you didn't get a Lessor's Disclosure Statement, you can terminate the lease within the first six months, by giving notice in writing. 
 
A retail lease is to be for at least five years, unless a solicitor or conveyancer explains how the Act works and you give the landlord a Section 16 certificate. Recent changes to the Act mean that a series of short-term leases (once the combined term is longer than 12 months) may give you the right to ask for a five-year retail shop lease. 
 
Lease term
The lease term or lease period is the time you can rent the shop. Make sure this is long enough to recover your investment, make a profit and, if you wish, sell the business. 
 
If you want a five-year lease but are worried about the financial commitment, ask for a shorter period with several options. Make sure you understand how the rent will change for each period. 
 
Permitted use
Permitted use defines how you can use the shop. Before you sign the lease, check with the council to be sure you can run the type of business you want from the shop. 
 
Shopping centres
There are additional things to consider in shopping centres. 
 
You may be required to contribute to the centre's advertising or promotional fund and there are often more outgoings than there are for strip shops. 
 
There may be set trading hours for the shop to be open. 
 
You may have to provide your monthly turnover figures to the landlord. 
 
 
Tenants, who are able to negotiate the right to have exclusive use, may find this to be a valuable part of their lease. Exclusive use means you are the only one that can have a particular type of business. Without exclusive use think about how your business may be affected when a competitor sets up nearby or next door. 
 
Other considerations
Sometimes council works can reduce the number of people coming by your shop. Unless you negotiate with the landlord for compensation or reduced rent up front, if council works occur, you will have no right for compensation. 
 
When you sign the lease (or any document), keep a copy, even if the other party hasn't signed it. If you have trouble getting a copy of the registered or signed lease, contact the Retail Tenancy Unit for assistance. 
 
If you're signing a lease for a shop and residence combined, it is far better to sign two leases, a residential lease and one for the retail shop. If both areas are covered on one lease, handling disputes may be much more difficult and expensive. 
 
Bonds & Guarantees
 
Bonds
A bond is security held by the landlord in case of unpaid money during or at the end of the lease. Security is usually in the form of a cash bond or a bank guarantee. 
 
The landlord has the right to the bond if the premises are not left in the condition required by the lease. A bond is not in place to cover the last month's rent. If you do not pay the rent at any time during the lease, the landlord may have the right to terminate your lease, lock up the shop and its contents, get the bond and sue you for damages. 
 
If you give the landlord a cash bond, they must lodge it with the NSW Retail Bond Scheme. The landlord will give you a copy of the lodgement form to sign. It is important at this point to make sure the tenant named on the form has a bank account in the same name. The named tenant is the owner of the bond. If the named tenant is not a legal entity the return of the bond is difficult. 
 
When the bond is lodged you will receive an advice of lodgement, with the bond number. Keep this available for when you claim a refund. Either the landlord or tenant can lodge a retail bond claim form when the tenancy is over; the form can be downloaded from www.retail.nsw.gov.au (click on "Online Forms" in the sidebar). If both parties sign the form the money will be paid as requested, right away. 
 
If there is a dispute about the bond, the Retail Tenancy Unit holds the bond until the matter is resolved. With the bond dispute resolution process most matters are resolved quickly at no cost. There is a staged approach to dealing with disputes and at every stage the parties can choose to agree to the payment of the bond, or progress to the next stage. 
 
Bank Guarantees
Banks issue bank guarantees, which are another form of security. Usually you deposit the amount of the bank guarantee with the bank and pay a fee to the bank every year. You need to check your bank's policy on guarantees. 
 
If you provide a bank guarantee the landlord can draw it upon demand. Many tenants find it helpful to have an agreement about the guarantee being released within a time period after the tenancy ends. 
 
Cost of Leasing
Lease preparation
When the landlord begins to advertise the premises, they must have a proposed lease to give you. They must pay for their costs of entering the lease. If you ask for changes to the lease after returning the Lessee’s Disclosure Statement, you may have to pay for the editing costs. It is the tenant’s responsibility to pay for the lease registration; stamp duty ended on 1/1/2008. 
 
Fit-out
Tenants generally pay the cost of installing shop fixtures and fittings (known as ‘the fit-out’). Some fit-outs can cost hundred of thousands of dollars, so consider this in your business plan. If a further lease is offered, you may be required by a shopping centre to do a further re-fit of the shop. 
 
At the end of the lease, many tenants must remove the fit-out and return the shop to the condition it was in when the lease began. This is often called a ‘de-fit’. Remember to set aside enough money and several days to de-fit, or ‘make good’ the premises. 
 
Rent
Before signing a lease, calculate the amount of rent you must pay over the full term. Ensure you can meet this obligation. Tenants should realise that all rents paid by tenants are not the same, which may affect a tenant's ability to compete. Anchor tenants and certain chain stores may pay less rent. Each deal stands alone. 
 
Your lease shows how your rent may change during the term. Only the lease or negotiations between the landlord and tenant can alter the rent. The Tribunal does not set or limit the increase of a retail rent. 
 
Keep your rent payments up-to-date. Most leases say that if you do not pay your rent for 14 days, the landlord can terminate your lease, which may result in the loss of your option or your entire business investment. Eviction from a shop can happen extremely quickly. The landlord doesn’t have to be understanding when your business is suffering. 
 
Often with an option, the rent is changed to reflect current market rent. You can request that the new rent be determined before you exercise the option. This is like an obligation-free quote before you decide on a further term. Read the section on ‘Options’ to understand more about this. 
 
With current market rent, the landlord and tenant can agree on this figure themselves, or seek an independent valuation. The cost of the valuation is shared equally – usually between $1,500 and $4,000 each. 
 
Outgoings
Outgoings are expenses that are related to the building the shop is in that you have agreed to pay in the lease. Outgoings can be a major cost. Plan how you will meet these payments and any increases in the costs during the term of the lease. 
 
The landlord must give you estimates and statements of outgoings. If you do not get these, write and ask for them. If in 10 days you do not have the statements, you may withhold the payment of outgoings until you receive them. You need to pay the withheld outgoings within 28 days of receiving the documents. 
 
Key money
Key money means money or any other benefit that you might give the landlord in exchange for them granting you the lease or renewing the lease. The Act prohibits landlords from asking for or accepting key money. There is a heavy penalty if they do. 
 
Security
The landlord may ask you for some form of security when you are negotiating the lease. This can be a cash bond, a bank guarantee or a third-party guarantee. Read the section on ‘Bonds and Guarantees’ to learn more. 
 
Insurance
It is very important that tenants carry insurance to cover the goods or equipment in the shop and coverage for loss of income. Sometimes tenants try to save money by not purchasing this insurance and then find that a completely unforseen event means the loss of their investment, their income and livelihood. It can take time to pay off the substantial debt remaining for the equipment or stock. In these situations, it can take years for the business owner recover from not protecting themselves from risk by having appropriate insurance coverage. 
 
Ups & Downs
Talk to the Retail Tenancy Unit or your solicitor as soon as a problem arises. Deal with problems at the time they occur: if you wait, it may be too late to act. 
 
Pre-lease misrepresentation
If the landlord makes a claim that turns out to be untrue, write to the landlord about this immediately, particularly when the claim influenced you to enter the lease. 
 
Relocation
If the lease has a relocation clause, you must get at least three months’ notice in writing about the move. The landlord will pay the reasonable costs of your relocation which can be agreed or a quantity surveyor can work them out. 
 
If the proposed premises are unacceptable, inform the landlord in writing within a month and the lease will finish at the end of the notice period. 
 
If you sign a lease with this type of clause, factor it into your lease negotiations. Consider how your business will be affected and consider the amount of rent you are willing to pay with these circumstances. 
 
Demolition
If the lease has a demolition clause, the landlord can end the lease if they require the shop to be vacated for the works. The landlord must give at least six months’ notice that the lease will end because of demolition. During the six-month notice period you can end the lease with seven days’ written notice. 
 
Disruptions
If the Landlord or something under their control disturbs your business you may have a right to compensation. If you knew about a particular disturbance in detail before the lease started, your right for compensation may be limited because you had the chance to consider the works in the negotiation for the lease. 
 
When your business is disturbed, immediately write to the landlord and ask that the disturbance end. Your right for compensation probably does not begin until after you have given the landlord written notice of the problem. 
 
Landlords must give you two months’ notice if they want to do works that may interfere with your business, unless it is an emergency. 
 
Repairs and damage
If you don’t know who has responsibility to maintain or repair things, read the lease to see if it is dealt with there. The landlord must do the things they are responsible for as soon as possible after you have given them notice in writing that there is a problem. 
 
If the shop or its building is damaged, immediately inform the landlord in writing. If the damage is significant, your obligation to pay rent may be limited until the damage is repaired. 
 
Ending the lease for breach
Either party may have a right to end the lease if the other party significantly breaches it. Normally, written notice outlining the breach must be given with a reasonable amount of time to make things right. This is not the case if rent is unpaid for more than two weeks. With unpaid rent the shop may be locked and the lease and business may be lost. 
 
If you are locked out, call the Retail Tenancy Unit for information on how you may be able to get back into the shop. Even if you do get back into the shop, this event can negatively affect your business reputation. 
 
Always get legal advice before deciding to end a lease because you think the landlord is in breach. 
 
Improper conduct
Neither the tenant nor the landlord may engage in unconscionable conduct. This is extreme conduct and is more serious than hard bargaining or being unfair. 
 
Neither the landlord nor the tenant can mislead or deceive the other party. This includes lying, leading someone to the wrong conclusion, creating a false impression, hiding information or making false claims. 
 
Any compensation given because of improper conduct will be directly related to the negative affect it has had on a business or damages that come from a breach of the contract. 
 
Leaving the lease before it is over
If your business isn’t going well and you have a lease, you can’t simply give notice and leave. Your options may be: assignment (where someone else takes over your lease); sub-lease (where someone rents the shop from you); and negotiating a deal with the landlord (this usually involves giving the landlord a payment in exchange for letting you out of the lease early). 
 
Disputes
Informal negotiation
Sometimes problems arise in relationships. The first step is always to try and resolve a problem through talking about it and informal negotiations. 
 
When talking to the other side, remember to speak so the other person can listen without becoming defensive. Be open about what your problem is, how it is affecting you and how you think it may be fixed. Be sure to listen to their side. You may be able to find an answer that deals with everyone’s needs and has not previously been considered. 
 
If the problem can’t be resolved by negotiation it may be necessary to take the dispute further, which will cost money. Consider whether minor issues are worth the damage it may cause to your relationship with the landlord. 
 
Courts and Tribunals can only give a narrow range of resolutions. A negotiated agreement can be anything the parties decide. Often the best options are those that are of great benefit to one party yet cost the other party little money. 
 
Mediation
If you want to take the dispute further, the next step is to apply to the Retail Tenancy Unit for mediation. Mediation will generally cost you between $700 and $900. 
 
Mediators are trained to help parties better understand what has happened, consider compromises that may resolve the matter and find comprehensive and lasting agreements. The mediator won’t make a decision for you or provide legal advice. 
 
It is important to get legal advice before the mediation to understand the legal strengths and weaknesses of your case. This will put you in a better bargaining position and help you assess whether an offer to settle the matter is a good one. 
 
It is usually better to make a commercial compromise than it is to spend a lot of money on an unknown outcome. This is why about eighty percent of matters settle at this stage. 
 
Administrative Decisions Tribunal
If your matter can’t be negotiated, you can proceed to the Administrative Decisions Tribunal, which is similar to a court. It is very important to get legal advice before going to the Tribunal.
 
While generally both parties pay their own legal costs, if you make a claim that has little chance of success, you may have to pay the other party’s legal costs. 
 
Preparing for your dispute
Whether your matter is going to informal negotiation, mediation, or the Tribunal, you must prepare your case. In a negotiation or mediation, you need to convince the other side of your position but in the Tribunal you have to convince a tribunal member. You must be prepared to communicate your claim clearly with evidence to support your arguments. 
 
While Retail Advisors can assist you greatly in negotiating a lease, be aware that they can not give you legal advice about a dispute. Solicitors are trained to advise you on an effective legal strategy and how to focus your argument. 
 
When seeking a solicitor, meet with them and ask about their retail leasing experience. Ask how many disputes they have advised on and how these disputes were resolved. Try to get a feel for their familiarity with this jurisdiction and how you relate to them personally. 
 
 
 
Options
 
Exercising the option
An option on a lease is valuable because it lets you decide whether to continue trading, to sell your business during the next term or to end the lease. If you have kept to the terms of the lease (paid rent on time, no significant breaches) then it is your decision to exercise the option. The landlord must let you stay if you follow the rules for exercising an option. 
 
Options are usually exercised in writing. Write to the landlord or managing agent clearly stating that you are exercising your option. It is very important that you remember the date when you must exercise your option on the lease. This is usually between three and six months before your lease ends. 
 
If you miss the date to exercise the option, the landlord does not have to renew your lease. The landlord can give you notice to leave, increase your rent or change the terms of the lease. 
 
To find out more about this, carefully read the ‘Options’ section of your lease and the Further Info PDF document for this chapter. 
 
Find out the rent, before exercising the option
If the rent changes to current market rent, you have the right to find out what this is before you exercise the option. Ask for it in writing in the three months before the period when you are able to exercise your option begins. Once the amount is decided, you have 21 days to exercise the option. 
 
End of Lease
When the lease expires
Do not wait until just before the lease is over to think about what you will do about a new term of lease. You will be in a stronger negotiation position if you have looked at other shops to see if you can move the business if you can’t come to terms for a new lease. When your choices are limited to paying the rent the landlord demands or losing your business, you are at a serious disadvantage – and the landlord has greater power. 
 
When your lease period is over and there isn’t an option for a new lease, the landlord doesn’t have to replace your lease and you don’t have to continue leasing the shop. It’s important to be aware there are no restrictions on how the rent can change once your lease is over. Don’t enter a lease where you can’t afford the rent and make a profit. 
 
Six months before the lease ends, the landlord should write and tell you if they plan to offer you a new lease. If you do not receive this written notice, write and ask for it before the lease ends. Then you will have at least six months left on your lease from when you receive the notice. If this extends your lease past the time it was due to expire, you may terminate the extension with one month’s notice during the extension. 
 
With most leases, at the end of the lease you go onto a month-to-month tenancy; this gives you and the landlord the right to end or change the lease with one month’s notice. 
 
While you are negotiating for a new lease, the landlord must finish dealing with you before advertising the shop for lease. They are allowed to speak to other tenants to gauge interest in the shop. 
 
'Make good' requirements
When leaving the shop, tenants usually have to return the premises to the condition it was in when the lease started. Read the lease to see what is required. Ask the landlord to put their requirements in writing so you know what they expect. Make sure you comply with the make good requirements in the lease before the lease finishes or expect to pay rent until the make good is completed. 
 
The bond is to cover any claim that the landlord has for money owed, which includes the make good requirements in the lease. Do not expect to use the bond for the last month’s rent.