In short
Calling a document a “commercial lease” doesn’t decide whether NSW retail-leasing law applies. The business use, location, size, term and any statutory exclusion determine the answer.
The classification affects what must be disclosed before signing, which costs can be recovered, how some rent clauses operate and which dispute process applies. Work it out before the deal becomes binding.
Why does the classification matter?
A lease remains a substantial commercial commitment whether or not it is retail. A retail shop lease also sits within the statutory framework created by the Retail Leases Act 1994 (NSW) .
For a tenant, getting the classification wrong can mean signing without information the landlord was required to provide or agreeing to costs that the Act restricts. For a landlord, it can mean using the wrong disclosure process or relying on a term that cannot operate as drafted. A lease cannot contract out of mandatory protections in the Act.
Does your business use bring the premises within the Act?
Start with the business that will actually operate from the premises. Schedule 1 to the Retail Leases Regulation 2022 lists the businesses treated as retail for this purpose. If the premises are used wholly or predominantly for one of them, the lease may be a retail shop lease even outside a conventional shopping centre.
The permitted-use clause is relevant, but the real proposed operation and surrounding facts also matter. For example, a document headed “commercial lease” can still be regulated if the premises will predominantly operate as a listed retail business. The label records what the parties called the deal; it doesn’t replace the statutory test.
Is the premises part of a retail shopping centre?
A business that isn’t individually listed can still be covered if it operates from a retail shopping centre. The definition generally looks for at least five premises used for listed retail businesses. It also considers whether the premises are under related ownership, are in the same or adjoining buildings and are promoted or understood as one shopping centre.
This can include more than a large, enclosed mall. The same type of business might fall outside the Act in a standalone industrial building but fall within it when its premises form part of a qualifying retail shopping centre.
Could an exclusion change the answer?
Yes. The Act excludes premises with a lettable area of 1,000 square metres or more and leases for a term of 25 years or more, counting any extension or renewal available at the tenant’s
option. A lease for less than six months with no extension right is generally excluded, although the Act can begin to apply after uninterrupted possession exceeds one year. Other exclusions cover particular uses and arrangements identified by the legislation.
The Act can also apply before the final lease is signed, including where the parties have entered an agreement for lease. An oral or informal arrangement isn’t automatically outside the Act just because there is no conventional signed lease.
What changes if the lease is retail?
The most visible difference before signing is disclosure.
A landlord must generally give the proposed tenant a compliant lessor’s disclosure statement at least seven days before the retail lease is entered into. It records the premises, term, rent, reviews, outgoings, works and other financial obligations. The tenant must then give its disclosure statement within seven days after receiving the landlord’s statement, or within a longer period the parties agree.
If the landlord or agent made a representation about access, nearby development, fit-out contributions, exclusivity or future works, the disclosure process gives the parties a place to record it. Missing, incomplete or materially false or misleading disclosure can have statutory consequences, but it does not automatically produce the same remedy in every case.
Retail status also affects outgoings, lease-preparation costs, key money, some rent adjustments, assignment and the forum for retail tenancy disputes. It doesn’t make the commercial bargain favourable by itself. Rent, incentives, repairs, security, permitted use and make-good obligations still need negotiation.
What should a tenant decide before signing?
First confirm that the intended business can lawfully and practically operate from the premises. Retail classification doesn’t replace council, planning, strata or licensing enquiries.
Then decide whether the total occupancy cost and restrictions work for the business. Disclosure may reveal significant outgoings or planned disruption, but you still need to decide whether the rent, term and operational limits are sustainable.
Our commercial and retail leasing service for tenants can assist with that review. If the lease forms part of a business purchase, coordinate it with the broader business acquisition review.
What should a landlord decide before issuing documents?
Classify the arrangement before selecting the lease and disclosure documents. If the Act applies, manage the transaction on that basis from the start.
The permitted use, recoverable outgoings, rent reviews, security and works should reflect the actual agreement. Our commercial and retail leasing service for landlords can help structure the process. If a dispute already exists, landlord and tenant dispute advice may be the more relevant pathway.
What should you do next?
Before finalising the lease, establish which legal framework governs it. The answer changes the documents you should receive, some costs the landlord can recover and the rights available if something later goes wrong.
For advice on classifying or negotiating a lease, contact Biz Lawyers & Advisory or call 1800 893 836.
This article provides general information, not legal advice. Classification depends on the premises, use, documents and circumstances.
Primary sources
Law and guidance checked 13 August 2026.
