Is it Necessary to Register a Commercial Lease?

lease

Whether you’re currently entering or have entered into a Commercial Lease, you may have considered registering the agreement with the title office of your state or territory. A commercial lease agreement can be executed and enforced without registration. As a result, a common question that exists is – why should a commercial lease be registered?

In this article, we’ll explain what a commercial lease is, what registration of a commercial lease is, when registration of a commercial lease isn’t required and why it’s necessary to register a commercial lease.

Read along!

Table of Contents

What is a Commercial Lease?

A commercial lease is a document that sets out the proprietary rights that a landlord and a tenant have agreed to concerning the lease of a commercial property. Commercial leases are available in the following forms:

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What is the registration of a commercial lease?

The registration of the lease refers to the procedure of documenting a tenant’s interest in the lease on the land title. After the registration and payment of the registration fee are completed, the tenant’s name and usage rights are documented on the property’s title. 

The state or territory in which you live determines where you need to register your commercial lease. For example, the registration of a commercial lease in Canberra is through the Australian Capital Territory’s Access Canberra, whereas to register a commercial lease in NSW, you will need to register through the NSW Land Registry Services.

When don’t you need to register a commercial lease?

You don’t need to register your commercial lease if it’s being executed for the short term, as the lease will be protected by legislation. However, if the duration of your commercial lease extends beyond this period, you’ll be required to register the lease with the relevant titles office. The short-term duration differs between each Australian state and territory. 

In NSW, another essential consideration that will determine whether you need to register your commercial lease is whether your business is covered by the Retail Lease Act 1994

To determine whether your business is covered, refer to Section 5 of the Retail Lease Act,  which outlines the businesses that are not covered. If your small business is covered by this Act and extends beyond the short-term lease duration, you will need to register your commercial lease. 

What is the duration of a Short-Term Lease?

The title offices and the duration of short-term leases of Australian states and territories consist of the following:

State  Title Office  Short-Term Lease Duration
New South Wales(NSW) Land and Property Information Less than three years
Australian Capital Territory(ACT) Access Canberra Less than three years
Queensland(Qld) Department of Natural Resources and Mines Less than three years
South Australia(SA) Land Titles Office Less than one year
Tasmania(Tas) Land Titles Office Less than three years
Northern Territory(NT) Land Titles Office Less than three years
Western Australia(WA) Landgate Less than five years

Is it necessary to register a Commercial Lease?: What are the benefits? 

Although there is no strict legal requirement for every commercial lease to be registered, a registered lease is crucial for several reasons. Firstly, registering a lease is necessary to protect a tenant’s interest in the commercial premises. The registration of the lease is beneficial as it  grants the tenant with absolute ownership of the property under the terms of the lease and legislation. 

There are four primary situations where it’s crucial for a tenant’s interest to be secured. These include the following: 

  1. If the landlord chooses to sell the commercial premise, an unregistered lease wouldn’t actively require the new landlord to honour the lease agreement
  2. If the landlord declares bankruptcy, the registered agreement between the landlord and creditors will be prioritised over the unregistered lease. As a result, a bank may repossess the property without honouring the commercial lease
  3. If the mortgagee wants to take possession of the property and sell it
  4. In situations where another entity claims an interest in the property

Under these circumstances, the tenant’s business operations could be negatively impacted.

Another primary benefit of registering a commercial lease is that it results in the creation of a formal record for all lease agreements affecting a specific property. This is particularly useful for landlords of commercial areas in which multiple leases have been issued for various locations within a single property. Examples of these types of properties include ‘strip shops’ and shopping centres. 

The registration of a lease also provides a landlord with benefits in the following circumstances:

  • When the landlord has intentions of selling the property
  • When the landlord wants to refinance or acquire a loan 
  • When the landlord plans to use the property as security 

Conclusion

There are many benefits to registering a commercial lease, and you may be legally required to do so.

If you’re still feeling unsure about whether you should register your commercial lease you should hire a lawyer for legal advice. A lawyer can also assist you with the registration procedure and advise you regarding your legal rights and obligations. 

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