Australian Convenience Store News

By Tom Williams, Solicitor

We are often told that we need to get more income from our businesses. One way of doing this is to sub-let areas of our premises for other activities to third parties.

On a service station site this could mean a workshop, a mobile phone, or tyre and muffler shop, spare parts, various food counters, kiosk caravans, ute rentals, used or car agency rentals, a Doner Kebab van or a car wash.

Clearly, an operator should be very careful. There are three levels of Government - Local, State and Commonwealth and a multitude of Courts and Tribunals which may create difficulties for doing business.

Written Agreement
Most sub-leasings occur on a handshake. This can lead to problems when the relationship sours, the rent is not paid or a customer of the sub-tenant complains to you. Many problems can be avoided if there is some form of written agreement which, in simple terms shows what space has been leased, the term of the lease, the rent paid, the permitted uses of the site and who is responsible for what.

Be Practical
A lawyer will tell you that every aspect of a sub-leasing arrangement should be in writing. This is often hard to do. Whilst negotiating, the parties should discuss how they are going to enter into the leasing arrangement. For example - what is required for the tenant to move in, signage, any fit out, access? How is the arrangement to work in practice? What rent is payable? When it is payable? Are there other amounts of money for the tenant to pay, such as outgoings, land tax, insurances, electricity; telephone? The Goods and Services Tax is also a consideration.

Normally, the biggest disputes between a landlord and tenant, after rent, are usually simple things such as garbage collection, electricity and joint use of facilities such as a compressor.

People should also bear in mind what happens at the end of the sub-lease. For example, the removal of plant, repair of damage, customer complaints, telephone numbers and the return of any security bond or bank guarantee.

Landlord/Oil Company
If there are third parties involved, any tenancy agreement should consider the rights of any property owner or oil company. Here is a sample of some things to consider: Are you allowed to sub-let?

With the introduction of Turnover Rents, etc, is the Landlord/Oil Company entitled to any income from the sub-leasing or other business conducted there?

Tenancy Legislation
All States have Rental Tenancy Legislation which governs minimum terms ñ often five years, rent reviews, options, outgoings and Disclosure. It is important to remember than an oral or an implied agreement to lease, or a licence, is regarded as a lease under the Legislation.

Keep it Separate
Make sure that you and your tenant operate separate businesses and that this is stated somewhere. The customers, authorities, landlord and employees should also know about it. In one case recently, I attended an Unfair Dismissal hearing for a Lessor who did not even employ the dismissed employee.

It is not beyond the realm of possibilities that unsatisfied customers of the tenant look to you for recompense for such things as faulty workmanship or even hamburgers that have given them diarrhoea.

Authorities have been known to look at the occupier or head-lessor as responsible for the tenant who does not have the appropriate licences in place, for example Authorised Inspection Station, Authorised Examiner.

All States have a Licence and Inquiry Service, and these should be checked as it seems nowadays that there is a licence to do just about everything.

Insurance
Make sure that whatever the tenant does, doesnít affect your insurances and you should consult with your insurance company and/or broker to ascertain if there is any problem. Your tenant should have certain insurance cover, which should be spelt out in the agreement.

It is always prudent for your tenant to have the following insurances:

More importantly, The Landlordís insurances should be compatible and not offend the tenantsí insurances and there should be discussion between the parties as to what coverage is needed.

Local Government
Local Government can be a headache.

Certain councils now require a Development Application and/or Building Application for seemingly trivial purposes. The rule is to check with your Local Council.

Even if similar businesses operate from the same premises, you should still check. The premises may be subject to restrictions on hours of operation, the number of employees, noise, fire, safety and parking.

If planning approval is required, the application could take a number of weeks to process. Delays can be avoided by supplying correct information.

Planning approval may be required even when no building works are involved. Where building alterations are proposed, more time should be allowed to obtain the necessary permit.

Similarly, approvals may be required from the Councils Health Departments, for example where food is prepared. If Town Planning approval is required the owner of the premises must sign the application.

Council Checklist
Generally, check with Council as the Council can give you the details for:

For ancillary business, you may need to give Council details of:

These are only a sample. Some of the rules could affect your setting up an ancillary business on your site.

Perhaps if some of the red tape could be cut out and if the government instrumentalities and agencies were better co-ordinated, people would have a more certain environment in which to do business.