Entering into a commercial lease for a hospitality venture in Western Australia comes with various legal and regulatory obligations, particularly where a liquor licence is part of the sale of a business, or new licence will need to be obtained in order to open your venue.

Understand Your Lease

A commercial lease is a legally binding contract outlining the rights and responsibilities of both the landlord and tenant. When leasing a hospitality venue, key terms to consider include:

Under the Liquor Licensing Act 1988, a licensed premises must have a lease agreement that grants exclusive possession to the licensee. This means that the licensee must have full control over the premises and that the landlord, or any other party cannot interfere with the operation of the business.

In some instances, a lease may give the licensee the right to use an area which is not part of their leased area e.g. licensed seating area.  In such cases, an Extended Trading Permit over the additional area would need to be obtained from the Licensing Authority.

Transfer of an Existing Liquor Licence

When  a licensee wishes to sell the business (operated under the licence) to another entity, then the applicant who wishes to purchase, or be assigned the rights to the business (including the rights to operate under the licence) must apply to the Licensing Authority to take over the business. This is done by lodging a Transfer of Licence application.

It is important to note that settlement cannot take place until the Licensing Authority have granted approval of the Transfer application.

Until approval of the Transfer of the Liquor Licence has been obtained, the existing licensee must not vacate the premises, and the applicant must not sell or supply liquor at the premises.

Contract for Sale or Assignment of Liquor Licence

A contract, or an Assignment of Liquor Licence must be provided that will give the rights of the licensee to the applicant to continue business under the licence (section 84(1)(a)).

The contract must be made between the applicant and the current licensee for it to be considered valid.

The contract must be subject to a condition precedent requiring the prior approval of the Licensing Authority before settlement can occur.

Key Considerations When Entering a Lease Agreement

1. Exclusive Possession Clause

The lease should explicitly state that the tenant (licensee) has exclusive possession of the premises.  The landlord cannot retain rights that allow interference in the running of the business.

2. Permitted Use

• Make sure your proposed business model aligns with the existing class of licence. As each class of licence has specific conditions (e.g. restaurant licence, tavern licence, small bar licence, special facility licence) have specific conditions.
• Check that the local zoning and planning regulations allow you to operate the intended class of liquor licence that you plan to operate at the site.
• The lease should specify that landlord consents to the premises operating as a licensed premises, as per the intended class of licence.
• Check that the lease does not restrict planned liquor-related activities: Some landlords impose conditions that limit alcohol service hours or activities on the premises.

3. Liquor Licence Contingency

• Include a clause that makes the lease contingent upon obtaining liquor licence approval. Without approval, you should have the option to terminate the lease without penalty.

4. Lease Term and Renewal Options

• The lease term should be negotiated to commence upon approval of the transfer or grant of the liquor licence.
• Renewal options should be included to provide business stability.

5. Rent & Outgoings

• Understand how rent is calculated and adjusted over time (e.g. turnover/percentage rent agreements, CPI, fixed percentage increase, or market rent reviews).

NB:  If Turnover Rent /Percentage Rent is part of the lease agreement, approval of a profit-sharing arrangement will need to be obtained from the Director of Liquor Licensing.

• Confirm what will be the outgoings that you will be responsible for (e.g.utilities, taxes, maintenance).

6. Fit-Out and Structural Modifications

• Identify who is responsible for fit-out costs, including any planned modifications and the cost of liquor licensing approvals relating to compliance and/or changes to the licensed area.

1. • Ensure the lease allows necessary renovations to meet liquor licensing requirements.

7. Subletting and Assignment Restrictions

• The lease should specify whether you are allowed to sublet or assign the lease to another operator.
• Landlord consent should not be unreasonably withheld if you need to sell your business.

8. Dispute Resolution and Early Termination Clause

• Understand how disputes between landlord and tenant will be handled.
• Checking the lease for an early termination clause, including a redevelopment clause that a landlord may insist on. Terminating the lease before a tenant is ready can be costly to their business and interrupt their operations.

By following these key steps, liquor licence applicants can secure a lease agreement that supports both legal compliance and long-term operational success.  For liquor licensing advise, contact the team at Fraser & Associates Lawyers.