The Retail Leases Act 1994, is the primary legislation which governs retail leasing in NSW. In January 2011 the NSW Government released a draft of the Retail Lease Amendment Bill 2011 in a bid to implement further amendments to the Act. It is highly important that all landlords and tenants of retail premises are aware of the impacts of these potential changes to the current retail leases legislation.
In addition to simplifying various provisions of the current Act, the key amendments proposed are as follows:
Further disclosure requirements – A lessor will be specifically required to give the lessee a lessor’s disclosure statement when the lease is renewed or extended (except where there is no increase in rent.) This statement may have to be provided at least seven days before the option to renew the lease is over. The aim of this amendment is to enable lessees to make a more informed decision on whether to exercise the option to renew.
A lessee that terminates a retail lease due to the lessor failing to provide a disclosure statement, or for providing a materially false or misleading statement, may be able to claim compensation for damage under section 10 of the Act.
Undisclosed outgoings – The tenant will not be required to contribute to outgoings that are not stated in the disclosure statement.
Mandatory registration – Retail shop leases are required to be registered for a variety of reasons; such as the need for registration being stated in the lease, the parties agreeing to the registration, or if the lease is for three years or more. A summary statement will need to be prepared and included. Mandatory registration aims to allow small retailers to better research what comparable shops in the area are paying.
Claiming on bank guarantees – There will be guidelines in relation to the claiming on bank guarantees held by the landlord as security for the tenant.
Land tax – NSW landlords will be prohibited from passing on land tax to the tenant as a recoverable outgoing.
Increased notice period – Currently, a landlord must provide his or her tenant with two month’s notice when there is any alteration or refurbishment that may adversely affect the tenant’s business. The new changes will see this timeframe increased to six months.
Relocation of the tenant – In the event that the landlord invokes the relocation clause, alternative premises which are offered to the tenant must be of reasonable and comparable commercial value to the existing premises leased by the tenant. If the landlord does not offer appropriate premises and the tenant terminates the lease, the tenant is then entitled to claim depreciated fit out costs from the landlord as compensation.
Demolition – The landlord cannot require a tenant to make any repairs or improvements after they have given the tenant a notice of termination on grounds of demolition.
Advertising and promotion contributions – The tenant is entitled to a refund of contributions towards shopping centre advertising and promotion that remains unspent at the end of the lease.
Administrative Decisions Tribunal (ADT) – The monetary limit of the ADT will increase to $750,000 (from $400,000).
How will these changes impact on you?
The proposed amendments clearly offer further protection to lessees, and require greater responsibility and requirements from lessors. If introduced, these proposed changes will primarily impact on landlords of retail premises in NSW, by imposing stricter disclosure and registration requirements, and by limiting costs to which tenants are required to contribute. However, at this stage the proposed changes are still under consideration and have not come into effect. .
Landlords and tenants should be aware of the potential for change in NSW, especially the likelihood of a provision prohibiting landlords from passing land tax on to tenants, which already exists in some other states. It is likely that that these reforms will come into effect in one form or another.
For further information with regards to the potential changes to the NSW retail leases legislation and how this may impact on you as a landlord, contact our experienced team of lawyers and accountants here at The Quinn Group. You can submit an online enquiry or visit our dedicated website All Lease Solutions, alternatively call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.