written by Leigh Adams 

On 21 February 2017, the Retail Leases Amendment (Review) Bill 2016 (NSW) was passed by both houses. While it is awaiting Assent, let us look at how the newly added amendments will affect retail leasing in NSW under the Retail Leases Act (NSW) 1994 (‘Act’).

New exclusions and inclusions

Under a new Schedule 1A,  a landlord will no longer be required to issue a disclosure statement in relation to a lease for uses of storage, ATMs, digital display screens, storage lockers and vending machines.

On the other hand, agreements to lease retail premises will now be subject to the Act, which means that a disclosure statement must be issued with agreements to lease.

Disclosure statements

It will now be even more important to issue a correct, complete disclosure statement at least 7 days before a lease is entered  into.   

A  tenant is currently able to terminate the lease within the first 6 months of the term if (i)  the landlord does not give the tenant a disclosure statement at least 7 days before the lease is entered into or  if (ii) the disclosure statement is false or misleading. Under these new changes,  the tenant now has an additional entitlement under section 2A to recover compensation from the landlord for the costs the tenant reasonably incurs  in entering into the lease, including fit out costs.

The new provisions provide more flexibility than before  in that parties can now amend the disclosure statement by agreement, even after the lease has started. The amendments will simply take effect from the date specified in that agreement. Furthermore, the Tribunal will now be able to order the rectification of a disclosure statement.

Note that the form of the disclosure statement will also be updated.

Outgoings

Landlords will need to be meticulous in disclosing outgoings in a disclosure statement in order to be able to recover them. The requirements have become more stringent under section 12A, which provides that a landlord is not able to recover any amount in respect of outgoings unless the liability to pay that amount was disclosed in the disclosure statement.

The good news for landlords is that the definition of ‘outgoings’ has been amended to include a direct reference to management fees, making it more difficult to a tenant to contend that management fees are not part of outgoings.

Removal of the minimum 5 year term

The requirement for a 5 year minimum term for retail leases will be removed. This means that a landlord will not need to obtain a section 16 certificate if the lease term is  less than 5 years.

Mortgagee consent fees

Landlords can no longer require the tenant to pay the costs of obtaining the mortgagee’s consent to the grant of the lease.

New landlord obligations

Landlords must:

  1. Provide the tenant with an executed copy of the lease within 3 months after receiving the lease signed by the tenant .
  2. Register a lease of more than three years within 3 months after receiving the lease signed by the tenant .
  3. Return a bank guarantee to the tenant within 2 months after the tenant has performed all obligations secured by the bank guarantee or risk being liable to pay the tenant compensation for loss or damage and costs incurred by the tenant in connection with the landlord’s failure to return the bank guarantee (s 16BA(5)).

Demolition

The landlord’s ability to terminate a lease using a demolition notice will be further restricted so that it is only permissible if the proposed demolition cannot be carried out practicably without vacant possession of the shop (s 35(1)(a1)).

Turnover rent

Various types of revenue are excluded from a calculation of turnover rent. This is  being expanded so that revenue  from on-line transactions will not form part of the revenue on which turnover rent will be assessed unless the goods or services that are being purchased on-line  and are either being delivered or provided by the relevant store.

Also, a landlord cannot require a tenant to provide to the landlord with information in relation to online transactions – s 47(1).

Way forward

Call us if you want to ensure that your retail lease is up to the mark. Fines and penalties apply for breach!.

In the event that you find yourself in need of such assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 780 770.