The Retail Lease Act NSW, 1994 (the Act) applies to the leases for retail shops and also for premises in a retail shopping centre. Signing a retail lease agreement is a financial commitment for both the Lessee and the Lessor. So before you sign a lease, make sure you have completely understood and agreed with the clauses in the lease.
Legislations concerning retail leases and property vary from state to state, and our Sydney commercial conveyancers are able to assist with the comprehension of complex state laws.
When looking to enter a tenant/landlord agreement, it’s imperative that the Retail Lease Act NSW is considered before any commitments have been made. Our team of expert commercial property lawyers are able to help from the very beginning to make sure you’ve sought comprehensive legal counsel.
For an overview of the main provisions of the Retail Lease Act 1994 prevailing in New South Wales (NSW), keep reading.
- What is the retail leases act, NSW?
- Disclosure by lessor
- Terms of lease
- Security bonds and security deposits
- Up-front fit out costs
- Market rent reviews
- Assignment of lease
What is the Retail Leases Act, NSW?
In NSW, the Retail Leases Act 1994 is the authority on retail shop leases between the tenant and the landlord. The Retail Lease Act NSW contains the rights and obligations of both parties. Retail shop tenants and landlords must abide by the legislation when entering into leases, and conduct themselves in accordance with the Act during the period of the lease. The Act supersedes the terms of any existing retail shop lease; if it is not consistent with the Act, then the lease is void.
Key takeaways of the Retail Leases Act, NSW are:
Disclosure provided by lessor
Before a Lessor advertises a retail shop for lease, the Lessor must have a:
(a) Copy of the proposed lease; and
(b) Copy of the Retail Tenancy Guide
Available for inspection by the prospective Lessee, a disclosure statement must also be given to the Lessee by the Lessor 7 days prior to the lease agreement. This disclosure statement confers all the essential terms of the lease as well as any representation made by the Lessor or by the Lessor’s agent to the Lessee.
Terms of lease
The Retail Lease Act NSW does not apply to leases for a term of less than 6 months. However, when a Lessee occupies a retail shop for more than 1 year, either by a series of consequential short terms or under the holding over provisions of a 6 month lease, the terms of the Act come into effect.
Security bonds and security deposits
This sum of money is required by a Lessor to secure the performance of the Lessee’s obligations and it is normally about 3 months’ rent, depending on the length of the lease term. However, the Lessor must deposit the security received for retail shop leases, with the Director-General of the Department of State and Regional Development within 20 days of such receipt.
Up-front fit out costs
The Lessor can sometimes ask the Lessee to contribute to the cost of fixtures, finishes, fittings and equipment of the premise. This contribution may be payable as a lump sum amount prior to the commencement date of the lease, or by the way of periodic contributions in addition to the base rent.
However, the maximum amount payable by a Lessee for works conducted by a property owner to enable the Lessee to fit out premises must be agreed in writing between the parties before a lease for the premises is entered into. A Lessor cannot require a Lessee to pay more than the agreed maximum amount.
Outgoings are a charge by a Lessor in addition to the rent. Outgoings are specific to the lease where they apply directly to the premises such as water rates, council rates and land tax.
Market rent reviews
The adjustment of the base rent during the term of lease may be subject to a market rent review. The Act sets out the procedure for determination of market rent under Section 32A. The lessor and lessee may apply to the Tribunal for the appointment of two specialist retail valuers. The valuers will conduct a review and determine the current market rent accordingly.
If the Lessor has proposed to relocate the Lessees during the tenure of lease, the Lessor will have additional obligations to pay the Lessee reasonable fit-out costs and legal costs for relocating premises. A 3 months relocation notice needs to be served to the lessee by the lessor prior to relocation. If you are in dispute over an agreement to relocate, you may need to involve a commercial lawyer to ensure you have sought appropriate legal counsel.
Assignment of lease
The Lessee may wish to assign a lease to another person during the term of the lease with due consent from the Lessor. The time period within which a Lessor must make a decision with regard to the proposed assignment is 28 days.
Lessors must provide details to the Lessees every 6 months regarding the promotions or advertising levy imposed on the Lessees. Lessees are entitled to withhold contribution of payments in respect to advertising or promotion if a statement with the above details is not provided by the Lessors.
For a comprehensive and well drafted lease agreement, the Lessors and the Lessees should familiarise themselves with all the provisions stated above. Our team of experts are adroit in drafting lease agreements. For any assistance, contact us at Owen Hodge Lawyers.
For further information on commercial property leases or if you need counsel from a commercial lease lawyer, please contact the offices of Owen Hodge Lawyers.
At Owen Hodge Lawyers, we are committed to providing exceptional legal support. 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 770 780.