What are the changes to the Retail Leases Act 1994?

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Changes to the Retail Leases Act 1994 (the Act), which came into effect on 1 July 2017, are relevant to everyone involved in retail leasing.

The amendments to the Act have been designed to:

  • increase transparency and certainty about the lease deal during negotiation. It ensures that landlords must disclose all costs in some detail before the tenant is bound to the lease;
  • introduce or improve fair protections including returning bank guarantees, registration of leases and returning copies of the lease; and
  • increase operational efficiency by simplifying the process for transferring a retail lease and clarifying existing provisions.

More information

Most of the changes to the Act apply to leases entered into after 1 July 2017.

Leases

A lease can be for any length of time. The minimum five-year term has been removed.

Leases longer than three years must be registered by the landlord within three months after the tenant has returned the signed lease. Failure to lodge the lease may incur penalties.

The landlord must give the tenant a copy of the signed lease within three months of receiving it from the tenant.

The Amendments make it clear that the Act applies to an agreement for lease.

Outgoings

The landlord, in the lessor’s disclosure statement, must fully disclose all outgoings to the tenant to be able to recover them.

If cost estimates are included in the statement and the actual amount is greater, the tenant has to pay only the estimated amount unless the landlord can show there was a reasonable basis for the lower amount. For future years, the costs can increase in accordance with market rates.

Bank guarantees

The landlord must return a bank guarantee to the tenant within two months of the end of the lease unless the tenant owes money to the landlord or has not met other obligations in the lease.

Online sales

Revenue from a tenant’s online sales is private unless the goods or services are provided from or in the shop or ordered from the shop.

Mortgage consent fees

The landlord cannot charge a tenant mortgage consent fees.

Disputes

The NSW Civil and Administrative Appeals Tribunal (NCAT) can now hear retail lease disputes involving claims of up to $750,000.

Demolition

The landlord can only terminate a lease if the proposed demolition can only be done with vacant possession of the premises leased by the tenant. This applies whether all or part of the building is being demolished.

Other

If a tenant assigns his or her lease to another person and the landlord doesn’t provide the new tenant with an updated disclosure statement, the assigning tenant must prepare an updated disclosure statement.

Specialist retail valuers, who carry out market rent reviews, are appointed by the NSW Small Business Commissioner from 1 July 2017 instead of by NCAT.

Documents and information the landlord must provide to the tenant

More clarity is provided in relation to the lessor’s disclosure statement which must be provided within seven days before the lease comes into effect. From 1 July 2017 the disclosure must be specific and meaningful or the outgoings cannot be recovered by the landlord.

Regulations are underway to require that before the lease is signed, the landlord must give the tenant a copy of the NSW retail tenant’s guide.

The disclosure statement can be amended by written agreement before and after the lease is entered into.

This is a summary of key changes to the Act. It does not attempt to replace professional, legal or business advice or try to explain every aspect of the amended Act.

For more information or advice contact the NSW Small Business Commissioner on we.assist@smallbusiness.nsw.gov.au or phone 1300 795 534.

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