WHAT'S HAPPENED?

The Retail Leases Amendment (Review) Act 2017 commenced on 1 July 2017.  It provides for significant changes to the Retail Leases Act 1994 (NSW) (the Act). In this article, Elizabeth McDonald of our property and planning team considers the recent changes to the Act and the impact on landlords and tenants.

WHAT ARE THE KEY CHANGES?

Minimum Term

Removal of the requirement for a minimum 5 year lease term.

Excluded leases

Excludes, from the scope of the Act, leases of premises used for certain non-retail purposes including ATMs, vending machines, public telephones, children’s rides, self-storage units and storage lockers.

Landlord’s disclosure statement

  • If the tenant terminates a lease in the first 6 months because the landlord failed to give a (or gave a misleading) disclosure statement, the tenant is entitled to compensation from the landlord for costs reasonably incurred by the tenant in entering the lease, including expenditure on fit-out.
  • A tenant is not required to pay outgoings unless that liability was disclosed in the landlord’s disclosure statement.
  • If the landlord’s disclosure statement provides an estimate of any outgoing and the estimate is lower than the actual amount, then, if there was no reasonable basis for the estimate, the tenant is only obliged to pay the lower estimated amount and, in respect of increases, the outgoing will be reduced in the same proportion.

Turnover

  • Tenant cannot be required to provide turnover information to the landlord on online sales unless the goods or services are delivered or provided from or at the premises or the transaction takes place while the customer is at the premises.
  • Turnover rent must exclude online sales revenue, except where the goods or services are delivered or provided from or at the premises or the transaction takes place while the customer is at the premises.

Demolition

The demolition provisions apply even if only part of the building of which the premises forms part will be demolished. The landlord may only terminate where the demolition cannot be carried out without vacant possession of the premises.

Lease execution and registration

  • The landlord must provide a copy of the signed lease to the tenant within three months of receiving the lease signed by the tenant.
  • If the lease term is for more than 3 years, the landlord must lodge the lease for registration within 3 months after the lease is returned to the landlord.

Mortgagee’s consent

The landlord cannot recover from the tenant expenses incurred in obtaining mortgagee’s consent to lease.

Return of bank guarantee

The landlord is required to return a bank guarantee to the tenant within 2 months after the tenant completes all obligations secured by the bank guarantee.

WHAT DOES THIS MEAN FOR LANDLORDS AND TENANTS?

  • Removes the existing requirement for a minimum 5 year term for retail shop leases. This is likely to be welcomed by landlords and tenants as it will save time and money for both parties.
  • Reinforces the need for a landlord to be accurate when disclosing and estimating outgoings in the disclosure statement.
  • Enhances tenant protection in respect of landlord’s disclosure statement, liability for outgoings and return of bank guarantee.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.