Retail Leases

From 1st July 2017, there have been some significant changes to the Retail Leases Act in place.

You can find a brief summary of the significant changes below:

  • No minimum term
    – The 5 year minimum has been removed.
    – This provides flexibility in determining the length of retail leases.
    – This also reduces the red tape for Landlords and Tenants.
    – Section 16 (3) Certificate (Solicitor Certificate for Retail Leases of less than 5 years) has been removed.
  • Disclosure of outgoings
    The Tenant is no longer liable for outgoings which are not fully disclosed in the Lessor’s Disclosure Statement.

    If the estimate in the Lessor’s Disclosure Statement is less than the actual amount then the Tenant is only required to pay the estimated amount.

    Close attention should be paid to the Lessor’s Disclosure Statement.
  • Mandatory Registration
    Registration of Retail Leases of 3 years or more is now mandatory.

    The Retail Lease must be registered within 3 months after Retail Lease signed by Tenant is returned to the Landlord.

    This 3 month period can be extended due to mortgagee delay.

    If the Retail Lease is not registered and the mortgagee takes possession of the property and did not consent to the Retail Lease, then the mortgagee does not have to recognise the Retail Lease. The Tenant is such as instance would be unprotected.

    Registration is for the Tenant’s protection.
  • Return of Tenant’s Bank Guarantee
    Following termination of the Retail Lease, the Tenants Bank Guarantee is to be returned within 2 months after the Tenant has complied with all obligations under the Retail Lease.
  • No Mortgagee consent fees
    It is now expressly stated that a Landlord cannot charge Mortgagee consent fees.
  • Copy of Retail Lease
    The Tenant is to be provided with a copy of the Retail Lease within 3 months after it is returned to the Landlord.
  • Failure to provide Disclosure Statement
    If the Landlord fails to serve the Disclosure Statement within 7 days before the Retail Lease is entered into or if the Disclosure Statement is materially false, misleading or incomplete, then in addition to the Tenant being able to terminate the Retail Lease within the first 6 months, they also have a right to claim compensation including in connection with the fit out of the retail shop.
  • Lessors Disclosure Statement can be amended by Agreement or by NCAT
    The Lessor’s Disclosure Statement can be amended both before and after the Retail Lease is entered into by agreement or by NCAT.
  • New Schedule 1A
    This new schedule to the Retail Leases Act specifically excludes certain usages. These uses are not Retail uses under the Retail Leases Act:

    – ATMs
    – Vending Machines
    – Public Telephones
    – Children’s Rides
    – Signage Display
    – Internet Booths
    – Private Post-Boxes
    – Storage of goods for use in retail shops
    – Car Parking
    – Communication Towers
    – Digital Display Screens
    – Public Tables and Seating
    – Self-Storage Units and Storage Lockers
  • Act does apply to Agreement for Lease
    Accordingly, a Lessor’s Disclosure Statement needs to be served 7 days before Agreement to Retail Lease issued.
  • The Retail Leases Permanent Retail Markets
    Act now applies to permanent retail markets. Provided such a store also satisfies the definition of a retail shop.
  • Applies to proposed Lessees and Lessors
    A Landlord cannot charge legal fees under Heads of Agreement for a Retail Lease if the Tenant does not proceed.
  • Specialist Retail Valuers
    This process run by Office of the NSW Small Business Commissioner and not NCAT.
  • Retail Lease Assignment
    Streamline the process – easier and clearer process for assignment of Retail Leases.
  • Online Sales
    Are excluded from turnover data.

    Turnover data must be in relation to the “bricks and mortar” shop only.
  • NCAT
    Financial jurisdiction increased from $400,000.00 to $750,000.00.

    NCAT may amend Retail Lease or Disclosure Statement.

    NCAT may make order for compensation.
  • Demolition
    Demolition of a building and also a part of the building now included.
  • Rental Bond
    Online rental bond scheme to apply.

According to the Office of NSW Small Business Commissioner such changes were adopted to:

  • Better level the playing field between Landlords and Tenants.
  • Improve the sharing of information between Landlords and Tenants for example in relation to rent increases, assignment and demolition.
  • Refresh and update the legislation to coincide with the rapid change the Retail Industry has faced.

For more information please contact our Office