The Retail Leases Amendment (Review) Bill 2016 (‘the Bill’) received royal assent on 1 March 2017. The Act will commence “on a day or days to be appointed by proclamation” or in other words when notified to that effect in the Government Gazette published online at http://www.legislation.nsw.gov.au/#/gazettes. On commencement the Bill will give effect to a number of significant changes to the Retail Leases Act 1994 (‘the Act’).
Some of the key amendments proposed include:
- No Minimum Term – Perhaps one of the most notable changes under the Bill is the fact that the requirement for a 5 year minimum term will be removed.
- A section 16(3) certificate from a lawyer will no longer be required to enter a lease for less than five years.
- Full Disclosure – Lessors must now disclose any obligation of the Lessee to contribute to outgoings. This is significant as the amendments clarify that Lessors will not be able to recover any undisclosed outgoings.
- Outgoings – The definition of outgoings under the Act has been extended to include fees charged by a Lessor for services provided by the Lessor.
- Furthermore, if the actual amount of outgoings exceeds the estimates given and that estimate was given without a reasonable basis, the lessee’s liability will be limited to that estimate. Extra care must be taken by Lessors when estimating outgoings.
- Lessee’s Right to Compensation – A Lessee who terminates a retail shop lease within the first 6 months due to the Lessor’s failure to provide an adequate or complete Disclosure Statement will be entitled to claim compensation from the Lessor.
- The extra rights provided to Lessees reinforces the need for Lessors to meticulously prepare their Disclosure Statements.
- Bank Guarantee – A Lessor will be required to return any bank guarantee to the Lessee within 2 months of all obligations secured by the bank guarantee being performed.
- This measure is to encourage a speedy determination of end of lease matters and prevent Lessors from holding on to bank guarantees for unreasonable periods.
- Lessees will be pleased with this change as they will receive their funds quicker, reducing the costs of a continuing facility and allowing them to allocate this money elsewhere.
- Lessors on the other hand may be left frustrated by the timeline given that in some circumstances disputes may arise regarding make good obligations.
- Provision of executed Lease to Lessee – A Lessor must now provide a Lessee with an executed copy of the lease within 3 months (previously 1 month) of the executed lease being returned to the Lessor or the Lessor’s lawyer/agent.
- Lease Registration – Where a retail shop lease is for a term of more than 3 years (or is required by the terms of the lease to be registered), it must be registered within 3 months after the lease is executed.
- Mortgagee Consent Fees – A landlord may not recover costs in relation to obtaining mortgagee consent.
- Agreements to Lease – The Act will apply to agreements to lease in the same way it applies to a retail lease.
- Furthermore, a separate Lessor’s disclosure statement will not be required or permitted when a lease is entered into pursuant to an agreement to lease.
- Demolition Provisions – Clarifying Lessee protections in relation to termination on the grounds of a proposed demolition of the building of which a retail shop forms part. Termination pursuant to a proposed demolition is only permissible where the demolition requires vacant possession of the shop.
- Turnover rent – Where rent is determined by reference to turnover, turnover does not include turnover from online transactions (with limited exceptions).
- Civil and Administrative Tribunal (CAT) Jurisdiction– Increased monetary limit for CAT from $400,000 to $750,000 for claims arising under the Act.
Outlined above are just some of the key provisions due to be effected by the Bill which will impact both Lessors and Lessees of retail premises in NSW. As such, it is important that Lessors and Lessees of existing or proposed retail shop leases are aware of the incoming amendments proposed as non-compliance will give rise to significant consequences and/or penalties.
Whether you are a Lessor or a Lessee of retail premises, it is crucial that the proposed amendments and updated material required are incorporated in your commercial dealings when they are released. In light of the many changes and the serious potential consequences of non-compliance, it is imperative you have your retail lease arrangements reviewed by lawyers who are experts in this field.
For further information regarding these amendments or any retail leasing enquiries in general, please contact James Hatzopoulos at Rostron Carlyle Lawyers on (02) 9307 8900 or by email to firstname.lastname@example.org.