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Jun24

Changes to Retail Leases Act

Amanda Quin - Monday, August 07, 2017

 

On 1 July 2017 a number of changes to the Retail Leases Act (NSW) (“the Act”)commenced including:

Removal of 5 year term

Section 16 of the Act was removed. As a result there is no longer a minimum term for a Retail Lease and no requirement for a solicitor’s certificate to be executed for short term leases.

Lease registration

  • The Landlord must supply the Tenant with a copy of the fully signed lease within three (3) months of the tenant returning the signed lease to the Landlord.
  • In addition, where the term of a lease is three years or more then the lease must be registered within 3 months of the Tenant returning the signed lease to the Landlord. This period may however be extended where any mortgagee delays in consenting to the lease.
  • The Landlord cannot require the Tenant to pay any mortgagee consent fees.
  • The maximum fine that may be imposed is 50 penalty units (which is currently $5,500).

Disclosure Statements

  • If the estimated amount of an outgoing is not disclosed in a Lessor’s disclosure statement, then the Tenant does not need to pay the outgoing.
  • Where the estimate for any outgoings is less than the cost of the actual outgoing – then unless there was a reasonable basis for the estimate, then tenant does not need to pay more than what was estimated.
  • If a Landlord fails to provide a Tenant with a disclosure statement (which is to be supplied at least 7 days before the lease is entered into) or has served a defective disclosure statement (ie an incomplete or misleading disclosure statement), then the Tenant may terminate the lease during its first 6 months.
  • If the Tenant does exercise its right to terminate the lease then the Tenant will be entitled to claim compensation for costs such as their expenditure on fitout. (Although the Tenant cannot terminate the lease under this section in relation to a defective disclosure statement if the Landlord had acted honestly and reasonably when issuing the disclosure statement and if the Tenant is in substantially as a good a position as they otherwise would have been if the disclosure statement had been correct).
  • Lessor disclosure statements are now required for Agreements for Lease.

Bonds and Bank Guarantees

Bank Guarantees must be returned to the Tenant within two months after the Tenant has performed all of its obligations under the lease.

Whilst it has not yet started, there is now provision for the Retail Tenancy Unit to move to an on-line bond lodgment system.

Assignment Process

When a Tenant is seeking consent to assign its lease to an assignee, then the Tenant may ask the Landlord for an updated lessor’s disclosure statement.

If the Landlord fails to provide the Tenant with an updated lessor’s disclosure statement within 14 days of it being requested to do so, then the Tenant may prepare its own updated lessor’s disclosure statement for service on the assignee.

If the Tenant then serves an assignor’s disclosure statement and the updated lessor’s disclosure statement on the assignee and the Landlord AND if the Landlord consents to an assignment of the lease (or is deemed to have consented, where the Landlord fails to respond within 28 days) then the Tenant and its guarantors will be released from liability under the lease from the assignment date.

NCAT jurisdictional limit increase

NCAT can now hear retail lease dispute matters up to $750,000.