Changes favouring landlords

The main changes to the law favouring landlords include:


Mandatory Lease Registration

Where a retail shop lease has a term of more than 3 years (including options), or where the parties agree that the lease is to be registered, the landlord must lodge the lease for registration within 3 months (previously 1 month) from when the tenant returns the signed lease.

Amending the Disclosure Statement

The disclosure statement can be amended “with the agreement in writing of the landlord and tenant”. This could be a potential problem to the tenant. For example, the parties can agree on rent but later the tenant negotiates the rent down, however the amended disclosure statement is not issued. How can this be a breach of the disclosure obligations when the tenant itself has initiated the change?

There could also be another issue to the landlord if it omits an outgoings estimate in the disclosure statement. If it discovers the mistake and issues an updated disclosure statement to correct the omission the tenant could not agree to the correction. The section says that the landlord “may” issue an amended disclosure statement with the written agreement of the tenant. It fails to say that the landlord “must not” issue an amended disclosure statement unless the tenant agrees. The position remains unclear.

Agreements for Lease

The obligation by the landlord to provide a Disclosure Statement at least 7 days before the retail lease is entered into will now also extend to any Agreement for Lease. It is not required for a resulting lease.

Excluded premises

The definition of “retail shop” has changed. Premises used just for certain non-retail purposes will be excluded e.g. vending machines, ATMs, kids’ ride machines, internet booths, phone booths and certain storage areas. The Act will also not apply to stalls in a market unless the market is a permanent retail market.

Removal of minimum 5 years lease term

The minimum 5 year lease term has now been removed and, accordingly, ‘section 16 certificate’ is no longer required. This change aligns with QLD, but differs from all other jurisdictions, which require the 5 year minimum term.

Management and service fees

Landlords are now permitted to pass on management and service fees as an outgoing.

Lease assignment – withholding consent

In the case of a retail shop lease awarded by public tender, the landlord is allowed to withhold consent to an assignment if the assignee fails to meet the criteria of the tender.

Executed copy of the lease

The landlord must provide a tenant with a landlord executed copy of the lease within 3 months (previously 1 month) from when the landlord receives the tenant executed lease. This can be extended to take into account any necessary delays with obtaining mortgagee or head landlord consent. Failure to comply is a new offence carrying 50 penalty units.

Recovery of outgoings and fit-out costs

A landlord is now able to include some management, operation, maintenance or repair of the retail shop, building or land as part of outgoings.

Changes favouring tenants

The main changes to the Act favouring tenants include:


Outgoings – duty of disclosure

Landlords are required to provide full disclosure in the disclosure statement of any contribution which the tenant will need to make in outgoings. A tenant cannot be held liable for outgoings not disclosed. Further, if the estimate provided is less than the actual amount payable (and there was no reasonable basis for the estimate), then the tenant’s liability will be limited to the estimate.

Turnover rent for most online transactions

When calculating turnover rent, the landlord is not able to include revenue from online transactions (with limited exceptions).

Bank Guarantee – obligation to return to the tenant

The landlord must return the bank guarantee 2 months after the tenant complies with its obligations under the lease.

Terminate lease due to deficiencies with disclosure statement

A tenant who terminates a lease in the first six months has the right to compensation if they were not provided with a disclosure statement or due to a defect in a disclosure statement.

Mortgagee consent fees – landlord cannot recover

The landlord is prohibited to pass on to the tenants the mortgagee consent costs.

Lease assignment – seeking consent

When a tenant is seeking consent to assign its lease to an assignee, if the landlord fails to provide that tenant with an updated disclosure statement, the tenant is now required to prepare its own updated disclosure statement which it must complete to the best of its knowledge. Previously if the landlord did not provide the disclosure statement within the 14 days then the tenant did not have an obligation to provide anything to the assignee.

Lease assignment – withholding consent

In the case of a retail shop lease awarded by public tender, the landlord is allowed to withhold consent to an assignment if the assignee fails to meet the criteria of the tender.

Demolition

If the lease includes a demolition clause, a landlord must prove that the proposed demolition cannot occur without vacant possession.

Additional changes

Disclosure statement

A new form is required for Disclosure Statements given after 1 July 2017.

Changes affecting dispute resolution

The NSW Civil and Administrative Tribunal currently can adjudicate a retail lease dispute for claims up to $400,000 but this change will increase it to $750,000. This applies to claims for leases entered into from 1 July 2017.

Valuation of market rent

Specialist retail valuers can be appointed through an administrative process with the NSW Small Business Commissioner (previously the Tribunal).

Security bonds

There will now be an online retail bond service.

Found this helpful?

Share on: