Retail News & insights

The Retail Leases Amendment (Review) Bill 2017 was passed on 21 February 2017 which will amend the Retail Leases Act 1994 (NSW). The commencement date is yet to be determined by Parliament but we have summarised how these changes will benefit retailers with stores in NSW below.

1. Tenants will no longer have to pay for undisclosed outgoings

It can be very unfair for a retailer when after the Lease is signed, a Landlord then charges for costs which were never disclosed. The amendments to the Act will now address this concern.as a Tenant will no longer be required to pay any amount to a Landlord in respect of any outgoing (including management fees) unless the liability to pay was disclosed in the Lessor’s Disclosure Statement.

If a Landlord fails to issue a Lessor’s Disclosure Statement at all, this oversight may now mean that the Landlord cannot charge any outgoings at all to the Tenant for the life of the Lease.

This is a big step forward in ensuring that Tenants know what they are getting into before entering into the Lease and if things are not properly disclosed, then a Tenant will no longer have to pay for any such expenses.

2. Bank Guarantee to be returned within two months

A Landlord must now return a Bank Guarantee within two months after the Tenant completes performance of the obligations under the Lease, which secure the Bank Guarantee.

Previously, Tenants can be placed under financial hardship waiting for a Landlord to return a Bank Guarantee, particularly in cases where a Tenant is fitting out a new store elsewhere and has to provide a new security under the new Lease, but the prior Landlord delays in the return of the Bank Guarantee.

3. Compensation for Tenant who validly terminates in the first six months

If a Landlord fails to serve a Lessor’s Disclosure Statement 7 days before the Lease is entered into or serves a Lessor’s Disclosure Statement which is incomplete or materially false or misleading, the Tenant has the right to terminate the Lease within the first six months.

If a Tenant however elects to terminate the Lease in these circumstances, the Act was did not state whether the Tenant could claim damages – in particular, the cost of one’s fitout – which can be very expensive. A Tenant in this situation faced a dilemma, it could terminate, but would forgo its fitout and set up costs.

A Tenant can now claim compensation (including the cost of its fitout) if the Tenant terminates in the first six months on these grounds.

This amendment will assist Tenants who have been misled.

4. Registrar to appoint a Specialist Retail Valuer

At present, if the parties cannot agree on a valuer (where the Lease or Option Lease provides for a market rent review), then the parties are required to make Application to the NSW Civil & Administrative Tribunal (NCAT) request NCAT to appoint a Valuer. This process will now be streamlined so the Valuer can be appointed instead by the Registrar (at the Office of the Small Business Commissioner) on application by a party.

This process should be easier and quicker for Retailers.

5. Copy of Executed Lease

The Landlord must now provide the Tenant with a copy of the signed Lease within three months after the Lease is returned to the Landlord.  This period can be extended if there is delay by the mortgagee.

Please note the above is a key point summary, and whilst the Bill has been passed, the commencement date has not yet been determined and various transitional provisions will apply.

For further information on how this amendment will benefit retailers please click the full summary hereIf you have any questions regarding these amendments, please do not hesitate to contact Anthony Herro at Herro Solicitors (www.herro.com.au)  on (02) 9247 0100 or by email to anthony@herro.com.au.

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