Changes to the Retail Lease Act 1994
The Retail Leases Amendment (Review) Bill 2017 (the Legislation), which introduces several changes the Retail Leases Act 1994 (RLA), was passed by NSW parliament and came into force on 1 July 2017.
The Legislation will remain applicable to and in respect of agreements to lease. However, under Schedule 1A, the excluded uses have been expanded so as to encompass automatic teller machines, children’s ride machines, communication towers, digital display screen, internet booths (not in an internet café or similar use), public telephones, storage and vending machines.
The amendments will affect landlords as well as tenants of New South Wales retail premises.
Under the amended section 11, a lessee who terminates the lease within the first six months is entitled to compensation from the lessor for costs reasonably incurred, given that the lessor failed to provide a disclosure statement. Compensation is in relation to the entering into the lease by the lessee, and may include expenditure connected with the fit-out of the retail premises.
A lessee is not liable to pay any amount of undisclosed outgoings to the lessor under section 12A. As a result, if a lessor wishes to recover any outgoings, it must disclose the amount to be paid. Where the lessor’s disclosure statement offers an estimate of the outgoings and this amount is less than the actual amount, then, if there was no reasonable basis for the estimate at the time the disclosure statement was given, the lessee’s obligation for payment is tied to the original estimation and will be adjusted accordingly.
The scope of the term ‘outgoings’ has also been broadened to include fees charged by a lessor for services it provides in respect of management, operation, maintenance or repair of the retail premises.
Sections 15, 16 and 40 govern the registration of a retail shop lease. When the term of a lease is more than three years, or if the parties have agreed that the lease is to be registered, the lessor must lodge the lease for registration in accordance with the Real Property Act 1900 within three months aft ether lease is returned to the lessor (or their lawyer or agent). The three month period may be extended if the delay is not attributable to the lessor’s failure to make reasonable efforts to obtain consent. However, the above amendments only impact leases entered into after the commencement of the Legislation.
According to section 16BA, a lessor is required to return the original bank guarantee to the lessee within two months after the tenant has completed performance of its obligations under the lease which the bank guarantee secured.
The Legislation now excludes most online transactions from the determination of the turnover rent under section 20. Where the transaction takes place while the customer is at the retail premises, or the goods or services are delivered from or at the premises, the restriction does not apply.
Section 35 has been amended such that the provisions which enable tenants to terminate a lease on the grounds of demolition, will now apply to propositions of demolitions involving any part of the building which constitutes the premises. In conjunction with the obligation to provide a genuine proposal for demolition, the lessor can now only terminate the lease if the demolition cannot be carried out practicably without the vacancy of the premises.
Section 44 provides for the omission of section 16 of the RLA which required a compulsory five year minimum term of retail leases. Subsequently, lessees no longer need to obtain a lawyer or licensed conveyancer’s certificate, where the term of the lease is less than five years.
Mortgagee consent fees
A lessor is prohibited from seeing or accepting payment from a lessee, for mortgagee consent fees under section 45.
The monetary limit on the Civil and Administrative tribunal’s jurisdiction has been raised from $400,000 to $750,000.
The Legislation comes over a decade after the last amendments were made to the RLA and is a significant step forward in the provision of better safeguards for both landlords and tenants. It is important that all parties of a lease are informed of these changes and take the necessary precautions to ensure compliance.
For more information
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