In each Australian jurisdiction, landlords are required to provide retail tenants with disclosure statements.

The purpose of a disclosure statement is to provide tenants with an overview of the key commercial terms of the lease whilst highlighting any significant or important terms and disclosing the likely operating expenses (or outgoings) which are often payable in addition to the rent.

The public policy motivation behind making it mandatory for landlords to issue tenants with disclosure statements is to ensure that tenants properly understand the lease they are signing and the rights and obligations that stem from it.

Given that leases are often drafted in legal language, which can prove difficult to understand, disclosure statements have become an essential part of tenant/landlord negotiations as they provide a “snapshot” of the lease to give the tenant time to decide whether they wish to proceed with the transaction.

This article outlines the key terms in a disclosure statement so that:

  • you understand what to include if you are a landlord; and
  • what to look for if you are a tenant.

Key Terms in a Disclosure Statement

The key terms that must be included in a disclosure statement vary on a state-by-state basis as they are regulated by their respective retail leasing legislation. However, generally all jurisdictions require that disclosure statements document tenants’ positive obligations and money payable under the lease. For example, disclosure statements should detail make good obligations and end of lease obligations.

The following table provides a detailed break down of what disclosure statements ought to include in each Australian state/territory.

New South Wales

State Key Disclosure Items
New South Wales

· Annual base rent under the lease

· Whether rent is based on turnover payable by the lessee during the first year of the lease?

· Total estimated outgoings, promotion and marketing costs for the lessee during the first year of the lease

· The term of the lease

· The estimated commencement date of the lease

· The estimated handover date of the premises

· Any options for renewal

· Does the lease give rise to an exclusive right to use the premises in the permitted manner for the lessee?

Victoria

State Key Disclosure Items
Victoria

· Annual base rent under the lease

· Is rent based on turnover payable by the tenant in the first year of the lease?

· Estimated outgoings and promotion and marketing costs for the tenant in the first year of the lease

· Term of the lease in years and months

· Estimated commencement date of the lease

· Estimated handover date of the premises

· Any options for renewal

· Does the lease give right to the exclusive right to use the premises in the way permitted by the lease.

Queensland

State Key Disclosure Items
Queensland

· Annual base rent under the lease

· Is rent based on turnover payable by the lessee in the first year of the lease

· Total estimated outgoings and promotion and marketing costs for the lessee in the first year of the lease

· Term of the lease

· Estimated commencement date of the lease

· Estimated handover date of the premises

· Are there any options for renewal?

· Does the lease give the rise to the right to use the premise exclusively for the purpose permitted by the lease?

Tasmania

State Key Disclosure Items
Tasmania

· Rent and method of its calculation

· Items to be included in turnover calculations

· The commencement date of rental payments

· Rental reviews and options, how rental reviews are to be carried out and how frequent they will be

· The term of the lease and any options for renewal

· Any rental premium charged

· A list of general outgoings, plus an estimate of the costs and the basis on which the costs have been calculated

· A list of any other costs, with an estimate of their amounts

· The identity of the property owner, the name and address of the agent and an emergency contact point

· A description of the premises, including the total lettable area and what is included in that area

· Trading hours permitted by the lease

· Access to the premises

· The permitted use of the premises or the required use of the premises

· The date from which the premises will be available to occupy

· The tenancy mix in a shopping centre complex

Western Australia

State Key Disclosure Items
Western Australia

· Annual base rent under the lease

· Is rent based on turnover payable by the tenant in the first year of the lease?

· What are the total estimated outgoings/operating expenses, promotion and marketing costs and contributions to sinking fund for the tenant in the first year of the lease?

· Term of the lease in years and months

· The commencement date of the lease (actual or estimated)

· The handover date (actual or estimated)

· Any options for renewal and the manner in which they have to be exercised

· Does the lease give rise to an exclusive right to use the premises in the manner permitted for the tenant?

Australian Capital Territory

State Key Disclosure Items
Australian Capital Territory

· The landlord’s accounting period if the accounting period is not a standard financial year

· Estimate of outgoings the tenant is required to contribute under the lease in an itemized form, for the first accounting period under the lease

Northern Territory

State Key Disclosure Items
Northern Territory

· The identification and location of the shop

· The approximate area of the premises

· The proposed lease term and any option periods

· The rent payable and the method of calculating the rent

· The timing of rent reviews and the manner in which they will be conducted

· The tenant’s share of outgoing expenses

· The permitted uses of the premises

· The details of any work to be carried out on the site

· The expected date of occupancy or on which the premises will become available for occupation

Key Takeaways

If you’re a landlord:

  • you need to provide your tenants with a disclosure statement; abd
  • the disclosure statement must provide your prospective tenant with details of the key terms of the proposed lease is.

If you’re a tenant:

  • you need to ensure that your landlord has provided you with a complete disclosure statement, in accordance with the requirements in your state as outlined above.

Key terms are, however, just the tip of the iceberg when it comes to disclosure statements.