On 1 March 2017 the Retail Leases Amendment (Review) Act 2017 No 2 (NSW) (the Amendment) received assent from the Governor of NSW. When the Amendment commences on a day to be proclaimed, it will implement a number of significant changes to the Retail Leases Act 1994 (NSW) (the Act).
According to NSW Parliament, the purpose of the Amendment is to increase transparency and certainty in the NSW leasing sector, to improve standards of conduct between parties and to increase the operational efficiency of the Act by simplifying its key processes. Key changes include the following:
- Permanent retail market places: the Act will now apply to permanent retail marketplaces defined as ‘an assemblage of stalls, styled or described as a market’ that are predominately used for retail businesses operating in a permanent building or structure.
- Wholly non-retail premises: wholly non-retail premises such as ATMs, internet booths, public telephones and vending machines will be excluded from the Act.
- Retail lease preparation expenses: the Act will provide that lessees are not required to pay expenses for obtaining mortgagee consent.
- Retail lease term: the requirement that a retail lease must be for a term of at least five years will be removed.
- Turnover rent: the Act will provide that revenue from online transactions must not be included when calculating turnover rent.
- Copy of retail lease: a copy of an executed retail lease must be provided to the lessee within three months, instead of one month, of the lease being returned to the lessor.
- Registration of retail lease: the Act will provide that retail leases over a term of three years must be registered. A retail lease with a term of less than three years can also be registered if a clause of the retail lease requires registration. If a retail lease requires registration, it must be registered within three months after the retail lease is returned to the lessor or the lessor may be subject to a civil penalty.
- Lessor’s disclosure statement: the Act will simplify the procedure for providing a lessor’s disclosure statement and sets out a new prescribed form. The Act will also confer a right of compensation on a lessee who terminates a retail lease during the first six months.
- Lessee’s disclosure statement: the Act will introduce a civil penalty provision, requiring the lessee to provide the lessor with a lessee’s disclosure statement no later than seven days after receiving the lessor’s disclosure statement.
- Liability for outgoings: the Act will limit a lessee’s liability for outgoings to outgoings disclosed in the lessor’s disclosure statement. If a lessor’s disclosure statement provides an amount of an outgoing and there was no reasonable basis for the estimate, the lessee’s liability will be limited to the estimate only.
- Consent to assignment: a lessor will now be able to withhold consent to assignment if a retail shop lease was awarded by public tender and the proposed assignee fails to meet any criteria of the tender.
- Demolition: if a lessor wishes to rely on a demolition clause, the lessor must prove that the demolition cannot be carried out practicably without vacant possession of the retail shop.
- Return of bank guarantee: the Act will require lessors return a bank guarantee to a lessee within two months of the lessee complying with their obligations under the retail lease. If a lessor fails to return a bank guarantee, they may be subject to a civil penalty.
These changes are significant and should be taken into account when entering into a new retail lease as a lessor or lessee. Some of the Amendments will apply to all leases, and others will only apply to leases entered into or disclosure statements given after the commencement of the Act.