Australia: A refurb for the Retail Leases Act in New South Wales

Services: Real Estate & Construction
Industry Focus: Real Estate & Construction

What you need to know

  • From 1 July 2017, numerous amendments to the Retail Leases Act 1994 (NSW) will come into force.
  • Key changes include a prohibition on landlords from recovering any outgoings that are not properly disclosed in the disclosure statement, removal of the mandatory minimum five-year term for retail leases, and mandatory registration of retail leases that have a term of more than three years (or that are required by the lease to be registered).
  • Both landlords and tenants of retail premises in New South Wales should ensure they understand and prepare for the suite of changes.

It has been some 13 years since the Retail Leases Act 1994 (NSW) (RLA NSW) was amended. In that time there have been intermittent opportunities for public submissions to the Office of the NSW Small Business Commissioner, with changes to the legislation finally being debated in the NSW Parliament towards the end of last year. The result is that on 1 July 2017, changes to the RLA NSW will come into force, with an impact on both landlords and tenants of retail premises in New South Wales.

These changes are set to take effect less than a year after Queensland's equivalent legislation – the Retail Shop Leases Act 1994 (Qld) – received a facelift of its own. To read more about the amendments that came into force in Queensland in November 2016, you can visit our previous summary.

Here is what you need to know about the changes ahead for those involved in retail leasing in NSW.

Farewell to the five-year minimum term

One of the most significant changes is the removal of section 16 of the RLA NSW, which imposed a mandatory minimum five-year term for retail leases. With that whole section being abolished, there will no longer be any requirement for a tenant to obtain a solicitor's / licensed conveyancer's certificate if the lease term is less than five years.

Key changes affecting landlords and tenants

  • Disclosure of outgoings: A tenant will not be liable to pay an amount in respect of any outgoing unless the liability to pay the amount was disclosed in the disclosure statement. Therefore in the disclosure statement a landlord needs to provide details of all outgoings that it intends to recover from the tenant during the term, otherwise the landlord will not be entitled to recover any outgoings which are not specifically set out (with an estimate).
  • Further, if an estimate is provided in the disclosure statement and that estimate is less than the actual amount payable (and there was no reasonable basis for the estimate), the tenant's liability will be limited to the estimate. For example, if the disclosure statement indicates that the tenant is required to contribute an estimate of $2,000 for common area cleaning costs for that year and, at the end of the outgoings year, the landlord invoices the tenant for actual common area cleaning costs of $4,000 (and there was no reasonable basis for disclosing only $2,000 when the actual cost was $4,000), the amount recoverable from the tenant will be limited to $2,000.

  • Mandatory lease registration: If a retail shop lease is for a period of more than three years, or if the parties to the lease have agreed that the lease is to be registered, the landlord must lodge the lease for registration at Land & Property Information within three months after the tenant executed lease has been returned to the landlord (or the landlord's solicitor or agent). This three-month period can be extended if there is a delay in obtaining mortgagee or head landlord consent, provided that the delay is not due to any failure of the landlord to make reasonable efforts to obtain consent.
  • A landlord must also provide a tenant with a landlord executed copy of the lease within three months from when the landlord receives the tenant executed lease.

  • Additional ground to withhold consent to an assignment: Where a retail shop lease has been awarded by public tender, a landlord will be entitled to withhold its consent to an assignment if the assignee fails to meet the criteria of the tender.
  • Mortgagee consent fees: A landlord will not be entitled to recover from the tenant any expenses involved in obtaining mortgagee consent.
  • Return of bank guarantee: A landlord must return a bank guarantee to the tenant within two months after the tenant has performed all its obligations under the lease.
  • Turnover rent excludes most online transactions: Revenue from online transactions (with limited exceptions) will be excluded for the purposes of determining turnover rent. Additionally, a tenant will not be required to provide information to the landlord regarding online transactions (again, with limited exceptions).
  • Right to compensation: If a tenant terminates a lease within the first six months due to the landlord's failure to issue a disclosure statement, or due to a defect in a disclosure statement that is issued, a tenant will be entitled to claim compensation for costs reasonably incurred, including fitout costs.
  • Demolition: Section 35 of the RLA NSW confers certain protections on a tenant if the retail shop lease contains a provision allowing a landlord to terminate the lease on the grounds of proposed demolition of the building of which the premises forms part. Under the changes, the protection will extend to a proposed demolition of any part of the building (as opposed the building in its entirety). Further, as well as the landlord being required to have a genuine proposal to demolish (under the existing provisions), the landlord can then only terminate if the proposed demolition cannot be carried out practicably without vacant possession of the premises.
  • Consent to assignment: 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 failed to provide copy of the disclosure statement within 14 days, the tenant was relieved from its obligations to provide an updated disclosure statement to the assignee.
  • Security bonds: The Secretary (previously known as the Director-General) will have the power to establish an online retail bond service to facilitate the transition of the existing regime of lodging cash bonds with the Retail Tenancy Unit to an online platform.

Changes affecting the application of the RLA NSW

  • Agreement for lease: The RLA NSW will apply to an agreement for lease in the same way that it applies to a lease. Accordingly, a landlord must ensure that it provides the tenant with a lessor's disclosure statement 7 days before the agreement for lease is entered into. Failure to do so gives the tenant a right to terminate within the first 6 months.
  • Excluded premises: Premises used wholly for certain non-retail purposes will be excluded from the scope of the RLA NSW, including ATMs, vending machines, public telephones, children's rides, internet booths, private post boxes and certain storage uses.
  • Market stalls: The RLA NSW will not apply to stalls in a market unless the market is a permanent retail market. The RLA NSW has also been amended to allow the regulations to modify the operation of the RLA NSW in relation to shops in a permanent retail market, including by providing for a mandatory code of conduct for landlords and tenants.

Changes affecting dispute resolution and penalties

  • Monetary limits for tribunal: Currently, the NSW Civil and Administrative Tribunal (NCAT) can adjudicate a retail lease dispute in its Consumer and Commercial Division. NCAT previously had jurisdiction for claims up to $400,000, but this will be increased to $750,000. NCAT is granted some additional powers under the changes to the RLA NSW – for more information about those additional powers, contact our Disputes team.
  • Penalty notice: There is a greater emphasis on the ability for an officer of the Department of Industry, Skills and Regional Development to issue a penalty notice to a person if it appears that the person has committed an offence under the RLA NSW.

Key takeaways

Both landlords and tenants of retail premises in New South Wales will be affected by numerous changes to the RLA NSW and should act now to ensure they are appropriately prepared, come 1 July.

While some of the changes will operate retrospectively, the majority of the significant amendments will not, and will only apply to leases entered into from 1 July 2017.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.