The Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011 was assented to on 14 December 2011 with its main provisions expected to come into effect in early 2012.
These amendments will have a significant impact on agents involved in retail leasing and will require changes to disclosure statements, the provisions of the lease and other management procedures throughout the term of the lease. This article aims to set out the major changes that will affect leasing agents and property managers, and their landlord clients.
Under the new amendments, a disclosure statement must notify tenants of any obligation to contribute towards the cost of the landlord's fixtures, fittings, equipment or services. If this information is not included in the disclosure statement, any provision to that effect in the lease will be void and cannot be enforced by the landlord.
We expect that there will be a new form for disclosure statements within the amended Regulations (yet to be published) which will probably include provision for notifying tenants of this information. Agents must however be aware of the amendment to ensure that landlords can continue to claim such expenses from the tenant.
Further, if any information in the disclosure statement is false or misleading in any way, or incomplete, the tenant will now have the option to terminate the lease at any time within the first 6 months of the term (currently 60 days).
Tenants have more time to exercise option to renew term
Under the current Act, tenants must notify landlords at least 90 days before the end of the lease term if they wish to exercise an option to renew the lease for a further term. This will now be shortened to 30 days.
Obligation to notify tenant of option to renew term
There will be a new provision in the amended Act requiring landlords to give the tenant written notice of the last date by which the tenant must exercise their option to renew the lease, after which they would no longer be able to exercise their option to renew.
This notice must be given not more than 12 months, but at least 6 months before the end of the term.
If the landlord delays in giving such notice to the tenant, the tenant's time to exercise the option to renew is extended by the same period as the landlord's delay. Depending on the length of delay, the tenant may even be able exercise an option to renew after the term of the lease has expired.
Legal costs no longer recoverable
Landlords will no longer be able to recover legal costs from the tenant for preparing a lease, or for extensions and renewals of a lease.
Reasonable legal costs for assigning and sub-letting may still be recovered from the tenant.
If the landlord intends to include a clause in the lease dealing with relocation of the tenant's premises during, for example, redevelopment, there will now be standard clauses which can be included in the lease. Any non-standard relocation/redevelopment clause will have to be approved by the State Administrative Tribunal.
The standard clause for relocation after the first 5 years of the term will be included in new section 14A of the Act. The Regulations (not yet published) will provide a standard clause for relocation within the first 5 years of the term.
Other changes: Short term leases and definition of 'retail shop'
The changes to the Act will now allow for a short term lease of up to 6 months without requiring the landlord to grant a minimum 5 year term.
Also, the definition of 'retail shopping centre' will be amended to include only those levels of a shopping centre containing retail shops and will no longer apply to other commercial premises on levels containing no retail premises.
The amendments to the Act do bring in other changes that are not mentioned in this article.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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