Australia: Navigating retail leasing disputes in NSW: 10 questions answered

What you need to know

• While landlords and tenants would prefer not to be involved in retail leasing disputes, the reality is that sometimes they are unavoidable.
• After looking last month at the mechanisms for resolving such disputes in Victoria, this month we explore the position in New South Wales.
• In a Q&A with Emma Hodgman, we outline some of the key factors to be considered by any retail landlord or tenant who sees a dispute on the horizon, which begins early on with proactive management.

Last month, we looked at retail tenancy disputes in Victoria and the establishment of that State's Small Business Commission to enhance the resolution of disputes between landlords and tenants.

Certainly, retail tenancy disputes are not unique to any one jurisdiction.

In New South Wales, the process for resolving a retail tenancy dispute is primarily governed by the Retail Leases Act 1994 (NSW) (RLA), which sets out the rights and obligations of the parties in resolving retail tenancy disputes, as well as the processes that must be followed.

The NSW Civil and Administrative Tribunal (NCAT) is a specialist tribunal that deals with various disputes ranging from tenancy issues and building works, to decisions on guardianship and administrative review of government decisions. NCAT's Consumer and Commercial Division specifically deals with retail tenancy claims and unconscionable conduct claims under the RLA.

We talk to Emma Hodgman, partner in our Banking, Insolvency & Disputes group, about how to navigate the retail leasing dispute resolution process in New South Wales.

What should landlords and tenants do when a retail leasing dispute is on the horizon?

When a dispute is brewing it is important to manage it proactively from the outset – prompt, clear communication, and preferably with one person to avoid miscommunications.

It is important to establish early on in the dispute what evidence you do or do not have to support your version of events – this can ultimately save time and money, and it should inform how you approach the dispute, including its resolution (if possible). Getting legal advice on your position early on can also assist.

It is human to lose objectivity when you are too close to a matter, so having a fresh set of eyes look at the matter before either party becomes too entrenched in their position can help.

Also, be careful not to say or write anything that might compromise your position. Remember communications (unless they are with a lawyer) can become discoverable in any subsequent proceedings.

What pitfalls do landlords and tenants commonly fall into when a dispute arises?

Common pitfalls that landlords and tenants fall into include:

• a lack of evidence to prove or defend a claim, eg no or few contemporaneous file notes or correspondence
• what we call 'he said / she said' disputes, where there are two competing versions of a conversation without a corroborating witness to support one version over the other
• ambiguity in paperwork, including lease terms and disclosure statements
• witnesses who have moved on and cannot be located, or are unwilling to assist.

If a party decides to apply to NCAT, what must be done to have the dispute heard?

Under section 68 of the RLA a retail tenancy dispute may not be the subject of proceedings before a court unless and until the Small Business Commissioner has certified that mediation has failed to resolve the dispute, or that mediation is unlikely to produce a resolution (SBC certificate).

To apply for a hearing a party needs to lodge with NCAT an Application for Original Decision, which must attach the SBC certificate.

It is not necessary for a matter to be mediated before seeking an order in the nature of an injunction. An interim order can be sought from NCAT for urgent matters, but the application for interim relief needs to include an application for an original decision, to be heard at a later date. NCAT needs to be satisfied that there are urgent grounds for making an interim order.

Can NCAT hear every retail dispute?

NCAT has jurisdiction to hear and determine retail tenancy claims and claims about unconscionable conduct up to the value of $750,000 (where a lease has been signed on or after 1 July 2017), or $450,000 (where a lease has been entered into before 1 July 2017).

When must a claim be lodged?

Claims must be lodged within three years after the liability or obligation that is the subject of the claim arises. Similarly, a claim regarding unconscionable conduct must be lodged within three years after the alleged unconscionable conduct occurred. An extension of time applies if NCAT orders that the claim may be lodged after more than three years, but not later than six years, after the liability or obligation that is the subject of the claim arose, or after the alleged unconscionable conduct occurred.

Speaking of timeframes, how long does it typically take for a dispute to be resolved in NCAT?

Applications are listed for a directions hearing within four weeks.

NCAT currently estimate 14 to 21 days for a hearing date following the directions hearing.

A decision will generally be given on the day of the hearing, unless a matter involves complicated legal arguments which require NCAT to reserve their decision. The reserved decision will be made in written form.

Importantly, what are the likely costs involved?

Fees will vary depending on the matter type. For matters involving retail leases, an application fee of $100 applies to standard applicants and $200 for corporations.

Where an application for an interim order is made, an additional fee of $100 applies to standard applicants and $200 for corporations.

Other costs may apply in respect of evidence, such as a fee of $45 for the issue of a summons to produce documents. A list of other additional fees and charges is available on the NCAT website.

What if proceedings have been initiated in a court and not NCAT?

Under section 75 of the RLA if civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings to NCAT, but only if the court is satisfied that it is appropriate that the dispute be dealt with by NCAT, and it is in the interests of justice to transfer it. Section 75 sets out the factors that the court is to consider when deciding whether to transfer the proceedings, including the general principle that retail tenancy disputes should be dealt with by NCAT rather than a court.

A court is not prevented from granting urgent relief of an interlocutory nature where it is in the interests of justice to do so.

Can NCAT proceedings be transferred to a court?

Section 76 of the RLA sets out what is to occur when there is an overlap of jurisdictions – in some circumstances NCAT will have no jurisdiction and in some circumstances the court will have no jurisdiction.

Section 76A of the RLA provides that a party to any claim which includes an unconscionable conduct claim can apply to NCAT to have the claim transferred to the Supreme Court and NCAT must transfer the proceedings if it is satisfied that the nature of the claim is such that it may be more effectively and appropriately dealt with by the Supreme Court, and the interests of justice do not require the matter to be dealt with by NCAT.

NCAT seems to be a place of last resort for landlords and tenants. What alternatives should landlords and tenants consider before applying to NCAT?

Common forms of alternate dispute resolution (ADR) include mediation, an informal and without prejudice settlement conference, arbitration and expert determination.

If a dispute cannot be resolved at the early stages and before one of the parties applies to NCAT, the mediation that is required to take place pursuant to section 68 of the RLA provides an opportunity to resolve the matter before it proceeds to hearing.

It's important to note that pursuant to section 7 of the RLA, a provision of a lease is void to the extent it is inconsistent with the RLA, and this also applies to any agreement or arrangement between the parties to a lease – that is, the parties cannot agree to exclude the operation of the RLA.

Key takeaways

Clearly, landlords and tenants would prefer not be involved in retail leasing disputes. However, the reality is that disputes are sometimes unavoidable.

Landlords and tenants in New South Wales should be aware that the RLA and NCAT prescribe specific procedures for resolving retail tenancy disputes and that there are certain considerations to be kept in mind if an application is to be made to NCAT, such as, timeframes for hearings, costs and jurisdiction.

Landlords and tenants should also keep in mind that there are steps that can be taken from the outset to manage a potential dispute and that mediation and other forms of ADR may be viable alternatives to applying to NCAT.

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