In 2017 we saw changes to the Retail Leases Act 1994 (NSW) (the Act) come into force following the introduction of the Retail Leases Amendments (Review) Act 2017 No.2. The changes to the Act have been introduced with the aim of giving effect to the recommendations resulting from the recent statutory review of the Act, mainly aiming to achieve an increase in transparency, certainty and fairness for all parties involved in the retail leasing sector.

The most significant changes to the Act are as follows:

Disclosure statements and undisclosed outgoings
All contributions to the landlord's outgoings must now be specified in the disclosure statement. If outgoings are not disclosed in the Landlord disclosure statement, the landlord will not be able to recover the outgoings for the duration of the lease. In addition, if the actual amount of any disclosed outgoing is more than was estimated in the tenant's Disclosure Statement, unless there was a reasonable basis for the inaccurate disclosure, only the amount as disclosed will be recoverable. Landlords are advised to keep a record of their calculations to support that the outgoings were determined on a reasonable basis.

Disclosure statements and termination
If a tenant terminates a lease during the first six months as a result of not receiving, or as a result of receiving a misleading disclosure statement, the tenant may recover its costs of entering into the lease including fitout costs.

Variations to the disclosure statement
Any agreed amendments can now be reflected on the disclosure statement in writing by the landlord and the tenant. This saves the landlord from having to reissue the disclosure statement each time an amendment has been agreed.

Minimum term
The minimum five year term for retail leases has now been abolished and section 16 certificates are no longer required.

Excluded premises
Premises that were previously considered retail premises under the Act (such as ATMs, vending machines, public telephones, children's rides, internet booths, private post boxes and certain storage uses) are now excluded from the operation of the Act.

Market premises
Premises used as a permanent retail market will now be captured under the Act.

Lease execution and registration
A fully signed copy of the lease must be provided to tenants within three months of its return by the tenant. Further, a lease for a term longer than three years must be registered within three months of its return by the tenant.

Bank guarantees
At the end of the term, the landlord must return the tenant's bank guarantees within two months of the tenant satisfying its obligations under the lease.

Online sales and percentage rent
The exclusions from turnover now include revenue from online transactions other than where the transaction took place in the premises or the goods were delivered to the premises. This will require the tenant to provide information to the lessor about turnover rent from online transactions.

Mortgagee consent fees
Mortgages consent fees will not be recoverable from lessees.

Termination on the grounds of proposed demolition will only be permissible when demolition requires vacant possession of the premises.

Tribunal jurisdiction
The NSW Civil and Administrative Tribunal's monetary jurisdiction is increased from $400,000 to $750,000.

Amending the amendments

Since the revised Act has come into effect, it has already been amended by the Statute Law (Miscellaneous Provisions) Bill (No 2) 2017 in regards to disclosure statements. Schedule 2 of the Act provided that landlord's must disclose outgoings for the first 12 months of the lease, or if the lease is for less than 12 months, for the term of the lease. From 7 December 2017, the tenant's outgoings will again be estimated for the "accounting period of the lessor that is current when this disclosure statement is given or (if this disclosure statement is given less than one month before the start of the next accounting period of the lessor) for that next accounting period". The amendment to Schedule 2 brings the disclosure statement form into line with other provisions of the Act.

Moving forward

The amendments to the Act have an impact on both the landlord and the tenant of the retail premises, and both parties and their agents will need to understand the significance of the changes. It is important that all lease and disclosure statement templates are updated to ensure compliance with the Act.

While some of the changes will operate retrospectively, most will only apply to leases entered into from 1 July 2017.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.