New retail leas­ing dis­clo­sure oblig­a­tions now in force oth­er amend­ments proposed 

In brief – New land­lord dis­clo­sure state­ments and pro­posed amend­ments to retail leas­ing laws

Retail land­lords now have new dis­clo­sure oblig­a­tions and also need to be aware of pro­posed changes under the Retail Leas­es Amend­ment Bill (2011).

New dis­clo­sure oblig­a­tions for retail landlords

As from 1 Jan­u­ary 2011, a new form of land­lord dis­clo­sure state­ment was intro­duced across the east­ern seaboard states. This new form of dis­clo­sure state­ment must now be pro­vid­ed for all retail leas­es entered into on or after 1 Jan­u­ary 2011. It requires land­lords to include more detailed infor­ma­tion not pre­vi­ous­ly required. A tem­plate of the new form of land­lord dis­clo­sure state­ment can be down­loaded from the web­site of NSW Fair Trading.

Retail Leas­es Amend­ment Bill 2011

On 10 Jan­u­ary 2011, the NSW Gov­ern­ment released an expo­sure draft of the Retail Leas­es Amend­ment Bill 2011. If enact­ed in its cur­rent form, it would result in a num­ber of sig­nif­i­cant changes to land­lords’ respon­si­bil­i­ties in retail lease mat­ters. The Bill is intend­ed to address a num­ber of crit­i­cisms of the Retail Leas­es Act 1994 (NSW) and cor­rect what is per­ceived as a pow­er imbal­ance between larg­er land­lords and small retail tenants.

A sum­ma­ry of the key pro­posed changes is set out below.

Fur­ther dis­clo­sure require­ments for the land­lord (s11)

The ten­ant may require the land­lord to pro­vide an updat­ed dis­clo­sure state­ment before the ten­ant exer­cis­es an option for a fur­ther term.

Undis­closed out­go­ings (s12)

The ten­ant will not be required to con­tribute to out­go­ings that are not dis­closed in the dis­clo­sure state­ment. This pos­es a chal­lenge for land­lords of new shop­ping cen­tres, who may not be aware of all of the out­go­ings like­ly to be incurred over the life of the lease at the time of issu­ing the dis­clo­sure statement.

Manda­to­ry reg­is­tra­tion of retail shop lease (s15)

Retail leas­es of three years or more will be required to be reg­is­tered on the title of the premis­es or build­ing in which the premis­es are locat­ed. A sum­ma­ry state­ment will need to be pre­pared and includ­ed. This is intend­ed to make com­pa­ra­ble lease infor­ma­tion pub­licly avail­able to ten­ants, who will then be able to obtain details of oth­er reg­is­tered leases.

Claim­ing on bank guar­an­tees (s16)

The Direc­tor Gen­er­al will be enti­tled to pub­lish guide­lines in rela­tion to the claim­ing on bank guar­an­tees held by the land­lord as secu­ri­ty for the ten­ant com­ply­ing with its oblig­a­tions under the lease.

Pro­hi­bi­tion of pass­ing land tax on to ten­ants (s26)

To bring NSW in line with the retail pro­vi­sions in rela­tion to land tax in Vic­to­ria and Queens­land, the land­lord will be pro­hib­it­ed from pass­ing on land tax to the ten­ant as a recov­er­able outgoing.

Increased notice peri­od (s33)

The cur­rent require­ment for the land­lord to give the ten­ant two months’ notice of any alter­ation or refur­bish­ment that may adverse­ly affect the ten­an­t’s busi­ness will be increased to six months.

Relo­ca­tion of the ten­ant (s34A)

In the event that the land­lord invokes the relo­ca­tion clause, alter­na­tive premis­es which are offered to the ten­ant must be of rea­son­able com­pa­ra­ble com­mer­cial val­ue to the exist­ing premis­es leased by the ten­ant. If the land­lord does not offer appro­pri­ate premis­es and the ten­ant ter­mi­nates the lease, the ten­ant is enti­tled to claim depre­ci­at­ed fit out costs from the land­lord as compensation.

Demo­li­tion (s35)

The land­lord can­not require a ten­ant to make any repairs or improve­ments after the land­lord has giv­en the ten­ant a notice of ter­mi­na­tion on grounds of demolition.

Pro­mo­tion levy (s56)

The ten­ant is enti­tled to a refund of con­tri­bu­tions towards shop­ping cen­tre adver­tis­ing and pro­mo­tion that remains unspent at the end of the lease.

Admin­is­tra­tive Deci­sions Tri­bunal (ADT, s73)

The mon­e­tary lim­it of the ADT will increase to $750,000 (from $400,000).

Sum­ma­ry – Future of the Retail Leas­es Amend­ment Bill is cur­rent­ly unclear

The Bill is only in draft form and sig­nif­i­cant amend­ments could be made to it before it is enact­ed. It is also pos­si­ble that oppo­si­tion to the Bill will pre­vent it from being enact­ed alto­geth­er. Swaab Attor­neys will mon­i­tor devel­op­ments in this area and pub­lish updates when changes occur.