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Changes to NSW Retail Leases Act soon to become law

March 05, 2017

The NSW Retail Leases Amendment (Review) Bill 2016 has now passed parliament and will soon become law. The commencement date is to be gazetted by parliament at later date.

The amendment brings in a number of changes for retailers in NSW:

1. Jurisdictional Limit

The New South Wales Civil and Administrative Tribunal (NCAT) may now determine retail lease disputes involving claims up to $750,000. The increase in the jurisdictional limit from $400,000 is anticipated to provide greater access to justice.

2. No minimum five year term

Section 16, which requires that a retail lease must be for a minimum term of five years, has been removed from the Act.

3. Compulsory Registration

Leases must now be lodged for registration within 3 months. Failure to lodge the lease by the deadline may result in penalties. This may be extended in the case of delay by the mortgagee.

4. Copy of Executed Lease

The landlord is now obligated to provide the tenant with a copy of the signed lease within three months after the lease has been returned to the landlord by the tenant. This period may be extended in the case of delay by the mortgagee.

5. Bank Guarantee to be returned within 2 months

The landlord must return the bank guarantee within 2 months if the tenant has completed their obligations under the lease.

6. Compensation for Tenant who validly terminates in the first six months

A tenant may now claim compensation (including the cost of its fitout) if the tenant terminates in the first 6 months for reasons of the landlord’s failure to provide a Lessor’s Disclosure Statement or provided a Lessor’s Disclosure Statement that is misleading or incomplete.

7. Lessors Disclosure Statement

The Lessor Disclosure Statement can now be amended prior to or after the lease has been entered into by agreement between the parties or by NCAT.

8. No Mortgagees Consent Fees

It has now be legislatively clarified that a landlord cannot charge a tenant mortgagee consent fees.

9. Limitation of liability for undisclosed outgoings

The Act has undergone significant changes in relation to disclosure of outgoings.

A tenant will not be required to pay any amount to a landlord for any outgoings (including management fees) unless the liability to pay was disclosed in the Lessor’s Disclosure Statement.

Further, if an estimate for an outgoing is provided in the Lessor’s Disclosure Statement and the estimate is less than the actual amount charged and there was no reasonable basis for the estimate, then the liability of the tenant for payment is limited to the estimated amount.

A landlord estimates land tax of $7,000 but charges the Tenant $14,000 and there was no reasonable basis for the estimate of $7,000, then the Tenant is only required to pay $7,000.

10. Agreements for Lease

The amendments now clarify that the Act applies to agreement for lease.

11. Permanent Retail Market

The Act now can apply to stalls in a Permanent Retail Market. This is defined in the amendments as an assemblage of stalls, styled or described as a market that are predominately used for retail businesses operating in a building or other permanent structure.

12. Applies to both proposed Tenants and Landlords

The amendments clarify that the Act applies to proposed tenants and proposed landlords.

13. Rectification

NCAT’s powers to amend and vary a lease have been significantly expanded. NCAT can amend a Lease where:

  1. The Tribunal is satisfied that the order is necessary to correct an error or admissions;
  2. The Tribunal is satisfied that the order is necessary to give effect the intention of the parties when the Lease was entered into or;
  3. The Tribunal is satisfied that the order is necessary to give effect to the actual disclosure of information between the parties.

14. Registrar to appoint a Specialist Retail Valuer

Now the Registrar at the Office of the Small Business Commissioner may appoint a specialist retail valuer to determine a market rent review when the parties cannot agree on the choice of valuer.

15. Demolition

The protections relating to demolition in section 35 of the Act have been amened to confirm that the protection applies regardless of whether the whole building or only part of the building is being demolished.

16. Online Sales

Revenue from online transactions will not be included in turnover for the purposes of calculating percentage rent. This does not apply to transaction where goods and services are delivered or provided from or at the retail shop or where the transaction takes place while a customer is in the shop.

A landlord may not seek information regarding online transactions, apart from transactions where goods and services are delivered or provided from or at the premises or where the transaction takes place while the customer is in the store.

17. Rental Bonds

There will now be an online rental bond service.

If you require assistance or clarification on these changes, contact one of our Leasing & Tenancy advisors on 1800 738 245 or by email [email protected].

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