Changes to Retail Leases Act

The Retail Leases Act 1994 applies to most retail shop leases in NSW. Amending legislation, which commenced on 1 July 2017, introduces significant reforms including the following changes:
* The requirement that a retail lease must be for a minimum of 5 years has been removed so that there is now no minimum term.
* A lessee will now have a right to compensation where the the lessee terminates the lease inside the first 6 months for a failure by the lessor to give the lessee a Lessor’s Disclosure Statement or if the lessor gives one that is incomplete, false or misleading.
* A lessor must return a bank guarantee to a lessee within 2 months of the lessee complying with its obligations under the lease.
* A retail lease must be registered within 3 months of the executed lease being returned to lessor by the lessee.
* A lessee will not be liable to pay a particular outgoing under the lease unless that outgoing was disclosed in the Lessor’s Disclosure Statement. Also, if the lessor had no reasonable basis for a particular outgoing estimate the lessee is only obliged to pay the amount of the estimate and nothing more.
* A Lessor’s Disclosure Statement, which has to be provided by the lessor to the lessee 7 days before the lease is entered into, can now be amended if the parties agree in writing rather than the lessor having to issue a new document and the parties having to wait another 7 days.
* The monetary jurisdiction of the NSW Civil and Administrative Tribunal with regard to retail lease disputes is increased from $400,000.00 to $750,000.00.
* Penalty notices for failure to comply with the Act can now be issued. The main message is that greater care must now be taken to ensure that a Lessor’s Disclosure Statement is accurate otherwise: (a) a lessee may not only be entitled to terminate the lease in the first 6 months but also substantial compensation including the cost of a fit-out and legal fees; and (b) a lessor may not be able to recover all outgoings in full if those referred to in the lease are not disclosed or the estimates are not reasonably based. Compliance with the Retail Leases Act will also be important to avoid receiving a penalty notice.