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.
