From 1 July 2017, a number of significant amendments to the Retail Leases Act 1994 (NSW) will take effect, including (among others) the following:
Disclosure of Outgoings – Lessors will now need to make more detailed disclosures to their lessee’s as to outgoings as the lessee’s liability for outgoings will now be limited to only those disclosed in the lessor’s disclosure document.
If an estimate as to outgoings is provided in the lessor’s disclosure document and there was no reasonable basis for the estimate, then the lessee’s liability to pay outgoings will be limited by reference to the estimate provided.
If properly disclosed, the lessor will now also be able to recover, as an outgoing, management fees for services provided by the lessor in connection with the “management, operation, maintenance or repair of the retail shop building or land”.
We recommend that lessors be careful about keeping detailed and appropriate records to satisfy any potential request from a lessee to justify the reasonableness of estimated outgoings. A disclosure agreement can be amended by agreement in writing.
Lessee’s right to compensation – Should lessee’s terminate a lease within the first six months by reason of not receiving a disclosure statement, or a false or misleading disclosure statement, then lessors will be liable to pay compensation to the lessee including the costs incurred by the lessee in entering into the lease, and fit-out costs (if relevant).
No more 5 year term requirement – There will no longer be a minimum 5 year term requirement for retail leases. This also means that the section 16 certificate will no longer be required. This is a good thing for lessors and lessees alike. For example, where lessees have previously incurred costs in obtaining a section 16 certificate for retail leases of less than 5 years, this expense will no longer be required.
Certain leases now excluded from the Act – Certain leases are now excluded from the Act including ATMs, children’s rides, phone and internet booths, and signage displays. A full list of the exclusions is set out in Schedule 1A of the amended Act.
Bank Guarantees – Bank guarantees are to returned to the lessee within two months after the lessee has completed its obligations under the lease which are secured by the bank guarantee, giving the lessee a clear timeframe to complete any required works, and the lessor a clear timeframe to ensure that the work has been completed.
NCAT Jurisdiction – The jurisdictional limit for disputes brought before the New South Wales Civil and Administrative Tribunal has been increased from $400,000 to $750,000 acknowledging increased cost of leasing and improving access to justice for both lessors and lessees.
There are many other changes to the Act not mentioned here. Landlords and Lessees alike should keep informed as to those changes.
If we can be of any assistance at all please do not hesitate to contact Wood Marshall Williams on 02 9938 2444.