Benefits for both tenants and landlords in changes to NSW retail leasing laws
The NSW Retail Leases Amendment (Review) Bill 2016 was introduced into the parliament in November 2016 and received assent on 1 March 2017. The commencement date is yet to be proclaimed, but we could expect it at any time now.
The amendments to the Retail Leases Act 1994 are the most wide-ranging amendments made in over a decade. The details of this reform have been worked on for about the past six years, so it has been a long time coming. There are 91 amendments to the Act. This article focuses on ten of the top retail leasing amendments which we consider to be of most significance to tenants and landlords.
Amendments which strengthen the position of tenants
The five-year minimum term for retail shop leases has been abolished. This does favour landlords, however in current practice, landlords are simply requiring tenants to see a solicitor or conveyancer to sign a certificate which provides that they are accepting a term of less than five years. This amendment means tenants will be no longer required to see a solicitor or conveyancer to sign the certificate.
After the lease has been signed by the tenant and returned to the landlord, the landlord must give a fully executed lease back to the tenant within three months.
If the lease is for a term of over three years, the landlord must lodge the lease for registration within three months. However, this can be extended if the landlord’s bank is taking a long time to consent to the lease.
The tenant cannot be required to pay the costs of consent from the mortgagee.
The current section 11 of the Act requires landlords to provide a disclosure statement. If a disclosure statement is not given within six months of the lease, the tenant may terminate the lease. The new section 11 adds the provision that if the tenant terminates the lease, they can now be compensated for any costs reasonably incurred in connection with entering into the lease. This includes any fitout costs.
All outgoings must now be fully disclosed. There is a new provision which provides that a landlord may not recover any outgoings from the tenant if they were not disclosed.
At the end of the lease, a bank guarantee must be returned to the tenant within two months of the tenant fulfilling all of their obligations.
Assignment of leases (e.g. when your business is sold) must now follow a specific procedure. It is not very different to the procedure which is currently followed, except that there are specific timeframes in which the disclosure statement must be given to the incoming tenant. Once the landlord has all the required information, they have 28 days to give their consent, or otherwise it is assumed that their consent is given.
Benefits to landlords from changes to legislation
The definition of outgoings can now include legal fees charged in connection with managing, operating, maintaining and repairing the premises. Of course, under section 14 a landlord still cannot charge the tenant for the legal costs of preparing a lease.
A number of uses are now excluded from the Act, including ATMs, vending machines, telephone boxes and storage units. This means tenants who wish to use the premises for these purposes do not enjoy the protection of the Act.