Have you got a retail business? Are you leasing retail premises?
From 1 July 2017, there are changes to the NSW Retail Leases Act.
Disclosure Statement
A Landlord is now required to provide a reasonable estimate of all outgoings payable by the tenant. Such as:
Council rates
Water Rates
Insurance
Cleaning
Any other building running expenses
What happens if the landlord underestimates these outgoings?
Under the changes, the landlord will only be able to recover the amount of the estimate, no extra. This could significantly disadvantage a landlord if they do not provide accurate estimates in the first place.
Are advertising costs included in this estimate?
Advertising and promotion costs, which are common with shopping centres, are excluded from outgoings. These are dealt with separately under the legislation.
Landlord’s Mortgagee’s consent expenses
The legislation extends the definition of lease preparation costs. It now includes the cost of obtaining the landlord’s mortgagee’s consent to the lease and production of the certificate of title to enable the lease to be registered.
Why the change? In the past these expenses have been in doubt as to whether they are considered to be lease preparation expenses. This change clears up any confusion
Lease Documentation
The time frame for a landlord to provide a lease to the tenant has been increased from 1 month to 3 months.
Why the change? One month was considered to be too short a time frame. 3 months is much more realistic.
Bank Guarantees & security bonds
The legislation requires landlords to return bank guarantees or security bonds within 2 months after completion of the lessee’s obligations.
Why the change? Some landlords have been very tardy in returning bank guarantees. This results in tenants experiencing difficulties obtaining a new bank guarantee for a new lease.
Demolition
Demolition provisions within a lease have been affected by the new legislation. A landlord cannot terminate a lease for demolition purposes unless the demolition work cannot be carried out without the tenant vacating the premises.
Why the change? This has been a common issue with renovations within shopping centres. Some landlords have demanded that a tenant vacate a retail premises even if their area is not affected by demolition or building works.
NSW Civil and Administrative Tribunal’s jurisdiction
The legislation has also increased the NSW Civil and Administrative Tribunal’s jurisdiction from $400,000 to $750,000.
Shorter term leases
The previous legislation required a tenant wanting a lease for less than 5 years to obtain legal advice. This provision has been removed from the new legislation so there is no requirement for the landlord to provide a minimum 5 year lease term. However, it is mandatory for a landlord to register any retail lease where the lease term exceeds 3 years.
Are there any changes for selling a business with a retail lease?
The requirements for transferring a lease to the purchaser of the business remain largely unchanged.
A tenant still needs to obtain the landlord’s consent to transfer a lease to a purchaser of a retail business. The landlord is still required to comply with the tenants request for consent to transfer within 28 days.
If you require advice regarding a retail lease contact us