The NSW parliament has passed legislation to amend the retail leasing regime in NSW. The amending legislation is awaiting Royal Assent and is expected to commence shortly.

The Retail Leases Act 1994 (the Act) applies to most retail shop leases in NSW subject to specific exceptions (such as leases for a term of 25 years or more or shops that have a lettable area of 1000sqm or more). The amending legislation will introduce significant reforms to the Act and will impact both landlords and tenants of retail premises in NSW.

Key changes

The key changes include the following:

  • Undisclosed outgoings | landlords will be required to make more detailed disclosures to tenants regarding contributions to outgoings and tenants will not be liable to pay outgoings that were not disclosed in the disclosure statement.
  • Exclusion from turnover rent | revenue from online transactions will be excluded from turnover rent payable by tenants except where the goods or services are delivered or provided from the retail shop or where the transaction takes place while the customer is at the retail shop.

    Tenants will also not be required to disclose information about online transactions to landlords except in those circumstances.
  • No minimum term | the requirement for a minimum term of 5 years will be removed.
  • Right to compensation | tenants who exercise a right to terminate in the first 6 months of the lease term because the landlord failed to give a disclosure statement or the disclosure statement was defective will be entitled to recover compensation from landlords for reasonable costs incurred in entering into the lease including fitout costs.
  • Excluded uses | leases of premises used only for certain uses will be excluded from the operation of the Act including ATMs, vending machines, communication towers, public telephones, children's ride machines, signage displays, internet booths, private post boxes and certain storage uses.
  • Exclusion of market stalls | clarification will be included that the Act does not apply to market stalls unless the market is a permanent retail market.
  • Registration and return of documents | retail leases for a term of more than 3 years must be registered by the landlord and landlords will be obliged to provide a signed lease to tenants within 3 months of it being returned to them (subject to certain permitted delays e.g. mortgagee consent).
  • Return of bank guarantees | landlords will be required to return any bank guarantee within 2 months after the tenant completes performance of its obligations under the lease.
  • Demolition | clarification will be included that:
    • the demolition provisions under the Act apply if only part of the building is proposed to be demolished; and
    • termination on the grounds of proposed demolition is only permissible when demolition requires vacant possession of the shop.
  • Mortgagee consent fees | landlords will not be entitled to recover mortgagee consent fees from tenants.
  • Increased jurisdiction of Tribunal | the monetary limit on the jurisdiction of the Civil and Administrative Tribunal will be increased from $400,000 to $750,000 resulting in a greater number of claims that may be heard by the Tribunal.

If you would like to know more about the reforms, or are looking to lease retail premises in NSW, then please contact one of the authors listed in this alert.

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