The changes to the NSW retail leases legislation provides some excellent practical changes for the tenants. I cannot begin to count the number of times I have argued with a landlord to require that a bank guarantee have a reasonable expiry date, or that online sales not be included in the turnover rent. Now with the new legislation, NSW retail lease tenants will not need to argue these points, as they are governed by the Retail Leases Amendment (Review) Bill 2016 (‘the Bill’).
The Bill has been passed, amending the Retail Leases Act 1994 (NSW) (‘the Act’). Whilst the commencement date is to be determined, it is recommended that our clients who are involved in retail leases (either as tenant or landlord) should be aware of the following:
- Retail leases are no longer required to have a minimum 5 year term, reflecting the growing popularity of short-term “pop-up” stores;
- Landlords must register retail leases of more than three years, with lodgement being within three months of receiving the signed lease to avoid penalties;
- Landlords must provide the tenant with a copy of the signed lease within 3 months after the lease is returned to the landlord;
- Landlords must return a Bank Guarantee to the tenant within 2 months after the tenant completes performance of its obligations under the lease which secure the Bank Guarantee;
- Landlords must provide more detailed disclosure statements where contributions to outgoings are payable by tenants, such that undisclosed outgoings cannot be recovered. This extends to ‘estimates’ of outgoings which are below the actual amount charged – if there is no reasonable basis for the estimate, the liability of the tenant is limited to the amount of the estimate;
- The definition of ‘outgoings’ will be extended to include service fees and management fees charged by the landlord. The Bill also allows tenants to receive compensation for costs incurred to enter into the lease, where they exercise their right to terminate the lease in the first six months due to failure of the landlord to provide the disclosure statement or if the disclosure statement is materially false/misleading;
- Landlords cannot charge a Tenant mortgagee consent fees;
- Non-retail uses are excluded from the operation of the Act, such as particular storage areas, ATMs, vending machines, signage displays, etc., as are market stalls except permanent retail markets; and
- Permanent retail markets are affected by the Act, defined as market stalls used for retail businesses, operating in a building or other permanent structure.
Additionally, more power will be given to the Civil and Administrative Tribunal (‘the Tribunal’) in hearing retail lease matters:
- Claims under the Act of up to $750,000 AUD may now be heard in the Tribunal, as opposed to the previous $400,000 AUD limit; and
- The Tribunal may order rectification of the lease, including correction of a mistake, giving effect to the intention of the parties or reflecting the actual disclosure of information between the parties. At present, rectification may only occur where both parties consent.
One of the biggest wins for our clients is the change relating to online sales. The Bill takes into account the growing use of online e-commerce transactions which occur alongside brick-and-mortar retail stores with the following amendments:
- Turnover rent payable by a tenant must not include any income received from online transactions (except click and collect/in-store transactions); and
- Landlords cannot require that income generated from online sales be disclosed (except as above).
These changes will soon apply, so it is a great time to start reviewing your retail leases.
If you need assistance in reviewing your retail lease, contact me at or call me at 1300 033 934 for a no-obligation quote.