Summary of changes Retail Leases Act review

The Retail Leases Act 1994 regulates the relationship between landlords and tenants of retail shops. The Retail Leases Amendment (Review) Bill 2016 has been passed by Parliament to amend the Act on limited issues.

Disclosure of outgoings

The Bill streamlines and clarifies the landlords’ disclosure obligations to increase certainty in the deal. Tenants will not be liable for financial obligations that have not been disclosed before the lease was entered into.

The only exemptions are new statutory charges that arise under legislation after the landlord’s disclosure statement has been provided. The tenant will be liable if a general obligation to pay statutory charges had been disclosed to them.

Mandatory registration

The Bill introduces a requirement for leases of more than three years to be registered. This amendment will increase certainty for tenants and protect their rights if ownership of the property is transferred.

Registration will also provide tenants with access to market information from the land titles register to improve decision making.

Executed copy of the lease

Landlords will be required to provide tenants with an executed copy of the lease so that tenants have evidence of their deal. The timeframe for providing the copy has been aligned with the timeframe for registration to enable both processes to be performed simultaneously, with exemptions for delays beyond the control of the landlord.

Removing the minimum five year term

The Bill repeals the minimum five year lease term to allow parties flexibility in determining the length of a retail lease. This amendment will reduce red tape for landlords and tenants.

Bank guarantees

Regulation for the return of bank guarantees will be introduced that prohibits landlords from holding on to bank guarantees for more than two months after a tenant has discharged all obligations under a lease.

Online bond scheme

The Bill makes changes to the operational provisions of the Retail Bond Scheme to transition it to a digital platform in 2017.

Specialist retail valuers

The Bill transfers the administrative process for appointing specialist retail valuers (who determine market rent) from the NSW Civil and Administrative Tribunal (NCAT) to the NSW Small Business Commissioner and increases the number of valuer industry associations identified in the Act.

The amendment will enable criteria to be developed in consultation with industry for the training and experience requirements for specialist valuers.

Lease assignment

The Bill consolidates and streamlines the provisions that govern assignment of a lease to make the process easier and clearer. It includes additional limitations from the landlords’ obligation to consent to the assignment of a lease relating to the requirements of a public tender process.

Online sales

The Bill prohibits collection by landlords of a tenants’ turnover data from online sales where goods or services are not collected or provided from the shop or shopping centre where the transaction takes place while the customer is at the retail shop. The amendment ensures that any turnover data collected must be connected to the bricks and mortar shop.

Increased access to justice

The Bill increases the financial jurisdiction of NCAT from $400,000 to $750,000 and enables NCAT to rectify a lease or disclosure statement and make orders for compensation.

Clarification of existing provisions

The Bill removes the unnecessary exemption from the Act of premises located in an office tower and clarifies that only retail shops come under the operation of the Act. This will ensure that the application of the Act applies as originally intended, to retail leases, which are defined as any agreement under which a right of occupation of premises is granted for the predominant use as a retail shop. Retail shop businesses are specified in the Act (in Schedule 1) and also include businesses located in retail shopping centres.

Office towers located above shopping centres or shopping arcades, are clearly distinguished from shopping centres, and therefore, will not be captured by the operation of the Act.

The Bill clarifies that demolition clauses in leases can only be used for demolition or renovation proposed to a building, or part of a building, where the demolition or renovation cannot be carried out practicably without vacant possession.

Industry code of practice

The Act will not regulate of the collection and use of tenant’s turnover data from sales and occupancy costs. This has been addressed through a voluntary code of conduct, Retail Code of Industry Practice—The Reporting of Sales and Occupancy Costs, which has been negotiated by industry to address information asymmetry.

Signatories to the code (namely the Australian Retailers Association, the National Retail Association, the Pharmacy Guild of Australia and the Shopping Centre Council of Australia) represent parties to retail leases inside large shopping centres.

Enquiries about the code should be directed to the code's signatories named above.