The NSW Retail Leases Amendment (Review) Bill 2016 was recently passed and will now become law.
The commencement date is yet to be proclaimed by Parliament. Research firm Leasing Information Systems provided a brief summary of the major points:
1. Jurisdictional Limit
NCAT can now determine retail lease disputes involving claims for up to $750,000.00. This will provide greater access to justice as currently the jurisdictional limit is $400,000.00.
2. No minimum five year term
Section 16 has been removed from the Act. That is, there is no longer the requirement that a retail lease must be for a minimum term of five years.
3. Compulsory Registration
Leases must now be lodged for registration within three months with penalties applicable for failure to do so. This period can be extended if there is delay by the mortgagee.
4. Copy of Executed Lease
The Landlord must now provide the Tenant with a copy of the signed Lease within three months after the Lease is returned to the Landlord. This period can be extended if there is delay by the mortgagee.
5. Bank Guarantee to be returned within 2 months
A Landlord must return a Bank Guarantee within two months after the Tenant completes performance of the obligations under the Lease, which secure the Bank Guarantee.
6. Compensation for Tenant who validly terminates in the first six months
A Tenant can now claim compensation (including the cost of its fitout) if the Tenant terminates in the first six months for failure by the Landlord to provide a Lessor’s Disclosure Statement or if the Lessor’s Disclosure Statement is misleading or incomplete.
7. Lessors Disclosure Statement
Lessor Disclosure Statement can be amended by agreement or by NCAT. The Lessor’s Disclosure Statement can now be amended in writing both before and after the Lease is entered into either by the parties themselves or by NCAT.
8. No Mortgagees Consent Fees
It is clarified that a Landlord cannot charge a Tenant mortgagee consent fees.
9. Limitation of liability for undisclosed outgoings
There has been a very significant amendment in the Act in relation to disclosure of outgoings.
A Tenant is not required to pay any amount to a Landlord in respect of any outgoing (including management fees) unless the liability to pay was disclosed in the Lessor’s Disclosure Statement.
If the Lessor’s Disclosure Statement provides an estimate and the estimate is less than the actual amount charged and there was no reasonable basis for the estimate, then the liability of the Tenant is limited to the amount of the estimate. For example, if a Landlord estimates land tax of $7,000 but charges the Tenant $14,000 and there was no reasonable basis for the estimate of $7,000, then the Tenant is only required to pay $7,000. It is very important that Lessor’s Disclosure Statements are completed with care. It includes management fees.
10. Agreements for Lease
The Amendment clarifies that the Act applied to Agreements for Lease.
11. Permanent Retail Market
The Act now can apply to a Permanent Retail Market which is defined as an assemblage of stalls, described as a market that are predominately used for retail businesses operating in a building or other permanent structure.
12. Applies to both proposed Tenants and Landlords
It has been clarified that the Act applies to proposed Tenants and proposed Landlords.
This may mean that if a Tenant pulls out of a deal and the signed Heads of Agreement provided that legal fees were payable because arguably there is no Retail Lease in place, this change may override such a claim.
The powers of NCAT to vary the Lease have now been significantly expanded such that NCAT can rectify a Lease in the following circumstances:
a) If the Tribunal is satisfied that the order is necessary to correct an error or admissions;
b) If the Tribunal is satisfied that the order is necessary to give effect the intention of the parties when the Lease was entered into or;
c) If the Tribunal is satisfied that the order is necessary to give effect to the actual disclosure of information between the parties
14. Registrar to appoint a Specialist Retail Valuer
Now the Registrar at the Office of the Small Business Commissioner rather than the Tribunal can appoint a specialist retail valuer to determine a market rent review when the parties cannot agree on the choice of valuer.
There is a minor amendment to the protection afforded by section 35 of the Act in relation to demolition such that it confirms that the Act applies whether the whole building or only part of the building is subject to demolition.
16. Online Sales
Revenue from online transactions are not to be included in turnover for the purposes of calculating percentage rent, except for transaction where goods and services are delivered or provided from or at the retail shop or where the transaction takes place whilst a customer is in the shop. A Landlord is prevented from seeking information regarding on line transactions, except for transactions where goods and services are delivered or provided from the premises or where the transaction takes place while the customer is in the store.
17. Rental Bonds
There will now be an online rental bond service.
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