Retail Leases in NSW

This law outlines the rights and obligations of both landlords and tenants in the context of retail leasing. Here’s a summary of key provisions:

1. Scope of the Act:

• Applies to Retail Premises: The Act covers leases for premises used wholly or predominantly for the sale or hire of goods, or for retail services.
• Exclusions: The Act does not apply to leases of premises with a floor space of more than 1,000 square meters, agricultural land, or certain government premises.

2. Disclosure Obligations:

• Landlord’s Disclosure Statement: Landlords must provide a disclosure statement to prospective tenants at least seven days before the lease is signed. This statement includes essential information about the lease, such as rent, outgoings, and lease terms.
• Tenant’s Disclosure Statement: Tenants must provide a disclosure statement to the landlord, acknowledging they have received and understood the landlord's disclosure.

3. Minimum Lease Term:

• Minimum Five-Year Term: The Act stipulates a minimum lease term of 5 years, including any options to renew. However, tenants can waive this right by signing a certificate that confirms independent legal advice has been received.

4. Rent and Rent Reviews:

• Initial Rent: The initial rent is agreed upon by the landlord and tenant.
• Rent Review Mechanisms: Rent can be reviewed using various methods, such as fixed increases, percentage increases, or market reviews. The Act prohibits rent reviews based on turnover unless explicitly agreed upon.
• Market Rent Reviews: For market rent reviews, if the landlord and tenant cannot agree on the rent, it must be determined by an independent valuer.

5. Outgoings:

• Responsibility for Outgoings: Landlords can recover outgoings (expenses related to the operation, maintenance, or repair of the premises) from tenants only if they are clearly outlined in the lease and the disclosure statement.
• Audit of Outgoings: Tenants have the right to request an audit of outgoings to ensure they are being charged correctly.

6. Security Bonds:

• Maximum Security Deposit: Landlords can require a security deposit, but it must not exceed the equivalent of three months' rent.
• Bond Handling: The security bond must be lodged with the NSW Small Business Commissioner.

7. Assignment and Subleasing:

• Assignment of Lease: Tenants have the right to assign (transfer) their lease to another party, subject to landlord consent, which cannot be unreasonably withheld.
• Subleasing: Tenants may sublease the premises, but the sublease must comply with the Retail Leases Act and is usually subject to landlord approval.

8. Lease Termination:

• Termination by Tenant: Tenants can terminate the lease if the landlord fails to provide a disclosure statement, or if the statement is materially false or misleading.
• Termination by Landlord: Landlords may terminate the lease if the tenant breaches the lease terms, subject to the provisions of the lease agreement.

9. Dispute Resolution:

• Mediation: The Act encourages dispute resolution through mediation, often facilitated by the NSW Small Business Commissioner, before escalating to court proceedings.
• Tribunal or Court: If mediation fails, disputes can be resolved through the NSW Civil and Administrative Tribunal (NCAT) or the courts.

10. Compensation:

• Tenant Compensation: Tenants may be entitled to compensation if the landlord disrupts the business operations (e.g., through construction) or breaches the lease.

11. Disclosure of Sales Information:

• Turnover Information: If rent is determined based on turnover, the tenant must provide accurate sales information to the landlord, but the landlord must keep this information confidential.

This summary provides an overview, but specific situations may require tailored legal advice. It is advisable for both landlords and tenants to seek professional guidance when entering into or negotiating retail leases.

For more information, contact:

Michael McHugh BA LLB (Hons)

Accredited Specialist – Property Law

Australian Legal Practitioner