Australian state governments have expanded their concept of consumer
protection to include small business consumers who are bargaining on a
playing field that is far from level, against owners of big shopping
centres. They seek to provide this protection by making sure that
prospective tenants have sufficient information to make a sound
business decision about entering into or renewing a Retail Shop Lease
Recent amendments to the Retail Leases Act of 1994
clearly offer further protection to tenants, the Government regarding
them as the less powerful party in most retail leasing transactions. As
a result, the Retail Leases Amendment Act 2005 requires greater responsibility and pro-active behavior from Landlord.
Act does not apply to a shop with a lettable area of 1,000 square
metres or more but will apply to a sub-lease of space in the shop if
the space which is sub-let has a lettable area of less than 1,000
square metres. A lease for a term of less than six months (without any
option of the lessee to renew) is excluded in NSW. A lease for a term
of 25 years or more or with a shorter term but with options to renew
which (if aggregated with the original term) is 25 years or more is
excluded in NSW. There is some discussion as to whether void areas,
such as, for example, stairwell areas and areas adjacent to mezzanine
floors, are part of the lettable areas as they are not be used to
provide the retail services for which the premises are dedicated even
if you pay rent on them. Be safe: use the lease even if areas such as
window planter boxes or car parks might extend the actual area over
Law in NSW is very clear: A landlord in a retail lease must not, in
connection with the lease, engage in conduct that that is misleading or
deceptive to a tenant or guarantor. A party who suffers damage by
reason of misleading or deceptive conduct of another party may make a
claim for compensation.
If a landlord fails to give
sufficient information it is guilty of Unconscionable Conduct. At the
disclosure stage, Landlords and their agents will now be required to
provide a copy of a retail tenancy guide to any prospective tenant as
soon as negotiations are entered into. The law requires the landlord to
give the tenant a disclosure statement at least seven days before
entering into the lease. Tough penalties apply if you don’t, or if the
statement is inaccurate.
In particular, the Act renders
void lease provisions which require any tenant’s payment for
contribution to fit out that has not been disclosed in a disclosure
statement. In most states law entitles the tenant, if she gives you the
proper notice, to withhold payment of rent until the disclosure
requirements are complied with (but any rent they do pay they can’t get
The only way a tenant cannot end the lease in case of inadequate disclosure is where:
(a) the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
(b) the tenant is in substantially as good a position as the tenant would have been if the failure had not occurred.
a lease is entered into by way of the renewal of a lease on the
exercise of an option, a landlord should make a fresh disclosure
Minimum lease period
have a lease of less than 5 years In NSW you need a certificate that
the tenant has received independent legal advice from a lawyer or
conveyancer not working for the landlord about the limited term,
otherwise the lease is deemed to be extended to 5 years.
new leases you have to provide the tenant with a copy of the unsigned
agreement (with the names and addresses of the parties included), a
disclosure statement, and a government – prepared information brochure,
the NSW the Retail Tenancy Guide. when negotiations are commenced, and
in no case less than 7 days before the lease is entered into. (That is,
negotiations have to go on for 7 days, you can’t just sign a tenant up
on the spot).
A copy of the proposed lease has to be
provided once it has been signed. The copies can be photocopies. If you
don’t supply a full copy of the lease, or don’t do it within 28 days of
it being signed, or the disclosure statement is wrong, the tenant can
also end the lease.
The tenant doesn't’t have to pay for
fit-out contributions if the liability to pay them is not disclosed in
the disclosure statement.
Landlords may be kept on their
toes throughout the duration of the lease with new powerful remedies
for tenants to withhold payments when information is not provided on
This can particularly occur in the case of providing
estimates or statements of outgoings. Strata levies are also to be
included in the list of outgoings.
In NSW you need to register a lease of over 3 years (including options)
at the Nsw Department of lands - Section 53(1) of the Real Property Act
1900 (NSW) refers to a lease for a term exceeding three years. As the
minimum term of a lease subject to the provisions of s16 is 5 years,
you should register all leases in NSW.
15 of the Act requires the lessor, in effect, to lodge promptly for
registration under the Real Property Act 1900 a retail shop lease which
is required to be registered. You don’t pay stamp duty on leases
commenced after 1.1.2008. See
In all states, provide the lessee with a copy of the Retail Lease Agreement promptly.
You can’t demand that a tenant pay you key money in NSW.
In NSW, give the tenant at least 6 months notice of a market review and
keep reminding them, in writing. NSW retail leases are limited to one
rental increase a year by an amount which can’t be specified in the
lease, but you can have as many fixed-sum or fixed-percentage increases
as you like.
Landlords are required to provide a written estimate of all outgoings,
before entering into the lease. This estimate must also be given to the
tenant one month before the start of each accounting period, of the
outgoings to which the tenant is liable to contribute under the lease,
(including rates, taxes and shares of things like car parking
contributions) otherwise the tenant doesn't’t have to pay them. If you
want the tenant to pay for a share of your expenses (other than usual
outgoings – such as marketing expenses) you have to provide an audited
can’t ask your tenant for capital costs or interest on your loans. In
NSW you can ask for some land tax and some (but not all) legal expenses
but the calculation method is somewhat complicated. If you can’t
calculate it in your base rent when you negotiate the lease, leave it
out. In line with other states you can ask for reimbursement in respect
of any assignment of the lease or a sublease, including investigating
anyone’s suitability as a tenant.
Landlords or their agents may ask for a bond, or security deposit. In
NSW the bond money must be lodged with the Director-General of the
Department of State & Regional Development.
tenant has the option to provide a bank guarantee instead of a security
deposit however any security deposit must be held in an interest
bearing account, the interest being added to and held with the
Breaches of the agreement
In the event that the tenant breaches the terms and conditions of the
Retail lease agreement, the landlord is required to give the tenant a
notice of breach and at least 14 days to rectify the breach prior to
the landlord entering the premises.
Renewal and Options to renew
In all states, if an option for renewal is not exercised at the right time it will be lost.
The tenant can exercise an option for renewal even if there has been a
breach of the lease – generally the lease will set out the provisions
for exercise of the option but in NSW refer to section 133E of the
Conveyancing Act 1919.
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