The Act offers certain protections and safeguards to tenants including placing stringent obligations on the landlord to provide full disclosure and transparency in the lease negotiation process before the tenant commits to the lease.
As a result, it is important that landlords are aware of their obligations and comply with their responsibilities under the Act.
The Act aims to deliver transparency and fairness by:-
- requiring the landlord to provide the tenant with a Disclosure Statement;
- establishing rules to ensure fair rent reviews;
- providing the tenant with a minimum 5 year lease term;
- regulating the tenant’s obligation to pay outgoings and other lease costs; and
- provide mediation and dispute resolution mechanisms, among other things.
Does the Act apply to my lease?
The Act applies to premises that are:-
- carrying on a business in a retail shopping centre; or
- for any business wholly or predominantly involved in the sale of goods by retail; or
- a specified business – ie. drycleaning, hairdressing, beauty therapy and treatments, shoe repair including key cutting and engraving, sale or rental of video tapes, DVD’s electronic games or other similar amusements.
It does not include a lease:-
- for a premises with a lettable area exceeding 1,000 square metres which is not a business prescribed by the regulations;
- held by a listed corporation or a subsidiary of a corporation;
- held by a body corporate whose securities are listed on the stock exchange outside Australia or a subsidiary of such a body corporate;
- an exempt business under the regulations: a Lease for the purpose of operating only a vending machine or automatic teller machine.
In Western Australia, the Act prohibits conduct that is unconscionable, misleading or deceptive. This can include failing to give sufficient information.
Following from this, landlords are required to provide prospective tenants with a Disclosure Statement at least 7 days before a Lease is entered into. The Disclosure Statement highlights key provisions of the Lease and the tenant’s monetary and other obligations, including payments relating to rental, outgoings and other Lease costs.
The Disclosure Statement must be accompanied by a:-
- copy of the proposed retail Lease;
- the current year’s annual estimates of expenditure for each item of outgoings/operating expenses; and
- a copy of the Tenant Guide.
Tough penalties apply if you do not provide these items – or if information contained in the Disclosure Statement is inaccurate, which may ultimately allow the tenant to terminate the Lease or avoid payment obligations which have not been disclosed in the Disclosure Statement.
A tenant cannot end the lease, however, in instances where:-
- the landlord has acted honestly and reasonably and should reasonably be excused for the defective Disclosure Statement;
- the tenant is in as substantially good position as if the defect had not occurred.
Commercial Tenancy Forms and Act
The landlord is required to provide the Disclosure Statement and Tenant Guide as specified by the Commercial Tenancy (Retail Shops) Agreement Act to prospective tenants to enable them to undertake a full and proper assessment of a lease proposal.
To read more about Retail Tenancy Leasing Kits click here.