NSW Retail Tenancy Laws

Exceptions under the Act

Certain types of lease transactions do not fall under the provisions of the Act, particularly, those premises being leased for the purposes of:-

• wholesaling;
• manufacturing;
• storage.

Other exclusions include:-

• shops that have a lettable area of 1,000 square metres or more;
• shops that are used wholly or predominantly for the carrying on of a business on behalf of the lessor by the lessee;
• any shop within premises where the principal business carried on is the operation of a cinema, bowling alley or skating rink and the shop is operated by the person who operates the cinema, bowling alley or skating rink;
• any premises in an office tower that forms part of a retail shopping centre.

Schedule 1 of the Act provides a list of businesses which fall under the regulation of the Act.  You should refer to this list if you are unsure about whether your lease is a retail lease or not.

The Act encourages Fair Conduct

The Act seeks to balance a lessor’s fundamental property rights with the interests of the lessee to ensure negotiations are conducted from a level playing field and that any disparity of bargaining power is minimised:  In short, it seeks to prevent unfair business practices, with the Government viewing lessees as the less powerful party in most leasing transactions. The result is an imposition of a number of obligations on the lessor.

Lessors need to be aware of their obligations, particularly their obligations to provide a retail lessee with certain documentation and information.

For all new retail Lease transactions, a lessor must provide the lessee with:-

• A copy of the unsigned draft Retail Lease Agreement at the commencement of Lease negotiations.A lessor cannot offer, invite an offer or advertise to enter into a retail lease unless the lessor has in his or her possession a copy of the proposed lease for the purpose of making it available for inspection by a prospective lessee – although it need not include the particulars of the lessee, the rent or the term.
• A Disclosure Statement.   The disclosure statement provides a lessee with an overview of the important aspects of the Lease, particularly, the financial obligations imposed by the Lease.This is to be provided to the lessee at least 7 days before entering the Lease.  That means a lessee can’t sign a lease “on the spot” without the opportunity to review the relevant documents and seek legal and financial advice if needed.  A seven (7) day buffer is effectively provided by the Act in this regard.

• The Information Brochure entitled “Retail Lessee’s Guide” as prepared by NSW Tenancy Unit is to be provided as soon as Lease negotiations commence, along with the proposed Lease.
• If all goes well and the lessee and lessor enter into a Lease, the lessor must provide the lessee with a copy of the final signed lease.

Lessee to return Disclosure Statement to Lessor

Within 7 days of receiving the lessor’s Disclosure Statement or as otherwise agreed, the lessee must provide the lessor with their own Disclosure Statement.  In it, the lessee confirms that it has received the Lessor’s Disclosure Statement, a copy of the proposed Lease and the Retail Tenancy Guide and confirms that s/he believes that they will be able to fulfil their obligations under the Lease including it’s rental obligations, outgoings payments and other amounts.

Term of lease

The Act stipulates that a retail Lease must not be for a term of less than 5 years.  Where a retail Lease is for a term of less than 5 years, it is automatically extended by such period as is necessary to bring the lease up to a 5 year term.

This will not apply if the lessee obtains a Certificate from a lawyer waiving this right.

Lessor cannot recover cost of preparing Lease Agreement

Under the Act, lessors cannot recover the cost of preparing the Lease Agreement and ancillary documentation.

Fortunately, its not all bad news for lessors because we provide a cost effective alternative for you to create your own retail legal documentation.

Professionally prepared Retail Tenancy Lease Kits are now available to help the DIY landlord negotiate and complete a compliant Retail Lease Agreement. The kit gives you all the tools you need to successfully complete a NSW Retail Tenancy Lease without spending thousands on legal fees.

To read more about our Retail leasing Kits click here.