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This article will take you through few changes that affects the Retail Lease provisions because of the recent amendments made under Retail Lease Amendment(Review)Act 2017 (NSW) assented on March 2017:
- Lessee entitled to compensation from the Lessor
Introduction of subsection 11(2A), allows a Lessee to recover compensation from the Landlord for items such as costs reasonably incurred for entering into the Lease including compensation for expenditure in connection with the Lessee’s fit-out. This section calls for the proper disclosure by the Lessor in their/its disclosure statement failure of which, attracts a penalty. The Lessee’s right to terminate the Lease for the failure of Lessor to provide an effective disclosure statement before entering into the Lease Agreement and the Lessee is may also be entitled to seek compensation (including Lessee’s fit out) for the same from the Lessor.
- Lessor to estimate accurately on outgoings
Introduction of section 12A, clarifies the Lessee’s liability for outgoings. The Lessor should provide the Lessee with an accurate estimated outgoing to ensure that the Lessee has reasonable clarity with respect to the payment to be made on outgoings. The Lessor’s Disclosure Statement plays a vital role due to the changes that has been brought in the Act.
- Time extended for registration
Section 15 of the Act is amended to give the Lessor an extra bit of time (3 months) for the registration of the lease which also includes the handover of the stamped and registered copy of the Lease to the Lessee.
- Changes in the mandatory lease period
Section 16, which required a Lease for a minimum 5-year period is repealed. This reform is more applauding from the part of both the Lessee as well as the Lessor. If the Retail Lease period together with any further term is for more than 3 years or both the parties have agreed to register the Retail Lease, the Lessor has to lodge the Retail Lease for registration within 3 months of the Lease being returned to the Lessor following the execution by the Lessee.
- Return of bank guarantee
The new section 16BA was introduced and it requires the return of bank guarantee by the Lessor to the Lessee within 2 months of the Lessee carrying out the performance of the obligations under the Retail Lease. The prompt return by the Lessor at the end of the lease term depends on Lessee fulfilling the obligations under the Retail Lease.
- Exclusion of online transaction in “Turn Over” rent
Introduction of sub-section20(1)(m), excludes the revenue generated from an online transaction for the purpose of determination of rent with reference to “turn over” for the goods or services that are delivered from a distribution centre or warehouse but not from the transactions that takes place from the retail shop or store.
Insertion of sub section 20(1)(m), states that the revenue that is generated from an online transaction will not be included as “turn over” for the goods that are delivered from a distribution centre or warehouse and not from the transaction from the retail shop or store.
- No duty to disclose online transaction by the Lessee
Section 47 was also introduced to protect the Lessee from the Lessor seeking information regarding the turnover of the Lessee’s business conducted online unless the supply of goods or services are rendered from a Retail Shop or the business takes place while the purchaser is at the Retail Shop.
- Few other changes:
1. Lessor is prohibited to recover mortgagee consent fee from the Lessee of the Retail Lease.
2. Demolition provisions changed in order to protect the Lessee from unnecessary eviction by the Lessor.
3. The jurisdiction limit of NSW Civil Administrative Tribunal has been raised from $400,000 to $750,000.
4. Changes in the excluded premises which includes ATMs, Children ride machines, internet booths, public telephones, certain storage areas and vending machines.
5. Agreement for Lease to be treated in the same way as the Lease.
6. Consent to the assignment of the Retail Lease which includes to provide the assignee with a new Lessor Disclosure statement and also a new ground for the withholding the consent by the Lessor in case of the Retail Lease is to be awarded by public tender.
The above article is only provided with an intention to provide general information about few changes only and is not a substitute for a legal advice. If you need any assistance or advice in relation to negotiation or preparation of retail or commercial lease agreement, please call Pannu Lawyers on 02 9920 1787.