The RMB Business and Commercial Law Division explains the updates to the Retail Leases Act 1994, which sets out the rights and responsibilities of lessors and lessees under a retail lease.
A retail lease is a lease for a shop that is less than 1000 square metres in size, sells and supplies goods and services and is a retail business. The lease needs to be for at least six months and less than 25 years.
The Retail Leases Regulation 2022 is a new principal Regulation under the Act, replacing Schedule 1 of the Act that listed types of retail businesses. The new Regulation adds gymnasiums and fitness centres, including yoga, barre, pilates and dance studios; and small bars with a maximum capacity of 120.
The Regulation removes uncertainty and clarifies that these businesses are covered by the Act.
Under Section 7, the Act will override what the lease says if there is an inconsistency between the two. It is important for both lessors and lessees to be aware of their rights and obligations under the Act because failure to comply can result in fines and provisions of a lease being deemed unenforceable.
Here are some of points in the Act that lessees and lessors need to be aware of:
- A lessor must provide a lessee with the proposed lease, a disclosure statement and a copy of the retail tenancy guide;
- Lessors must disclose any and all outgoings they intend to recover from the lessee with an estimate of the amount of each outgoing;
- Lessors must ensure that lessees are notified of the lessor's decision to consent or withhold consent to an assignment of a retail shop lease within 28 days of the request and provision of required information by the lessee;
- A retail lease for a term of three years or more (including any option period) must be registered by the lessor within three months after the lessee's signed lease is returned to the lessee;
- Whilst lessees can be required to pay the costs to register the lease, lessors cannot pass on their costs to prepare the lease to the lessee;
- If the lessor has proposed to relocate the lessees during the term of lease, the lessor will have obligations to pay the lessee's reasonable fit-out costs and legal costs for relocating premises.
RMB can assist lessees and lessors comply with the act, your first step should be to contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.