Amendments to the Retail Leases Act 1994 (NSW) will take place, with the intent to increase transparency and certainty of deals made during the negotiation stage, introduce fair protections and increase operational efficiency. Landlords and tenants of retail properties will be affected by these changes, and while some of the following will have impacted both old and new leases, the majority of the changes will apply to leases entered into from 1 July 2017. Preston Rowe Paterson specialise in the valuation and property management of retail property. Recently announced changes to the Retail Leases Act will impact the management and valuation of retail property. At Preston Rowe Paterson, we monitor legislative reform to ensure that we keep up-to-date with changes that impact the services we provide. The main changes are:
- Removal of Section 16 of RLA NSW: five-year minimum lease term has been abolished, and accordingly, tenants are no longer required to obtain a solicitor’s or licenced conveyancer’s certificate if their lease term is less than five years.
- Disclosure of outgoings: tenants will no longer be liable to pay outgoings unless their liability to pay was disclosed in the disclosure statement. The landlord needs to disclose all outgoings they intend to recover, otherwise they will not be able to recover any of the outgoings not specifically stated. The tenant is only liable to pay the estimated amount stated in the disclosure statement, unless the landlord can prove that there was a reasonable basis for the estimate being disclosed.
- Management and service fees: landlords are now able to pass on fees charged to the tenants in relations to the management, operation, maintenance or repair of the premises, as an outgoing.
- Mandatory Lease registration: The landlord is required to lodge the lease for registration at Land & Property Information if it is made for a period of more than three years or if both parties have agreed that the lease is to be registered. The lodgement must be made within three months after the executed lease has been returned to the landlord (or persons dealing on behalf), though can be extended if there is a delay in obtaining mortgagee or consent from landlord.
- Excluded leases: Schedule 1A provides a list of types of leases to which the RLA does not apply to. This includes, but not limited to, ATMs, public telephones, internet booths, children’s’ ride machines, vending machines, communication tower). Furthermore, the RLA does not apply to stalls in a market unless it’s a permanent retail market.
- Bank guarantees: landlords will be required to return a tenant’s bank guarantee within two months of them completing their obligations under the lease. Landlords who fail to comply with this will be penalised with 50 penalty points, and tenants will have the right to compensate.
- Mortgagee consent costs: landlords will no longer be able to pass on mortgagee consent expenses onto their tenants.
- Demolition: the definition of the term ‘demolition’ will be broadened to apply to any repairs, renovations or reconstruction, of any substantiality. Section 35 of the RLA NSW will provide protection for tenants as termination by landlords will only be permitted if proposal for demolition is genuine, and cannot be carried out practicably without its premises being vacant.
There are significant changes to occur in regards to the appointment of specialist retail valuers. Presently, any disagreement on the appointment of a valuer for a valuation of a market rent will lead to parties making an application to the NSW Civil & Administrative Tribunal (NCAT) to request them to appoint a valuer. As of 1 July 2017, specialist retail valuers will be appointed through an administrative process with NSW Office of Small Business Commissioner upon application by either party. If you would like to enquire how the changes may affect your valuation or management of your retail property, please contact us.
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