The Retail Leases Amendment Act 2020 (‘Amendment Act’) made a number of changes to the rights and obligations of both landlords and tenants under the Retail Leases Act 2003 (‘Act’).
Landlords and tenants should be aware of the following changes, which came into effect on 1 October 2020, unless otherwise stated.
Essential Safety Measures
As a result of changes to the definition of ‘outgoings’, landlords can charge tenants for the costs of repairing and maintaining essential safety measures.
Essential safety measures are defined in the Building Regulations, and include things such as fire extinguishers, smoke alarms and sprinkler systems.
The Amendment Act also makes a change to the Building Act 1993, so that tenants cannot recover costs for repairing and maintaining essential safety measures from the landlord if they have agreed to pay these costs under the lease.
These provisions came into effect on 23 September 2020.
Provision of landlord’s disclosure statement and proposed lease
The Amendment Act makes changes to the requirements for landlords to provide a disclosure statement and proposed lease to the tenant.
Tenants must now be given these documents at least 14 days before entering into a retail premises lease. If the landlord fails to do so, the lease term will not commence until 14 days after the landlord has provided a disclosure statement and proposed lease.
If there are changes to the lease before the tenant enters into the lease, the landlord has to provide an updated disclosure statement.
A landlord’s failure to notify the tenant of changes to the proposed lease now carries a penalty of $41,305 for corporations and $8,261.50 for individuals.
Security deposits
The Amendment Act has introduced a 30-day time limit for the return of the security deposit to the tenant at the end of the lease, provided that the tenant has performed all of its obligations under the lease.
Landlord’s disclosure on renewal of lease
After the landlord and the tenant have agreed to a renewal of lease, the landlord must provide a disclosure statement to the tenant. Under changes made to the Act by the Amendment Act, this disclosure statement must now set out any changes to the previous disclosure statement provided to the tenant.
The information in the disclosure statement must be current as at a date within three months of the disclosure statement being given to the tenant.
Landlord to give tenant certain information before option to renew lease expires
Landlords are now required to give tenants a notice relating to renewal of the lease that states:
- the last date to exercise the option to renew the lease;
- rent payable for the first year of the renewed lease;
- availability of an early rent review and cooling off period; and
- any changes to the most recent disclosure statement given to the tenant.
If the landlord fails to give the tenant all of the information at least 3 months before the last date to exercise the option to renew the lease, the last date to exercise the option will be delayed to 3 months after the landlord give them the required information. If that date falls after the expiry of the lease, the lease will be extended to that date. The tenant can give the landlord written notice terminating the lease on a specified date before that date.
Early rent reviews
The Act now includes a mechanism for tenants to request an early rent review if the lease provides for a market rent review.
The tenant may make a written request for an early rent review within 28 days of receiving the required notice from the landlord regarding the lease renewal.
The tenant must notify the landlord whether it is exercising its option to renew the lease on or before the last date to exercise the option.
If a specialist valuer is appointed, they must determine the market rent at least 14 days before the last date to exercise the option. If they do not, the date to exercise the option is extended to 14 days after the tenant is notified of the valuation.
If the extended date to exercise the option is after the end of the lease, and the tenant exercises the option, the term of the lease will be extended to that date.
Cooling off period – option to renew lease
The Amendment Act introduces a cooling off period for tenants who exercise an option to renew a lease. Provided that the tenant has not requested an early rent review, the tenant has 14 days from the exercise of the option to inform the landlord in writing that they no longer wish to renew the lease.
When a tenant cools off on a lease renewal, the term of the lease will be extended by 14 days and the tenant cannot exercise an option to renew the lease.
Know your rights and obligations
So if you are a tenant or a landlord in an existing retail lease or considering entering into a new retail lease, contact Sutton Laurence King Lawyers today to discuss what the Amendment Act means for you and your business.
Cale opt Hoog is a Lawyer in the Sutton Laurence King Lawyers commercial team.