Frequently Asked Questions

Who will the changes affect?

Why make the changes?

What administrative changes will there be and have efforts been made to keep administrative costs down?

When will the amended Act become law?

Does the Act cover a tenant who has an informal lease arrangement with the landlord?

There is a minimum five year lease, what if a tenant doesn't want to commit for five years?

What if a tenant has a short term lease and does not waive his or her right to a five year term?

What information will a tenant get from the landlord prior to signing a lease?

What information does a landlord have to tell a tenant about costs before the lease commences?

What changes have been made that will effect the operation of a lease?

What changes are there in assigning a lease?

How does the Act help in disputes about rent?

What about disturbances during a lease - who pays?

What rights does a tenant have if they have to relocate?

What information should marketing plans, and advertising and promotion statements include?

When will the new bond scheme begin?

How will the scheme operate?

If a tenant has not paid a bond, will the tenant have to pay a bond now?
What about getting the bond back?

Can a landlord advertise premises for lease if an existing lease is in place?

What do tenants and landlords need to know about the Administrative Decisions Tribunal?

Where can I go for advice?

Who will the changes affect?
Landlords and tenants of retail business – those shops of less than 1000 square metres, excluding car parking and unattached storage areas, located in shopping centres, arcades and malls and shopping strips or in stand alone shops.

There is a list of businesses considered as a retail shop at Schedule 1 of the Act. Full details can be checked by consulting www.austlii.edu.au to access the Act. However, if a business type is not listed in the Act, but is located in a shopping centre or arcade, it may be considered to be a retail shop.

Why make the changes?
The changes make sure the Act is up-to-date with the current issues in retail businesses. The amended Act was developed in collaboration with representatives from property, professional and retail leasing industries.

What administrative changes will there be and have efforts been made to keep down administration costs?
There are changes to the Act across all stages of the lease that are simple, transparent and easy to comply with. These include:

Where extra information from landlords has been sought, it is generally already collected. Where new processes have been introduced they are to make clearer the steps landlords and tenants need to take to comply with the Act.

Both parties in a retail lease will be better informed about what the lease requires of them. This will lead to better business planning and fewer misunderstandings.

When will the amended Act become law?
The amended Act will become law on January 1, 2006.

As a general principle, the amended Act will apply to all leases entered into after commencement of the Act. Exceptions are the amended disclosure statements and outgoings and estimates statements, for which a six month period applies before the statements are mandatory. Misleading or deceptive conduct provisions will extend to leases that were in place prior to commencement, but not to conduct that occurred before that date.

The retail leases bond scheme has a three month period before all existing leases with a cash security bond must use the scheme.

Does the Act cover a tenant who has an informal lease arrangement with the landlord?
Yes, the Act is the New South Wales legislation that regulates the leasing relationship between retail landlords and tenants. A lease does not have to be written, it can be a verbal agreement, relating to an arrangement that is for a period greater than six months, and is defined by the Act as a retail business. (see Question 1)

The Act will now apply to a tenancy comprised of successive short-term leases whose total terms exceeds 12 months, unless a waiver of the right to a five year lease term is given by the tenant, and has been signed by a lawyer or licensed conveyancer.

There is a minimum five year lease, but what if a tenant doesn’t want to commit for five years?
The landlord must advise a tenant of the right to a minimum five year lease, but the tenant and landlord can agree to a shorter term. If they do, a tenant must have his or her lawyer or licensed conveyancer sign a Section 16 certificate, and give it to the landlord within the first six months of the lease.

What if a tenant has a short term lease and does not waive his or her right to a five year term?
If a short term lease is extended to a five year lease by virtue of the operation of the Act, the landlord may increase the rent from the date of commencement of the additional period and then annually, in line with movements in the Consumer Price Index for Sydney, if the lease does not stipulate any other method for determining the rent.

What information will a tenant get from the landlord prior to signing a lease?
As well as a copy of the proposed lease, and the landlord’s disclosure statement, landlords will be required to give a copy of a retail tenancy guide, developed by the NSW Government, to any prospective tenant as soon as negotiations begin.

What information does a landlord have to tell a tenant about costs before the lease commences?
Landlords must give the tenant a Lessor’s Disclosure Statement at least seven days before the lease is signed. The Lessor’s Disclosure Statement includes critical information from the lease, set out in a short form, especially about the costs that the tenant will be required to meet.

Additions to the Lessor’s Disclosure Statement made by the amendments to the Act are:

For shopping centres, landlords will have to disclose:

and to the extent where it has been collected, provide:

Landlords are required to advise the costs of any works to be carried out by the landlord’s tradespeople in order to get the premises ready for fit-out. If the landlord requires a particular standard of construction for fit-outs, the lease or disclosure statement must contain a tenancy fit-out statement that contains the relevant information. The tenant will not be liable to carry out any fit-out if it is not covered by the statement.

These changes will give tenants better information to negotiate with the landlord before signing a lease, and will reduce unexpected losses to tenants and later disputes.

What changes have been made that will effect the operation of a lease?
There are a number of changes to provide greater clarity about how the expenses and outgoings of the landlord can be claimed from the tenant.

For instance, the definition of outgoings now makes clear that such expenses are to be directly and reasonably attributable to the operation, maintenance, and repair of the building.

In shopping centres, landlords will be required to provide a breakdown of contributions to be made towards the administration costs of running the centre and other fees paid to the management company, and further information on cleaning costs.

Tenants can withhold payment of contributions for outgoings if the landlord has failed to give the tenant the outgoings estimate or statement. Once the landlord provides the tenant with the estimate or statement, the tenant’s contribution must be paid within 28 days. No interest can be charged.

What changes are there in assigning a lease?
There is a new simplified process which will assist landlords and tenants. Tenants are required to inform the landlord if they intend to transfer their lease. A statement disclosing key facts about the person who it is proposed will take over the lease is prepared by the current tenant and signed by the landlord and the proposed new tenant. The proposed new tenant will be required to provide documentation showing their financial standing, and business experience.

The landlord must make a decision within 28 days of receiving the new tenant’s statement and documentation.

Tenants will be protected from paying the landlord any amounts payable by the new tenant, if they give the landlord and the new tenant the Assignor’s Disclosure Statement at least seven days before the assignment.

These changes will provide greater certainty for landlords and tenants and speed up the process of transferring or assigning leases. All parties will benefit from reduced business costs and a more certain procedure.

When transferring a lease to a new tenant, landlords may seek a replacement bond from the new tenant.

How does the Act help in disputes about rent?
Where a lease contains an option, the Act provides a process for a tenant to request, in writing, a determination of rent up to six months before a lease finishes. Where a tenant seeks this early determination of the current market rent, the tenant has 21 days to exercise the option after they have been notified of the determination. If necessary, the term of the lease is to be extended until the end of the 21-day period.

Where a landlord and tenant can’t agree about current market rent at the time a lease is renewed, they can apply to the Administrative Decisions Tribunal to have the rent determined by a specialist retail valuer, at the equal cost of the parties. Both the tenant and the landlord will be able to present their case in writing to the valuer.

If one or both parties disagrees with the valuation, a further application can be made to the Administrative Decisions Tribunal to appoint a panel of two valuers to review the current market rent determination made by the specialist retail valuer. Both parties pay the costs of the review panel equally, unless the review panel determines market value to be within 10 per cent of the original valuation, in which case the party who applied for the review pays the whole cost.

The valuers’ decision will be final unless the Tribunal finds a fundamental error has been made, in which case the decision may be set aside.

What about disturbances during a lease – who pays?
Landlords have certain responsibilities under the Act to notify a tenant about alterations or other disturbances to the building the shop is in that may disrupt the capacity to trade. The landlord is required to rectify problems that inhibit the flow of customers, and to compensate the tenant if loss or damage is not rectified as soon as reasonably practicable.

A lease may provide that the landlord is excluded from liability to pay compensation for a disturbance to a tenancy, provided the landlord gave a statement to the tenant before the lease was entered into. This statement must include the following details:

The inclusion of a general statement to the effect that disturbances may occur during the term of the lease, without setting out those details stated above, is not acceptable.

What rights does a tenant have if they have to relocate?
A tenant is entitled to be paid reasonable fit-out costs and legal costs in connection with relocation. If the parties do not agree on the amount of reasonable costs of the relocation, the amount is to be determined by a quantity surveyor appointed by agreement between the parties or, if there is no agreement, appointed by the Australian Institute of Quantity Surveyors.

What information should marketing plans, and advertising and promotion statements include?
Half-yearly and annual advertising and promotion expenditure statements must include details about the amounts contributed by the landlord and by the tenant, any unspent amounts and amounts to be carried forward into the next period. They must also include information about expenditure relating to the shopping centre in which the shop is located.

A tenant can withhold payment of contributions for advertising or promotion costs if the landlord has for 10 business days after being requested in writing to do so, failed to:

The tenant must pay the withheld contributions within 28 days after the landlord provides the plan, details or statement. No interest can be charged.

When will the new bond scheme begin?
The new bond scheme begins on January 1 2006.

How will the scheme operate?
The scheme will operate similarly to the residential bond scheme. Bond monies will he held and invested by a funds manager appointed by the NSW Government. The NSW Government will ensure the bond is available for return at the end of the lease, according to the disbursement of funds agreed between landlord and tenant.

Forms to use to lodge bonds are available from the Retail Tenancy Unit on telephone 1300 79 55 34.

If a tenant has not paid a bond, will the tenant have to pay a bond now?
No. If the lease does not require payment of a bond, the new bond scheme will not apply. Also, landlords and tenants are still free to choose not to have a cash bond as a condition of a lease, and a landlord cannot unreasonably refuse a tenant’s choice to use a bank guarantee or some other form of security.

What about getting the bond back?
Under this scheme, the NSW Government will ensure the bond is available for return at the end of the lease, according to the disbursement of funds agreed between landlord and tenant.

Should the tenant and landlord not agree on the return of the bond, such disputes must be referred to the Registrar of Retail Tenancy Disputes for mediation in the first instance. If mediation is unsuccessful a dispute may then referred to the Administrative Decisions Tribunal, Retail Leases Division.

Once the dispute has been resolved then the bond will be paid out of the fund.

Can a landlord advertise premises for lease if an existing lease is in place?
Landlords cannot publicly advertise the availability of retail premises during the term of an existing lease, unless:

What do tenants and landlords need to know about the Administrative Decisions Tribunal (ADT)?
The ADT provides an independent external review of administrative decisions, and can consider claims under the Retail Leases Act if a tenant or landlord believes that the Act has been breached and compensation should be paid.

Claims can relate to retail tenancy matters covered by the Act, and to unconscionable conduct claims.

Section 62B of the Act outlines the issues the ADT will consider when determining whether conduct is unconscionable. Both tenants and landlords are prohibited in engaging in unconscionable conduct.

New coverage for the ADT has been made in recent amendments. These include:

• No party to a lease can engage in conduct that misleads or deceives another party to the lease, or that is likely to mislead or deceive another party to the lease. The injured party may make a claim for compensation as a retail tenancy claim.
• The ADT may decide to accept claims within a further three year period after the initial three year limitation period expires.
• The monetary limit on the ADT’s jurisdiction has changed to $400,000, calculated on a net basis after setting off each party’s claims against the other.
• The ADT will now have a clear role in dealing with appeals arising from claims relating to both retail tenancy and unconscionable conduct.
• Appeals directly to the Supreme Court continue to be available on a point of law for all claims.
• If proceedings to an unconscionable conduct claim are transferred by the ADT to the Supreme Court, any part of the proceedings relating to a tenancy claim may also be transferred.

Where can I go for advice?
The Retail Tenancy Unit provides timely and cost effective information and a dispute resolution service for parties involved in retail leases. Mediations are conducted by a panel of independent professional mediators with retail lease experience and/or by Retail Tenancy Unit staff. For further information, ring the Unit on 1300 79 55 34 or visit the website at www.retail.nsw.gov.au