Retail Leases Act NSW

Read the current NSW Retail Leases Act alongside the proposed lease and disclosure statement. This guide concerns documentation and general legal information; Envision Legal does not conduct NCAT or court proceedings.

For tenants: what to do before you sign

• Get the disclosure statement and compare it line by line with the lease. Differences are leverage.
• Model the total occupancy cost: base rent, outgoings, promotion levy, fit-out, bank guarantee and personal guarantees.
• Check the permitted use is wide enough for how the business will evolve, and whether exclusivity applies.
• Understand option exercise dates. Missing one by a week can cost the business its premises.
• Know the make-good position before fit-out, not at the end.

For landlords: where claims come from

Almost all tenant claims trace to three things: a disclosure statement that was late, incomplete or inconsistent with the lease; outgoings recovered that were never properly disclosed; and a rent review conducted outside the prescribed process. Each is avoidable at the documentation stage and expensive to fix at NCAT.

When to involve a lawyer

• You have been handed a lease and disclosure statement to sign.
• The proposed term and options do not support your fit-out investment or business plan.
• Outgoings, a promotion levy or land tax are being charged and you doubt they were disclosed.
• A market rent review, assignment, relocation or make-good demand is on foot.
• You are buying a business where the lease is the real asset — see due diligence when buying a business.

Frequently asked questions

Does the Retail Leases Act apply to my lease?

Generally it applies to leases of retail shop premises in NSW — those in a retail shopping centre, or used wholly or predominantly for one of the business types listed in Schedule 1 of the Act. Premises above a certain lettable area, and some specific tenancy types, fall outside it. Whether your lease is covered is a question of the premises and the permitted use, not what the lease calls itself.

What is a disclosure statement?

A prescribed document the landlord must give the tenant at least seven days before the lease is entered into, setting out rent, term, outgoings, fit-out, permitted use and centre information. If it is not given, or is incomplete or materially misleading, the tenant may have a right to terminate within the first six months and to compensation.

Is there a minimum lease term?

NSW has no current statutory five-year minimum retail-lease term. The former requirement was removed in 2017. Negotiate the initial term and renewal options to suit the business and its fit-out investment; check the applicable law for older arrangements.

Can the landlord charge whatever outgoings it likes?

No. Outgoings must be disclosed and are only recoverable to the extent they were disclosed. Land tax recovery is restricted, the landlord must provide annual estimates and audited statements, and capital works and certain centre costs cannot be passed through as outgoings.

Where are retail lease disputes heard in NSW?

Retail tenancy disputes generally go to mediation through the NSW Small Business Commissioner first, and then to NCAT. Mediation is a precondition in most cases, which keeps costs well below court litigation — one reason it pays to raise an issue early rather than let arrears or a make-good dispute build.

Keep reading

• Commercial and retail leases
• Commercial lease lawyers Sydney
• Business contracts