New South Wales Bills Explanatory Notes New South Wales Bills Explanatory Notes[Index] [Search] [Download] [Bill] [Help]
RETAIL LEASES BILL 1994*
NEW SOUTH WALES
EXPLANATORY NOTE
(This Explanatory Note relates to this Bill as introduced into Parliament)
The object of this Bill is to impose certain requirements and restrictions on leases for
retail shops and on the practices of lessors and lessees under those leases.
The expression "retail shop" means a shop in which any of the businesses listed in
Schedule 1 is carried on or which is situated in a retail shopping centre.
Generally the Bill applies to leases for a term of between 6 months and 25 years
where the shop concerned has a lettable area of less than 1,000 square metres. Because
of the definition of "lease" used in the Bill, the Bill will apply to licences of 6 months
or more as if they were leases. The Bill does not apply to some retail shops (as provided
by clause 5 of the Bill), such as shops that are used for the carrying on of a business by
the lessee on behalf of the lessor. Generally the Bill applies only to leases entered into
after the proposed Act commences.
PART 1--PRELIMINARY
Clause 1 states the short title of the proposed Act.
Clause 2 provides for the commencement of the proposed Act on a day or days to
be proclaimed.
Clause 3 defines certain words and expressions used in the proposed Act.
Clause 4 provides that notes in the text of the Bill do not form part of the proposed
Act and are provided to assist understanding.
Clause 5 lists retail shops which are excluded from the operation of the proposed
Act.
Amended in committee--see table at end of volume.
Clause 6 excludes certain leases from the operation of the proposed Act. Leases for
less than 6 months or more than 25 years are excluded, as are leases entered into before,
or entered into under agreements entered into before or options granted before, the
commencement of the proposed Act. The regulations can exclude other leases from the
operation of the proposed Act.
Clause 7 provides that the proposed Act overrides any provision of a lease or other
agreement that is inconsistent with the proposed Act.
Clause 8 provides that a lease is "entered into" as soon as the lessee takes up
possession or starts to pay rent (even if the lease has not been executed at that time), or
as soon as the lease is executed by both parties, whichever happens first.
PART 2--BEFORE THE LEASE IS ENTERED INTO
Clause 9 prevents a retail shop being offered for lease unless a proposed form of
lease is ready, and requires that a copy of the proposed lease be made available to a
prospective lessee as soon as negotiations commence.
Clause 10 provides that a party to a lease is liable to pay compensation for damage
suffered by another party as a result of a false or misleading statement or
misrepresentation made by the party.
Clause 11 requires that a lessee be given a disclosure statement at least 7 days
before the lease is entered into or renewed. The disclosure statement contains
information about the proposed tenancy. The lessee is given a right to terminate the
lease if the disclosure statement is not given or if it is materially false or misleading.
There are exceptions to this right if the lessor has acted honestly and reasonably and the
lessee has not been disadvantaged.
Clause 12 provides that a lessee is not liable to pay or contribute towards the cost of
any fixtures, fittings, equipment or services unless the liability is disclosed in the
disclosure statement.
Clause 13 provides that a lessee is not liable to pay more than a reasonable amount
in respect of legal or other expenses in connection with the preparation of the lease and
requires the lessor to provide the lessee with a copy of any account rendered to the
lessor in respect of those expenses.
Clause 14 prohibits a lessor or a person acting on behalf of the lessor from seeking
or accepting any payment in the nature of key-money in connection with the granting of
a lease.
Clause 15 requires the lessor to provide the lessee with an executed, stamped and
(where appropriate) registered copy of the lease within a certain time.
Clause 16 provides that a lease must be for a minimum of 5 years (including
extensions and options for renewal available to the lessee) unless the lessee waives this
requirement (pursuant to a procedure involving the issue of a certificate by a lawyer
who has explained the effect of this to the lessee).
PART 3--RENT AND OUTGOINGS
Clause 17 provides that rent and outgoings that are due to start being payable under
the lease when the lessee enters into possession are not payable until any lessor's fitout
that is also required is substantially complete. The clause also prevents a lessor denying
a lessee possession because the lessor's fitout has not been completed.
Clause 18 prohibits a lease containing certain provisions that require or relate to a
change to "base rent" (the rent that consists of a specified amount, as distinct from
"turnover rent" which varies with the lessee's turnover). Examples of prohibited
provisions are provisions that enable base rent to be changed more frequently than once
every 12 months (unless the change is a fixed amount or fixed percentage) and
provisions that reserve a discretion as to which method of calculating a change to base
rent is to apply.
Clause 19 implies certain provisions into leases that provide for review of rent to
current market rent. The provisions relate to what matters are to be taken into account in
determining current market rent and the procedure for the determination of that rent if
the parties cannot agree.
Clause 20 deals with turnover rent (rent calculated as a proportion of the lessee's
turnover) and provides for various receipts of the lessee to be excluded from turnover
for the purposes of calculating turnover rent. The clause also provides for an adjustment
between the lessor and the lessee for any underpayment or overpayment of turnover rent
resulting from actual turnover being different to expected turnover.
Clause 21 provides that the proposed Act does not prevent a lease requiring
payment of a special rent to cover the cost of fitout and other items provided by the
lessor.
Clause 22 prevents the recovery of outgoings from a lessee unless the lease
provides which outgoings are recoverable and how they are to be determined and
apportioned to lessees.
Clause 23 prevents a lease requiring a lessee to pay any capital costs.
Clause 24 prevents the recovery from a lessee of any amount in respect of
depreciation.
Clause 25 requires amounts recovered from lessees for the cost of provision by way
of a sinking fund for major items of repair or maintenance to be invested by the lessor
in an account bearing interest. Amounts in the sinking fund (and net interest earned on
those amounts) must not be spent by a lessor except for the purpose for which the
sinking fund was established.
Clause 26 limits the lessor's right to recover land tax from the lessee to land tax
calculated on a single holding basis (that is, as if the land were the only land owned by
the lessor).
Clause 27 requires the lessor to give the lessee written estimates of expenditure on
outgoings and to make a written expenditure statement available to the lessee detailing
all expenditure by the lessor on outgoings.
Clause 28 requires the lessor in most cases to provide a lessee with audited reports
on expenditure by the lessor on outgoings to which the lessee contributes. In some cases
copies of receipts can be provided as an alternative to the report being audited.
Clause 29 requires an adjustment between the lessor and the lessee in respect of
outgoings expenditure on the basis of the lessor's actual expenditure on outgoings
properly and reasonably incurred.
Clause 30 limits a lessee's liability for outgoings that are not specifically
attributable to the lessee's shop, with the limit based on the ratio of the lettable area of
the lessee's shop to the lettable area of all shops enjoying the benefit of the outgoing.
Clause 31 implies certain provisions into leases that provide an option to renew at
current market rent. The provisions relate to what matters are to be taken into account in
determining current market rent and the procedure for the determination of the rent if
the parties cannot agree.
Clause 32 provides a procedure which allows the lessee to require a determination
of current market rent between 6 months and 3 months before an option to renew the
lease at current market rent must be exercised, if the parties cannot agree as to what that
rent is to be.
PART 4--ALTERATIONS AND OTHER INTERFERENCE WITH THE
SHOP
Clause 33 requires a lessor to give the lessee at least 2 months' notice of any
alterations or refurbishment that are likely to adversely affect the business of the lessee.
The 2 month notice period can be shortened in an emergency.
Clause 34 confers an entitlement on the lessee to compensation from the lessor in
respect of certain disturbances to the lessee's "quiet enjoyment" of the shop.
Clause 35 imposes certain restrictions on the termination of a lease on the ground of
intended demolition, substantial repair or other action by the lessor that requires vacant
possession of the shop. The lessee must be given at least 6 months' notice of
termination on that ground, there must be a genuine proposal for the demolition or other
action concerned.
Clause 36 implies certain provisions into a lease to deal with the situation where the
shop is damaged. Liability for rent and outgoings is reduced in proportion to the
diminution in useability caused by the damage. Rights of early termination are also
conferred if the damage is not to be repaired.
Clause 37 prohibits a lease from containing provisions that limit the lessee's right to
employ persons of the lessee's own choosing (with certain exceptions for ensuring
minimum standards of competence and behaviour' protecting the lessor's fittings and
fixtures and ensuring compliance with industrial awards and agreements).
Clause 38 requires that provision in a lease requiring the lessee to refurbish or refit
the shop must contain general details of the nature, extent and timing of the required
refurbishment or refitting.
PART 5--ASSIGNMENT AND TERMINATION
Clause 39 permits the lessor to refuse consent to assignment of the lease if (and
only if) the proposed assignee proposes to change the use to which the shop is put or
has inferior financial resources or retailing skills compared to the current lessee, or the
current lessee fails to comply with the procedure for obtaining consent set out in clause
41. The lessor is entitled to withhold consent pending payment of legal and other
expenses but the lessee is entitled to have those expenses substantiated.
Clause 40 prohibits requirements for key-money in connection with the granting of
consent to assignment of a lease.
Clause 41 provides a procedure for the obtaining of consent to assignment of a
lease. Requests for consent must be in writing and the lessee must first have given the
proposed assignee an updated disclosure statement for the lease. The lessor must deal
expeditiously with a request for consent and is deemed to have granted consent 42 days
after the request is made unless the lessor has refused consent by then.
Clause 42 permits the lease to reserve an unfettered right for the lessor to refuse
consent to the subleasing, parting with possession of or mortgaging of the lease.
Clause 43 provides that a section of the Conveyancing Act 1919 (which also deals
with the rights of the lessor and lessee in respect of a proposed assignment) does not
apply to the extent that it is inconsistent with the proposed Act.
Clause 44 requires the lessor to notify the lessee between 6 and 12 months before
the lease expires as to whether or not the lessor offers the lessee a new lease of the shop.
Any offer made by the lessor is held open for 1 month. If the lessor fails to notify the
lessee as required by the clause, the lease can be extended at the option of the lessee
until the lessor has given the required minimum 6 months notice of intention.
Clause 45 prohibits requirements for key-money in connection with the renewal or
extension of a lease.
PART 6--MISCELLANEOUS
Clause 46 voids a provision of a lease that imposes trading hours on a lessee that
are unlawful.
Clause 47 requires a security deposit paid by a lessee to be held by the lessor on
behalf of the lessee in an account bearing interest and to account to the lessee for the net
interest on the deposit.
Clause 48 prevents the lessee being compelled to use the services of a particular
lawyer nominated by the lessor.
PART 7--ADDITIONAL REQUIREMENTS FOR RETAIL SHOPPING
CENTRES
Clause 49 provides that the proposed Part applies only to retail shopping centres.
Clause 50 requires turnover information obtained from lessees to be kept
confidential.
Clause 51 requires the lessor to make statistical information obtained by the lessor
available to the lessee if the lessee has contributed to the cost of obtaining it.
Clause 52 prevents a lessee being compelled to advertise except by a requirement
that the lessee contribute to the lessor's advertising expenses for the retail shopping
centre.
Clause 53 requires the lessor to make an advertising and promotion marketing plan
available to lessees who are required to contribute towards the advertising and
promotion of the retail shopping centre.
Clause 54 requires the lessor to make 6-monthly advertising and promotion
expenditure statements available to lessees who are required to contribute to the lessor's
advertising and promotion costs.
Clause 55 requires the lessor to provide a lessee with an auditor's report detailing
expenditure by the lessor on advertising and promotion.
Clause 56 requires unexpended advertising and promotion contributions to be
carried forward for future advertising and promotion.
Clause 57 implies provisions into a lease that allows the lessee to be relocated on
the ground of proposed refurbishment etc. of the retail shopping centre. The implied
provisions give the lessee certain entitlements, such as a minimum notice period of
relocation and an entitlement to a lease of alternative accommodation.
Clause 58 prohibits a lease from containing a provision that allows the lease to be
terminated on the ground of failure to achieve specified sales or turnover performance.
Clause 59 prohibits a lease from containing provision that prevents or restricts the
lessee carrying on business outside the retail shopping centre.
Clause 60 prohibits a lease from containing a provision that would prevent the
lessee joining or forming a tenants association.
Clause 61 deals with core trading hours in shopping centres (the hours during which
all shops are required to be open). The clause provides that the lessor .cannot change
core trading hours without the approval in writing of a majority of the lessees of retail
shops in the retail shopping centre.
Clause 62 provides for how various provisions of proposed Part 7 are to apply when
the shopping centre is subject to a strata scheme. Generally, obligations that fall on the
lessor will fall also or (in appropriate cases) instead on the body corporate or the centre
manager appointed by the body corporate.
PART 8--DISPUTE RESOLUTION
Clause 63 defines "retail tenancy dispute', as meaning a dispute between the parties
to a retail shop lease concerning the lease or the use or occupation of the shop. An
extended definition of lease applies so that leases in existence when the proposed Act
commences will also be subject to proposed Part 8. A definition of "court" is also
included, to include arbitrators.
Clause 64 provides for there to be a Registrar of Retail Tenancy Disputes.
Clause 65 deals with the functions of the Registrar. The principal function of the
Registrar is to arrange for the mediation of retail tenancy disputes. The Registrar is also
empowered to intervene in proceedings before a court or arbitrator concerning a retail
tenancy dispute.
Clause 66 deals with how a lessor or lessee refers a retail tenancy dispute to
mediation under the arrangements made by the Registrar.
Clause 67 provides that mediation is not limited to formal mediation and includes
preliminary steps for advising the parties as to their rights and attempting to resolve
their differences at an early stage.
Clause 68 requires mediation of a retail tenancy dispute to be attempted before the
dispute is litigated before a court (or heard by an arbitrator).
PART 9--ANCILLARY INTERPRETATION PROVISIONS
Clause 69 provides that a court (including an arbitrator) interpreting this Act is to
have regard to accepted practices and interpretations within the industry.
Clause 70 deals with the situation of a lease partly for a retail shop and partly for
other premises. The clause provides that the proposed Act applies to such a lease only to
the extent that it is a lease for a retail shop.
Clause 71 provides that "renewal" of a lease is constituted by the lessor and the
lessee entering into a new lease for the same shop (whether or not on the same terms).
PART 10--GENERAL
Clause 72 provides that extension of the term of a lease by operation of a provision
of the proposed Act does not operate for the purposes of the Real Property Act 1900
until a lease is registered under that Act giving effect to the extension, or a variation of
the lease is registered giving effect to the extension.
Clause 73 is a power to make regulations creating exemptions from the operation of
the proposed Act.
Clause 74 provides that the proposed Act binds the Crown.
Clause 75 deals with how proceedings for offences are to be taken.
Clause 76 is a general regulation making power.
Clause 77 provides for the Minister to review the proposed Act 5 years after the
date of assent.
SCHEDULES
Schedule 1 lists the businesses that are referred to in the definition of "retail shop"
in clause 3.
Schedule 2 contains the form of disclosure statement required by the proposed Act.