The Retail Leases Amendment Act commenced on 1 January 2006 and introduced some significant changes to the Retail Leases Act which will affect most landlords and tenants.
Set out below is a brief summary of some of the changes.

1. Security Bonds
There is now a system for the lodgement of cash bonds with the Director General of the Department of State and Regional Development in a way similar to the lodgement of residential bonds with the Rental Bond Board. All existing bonds must be lodged with the Director –General by 1 April 2006. Forms are available from the Department of Fair Trading and require the signature of both the landlord and the tenant. Each lodgement form is individually numbered, so photocopies may not be used.  Bank Guarantees will not be affected. Landlords who do not comply may face penalties of up to $2,200.00
In relation to leases entered into after 1 January 2006, the bonds must be lodged no later than 20 business days after the later of the date of receipt of the bond and the date the lease becomes binding.
An application to draw down the deposit jointly by the landlord and tenant can be done at any time, but if one party only wishes to apply for the whole or part of the deposit, it may only do so after termination of the lease.

2. Short term leases
(a) Section 6, currently provides that the Act does not apply to leases for a term of less than 6 months without any right for the lessee to extend the lease. A new section 6A provides the Act will apply to successive short term leases whose total terms exceed 12 months. Once a tenant has been in possession for 12 months the Act will then apply to the lease on and from the day on which the tenant has been in possession or entitled to be in possession of the shop for more than one year and any subsequent lease where possession or entitlement to possession has not been interrupted. The amended Act, however, does not apply to leases where the landlord and the tenant have agreed that the tenant will remain in occupation under holding over provisions in the lease.
(b) The lessee may now give a section 16 certificate at any time during the first 6 months of the lease.  If a section 16 certificate is not given and the lease becomes a lease for a term of 5 years. Section 21A now provides a mechanism for rent increases in accordance with increases in the CPI.

3. Retail Tenancy Guide
Section 9 is amended to require a prospective lessor to make a copy of the retail tenancy guide prescribed by or identified in the regulations available to any prospective lessee as soon as negotiations are entered into. The regulations are not yet available but the retail tenancy guide is available at the Department of State and Regional Development’s Web site at www.retailtenancy.nsw.gov.au.

4. Disclosure Statements
There have been changes to the disclosure statements exchanged by the landlord and the tenant prior to the lease being entered into and the disclosure statement that applies when the lease is being assigned. Landlords must now disclose additional information including:

• details of current legal proceedings in relation to the lawful use of the premises or the shopping centre;
• the right of tenants to a 5 year lease if they want it, is to be made clear;
• in relation to shopping centres:
  • the expiry date of leases of major tenants;
  • the intended future tenancy mix;
  • more detailed information about outgoings;
  • whether the landlord is able to assure the tenant that the current tenancy mix will not be altered by introducing a competitor of the tenant;
  • to the extent that it has been collected, the annual sales of the centre, the traffic count for the centre and the annual turnover of specialty shops in the centre.

5. Fitout

(a) If a landlord requires a tenant to pay for work carried out by the landlord to enable the tenant to fit-out the premises, a maximum amount or a formula is to be agreed before the lease is entered into and the tenant does not have to pay more than the agreed amount.
(b) if the landlord requires a particular standard of fit out by the tenant then the lease or disclosure statement must contain a tenancy fit-out statement that contains the relevant information.

6. Assignment
To obtain the benefit of a release from continuing financial obligation under a lease, the assignor must give the assignor’s disclosure statement at least 7 clear days before the assignment is affected. The time for the landlord to give approval to an assignment is reduced from 42 days to 28 days.

7. Other changes

• relocation;
• negotiations for the renewal and extension of retail shop leases;
• promotion expenditure statements and the non provision of marketing plans and advertising and promotion statement;
• market rent review and dispute resolution;
• expansion of the list of businesses to which the Act applies.

For further information, please contact Jennifer Graves.