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Reminder to landlords of retail premises

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The Retail Leases Act 2003 (‘RLA’) has been with us since 1 May 2003. Despite the fact that the RLA has been operational for some time, Landlords are still not familiar with its provisions and are not complying with some key obligations imposed upon them pursuant to the RLA.

We have found that many landlords are extremely vigilant about ensuring that the Lease itself complies with the RLA, but many of the procedural requirements in the RLA are not well known and are not being consistently observed.

It is timely to remind landlords of some of their procedural responsibilities under the RLA and the consequences of non-compliance.

  • The obligation to provide a copy of the proposed Lease and Information Brochure published by the Small Business Commissioner to a prospective tenant at the time negotiations for the Lease commence
  • The obligation to provide a Disclosure Statement and a copy of the proposed Lease to a prospective tenant at least 7 days before the tenant enters into a lease (section 17). Provided that the tenant has served notice on the landlord requiring the provision of a disclosure statement between 7 and 90 days after entering into the lease the consequence of not providing a disclosure statement is:
    • the tenant can withhold payment of rent until it is given a disclosure statement
    • the tenant is not liable to pay the rent from the date it gives the notice until the disclosure statement is given
    • the tenant can terminate the lease at any time before the end of 7 days after the disclosure statement is given
  • If a tenant has exercised an option to renew a lease or is entitled to do so or the parties have agreed to renew a lease, there is an obligation on the landlord to provide its tenant with a disclosure statement. Such disclosure statement must be provided at least 21 days before the expiry of the tenant’s current term. The consequences of non-compliance are the same as for not providing a disclosure statement described above
  • If the lease contains an option to renew there is an obligation upon the landlord to notify the tenant, in writing, of the last day by which the option must be exercised. Such notice must be given at least 6 months but not more than 12 months before the date on which the option is exercised by the Tenant. The consequence of non-compliance is that the date  by which the option must be exercised is extended by 6 months from the date the landlord actually gives the notice and the tenant may terminate the lease (section 28)
  • If the lease does not contain an option to renew, there is an obligation upon the landlord to notify the tenant, in writing, at least 6 months but no more than 12 months before the lease is due to expire, of whether or not the landlord intends to offer a renewal of the lease

    If the landlord intends to offer a new Lease to the Tenant the offer must specify the terms of the new Lease. The consequence of non-compliance is that the Lease continues for a period of 6 months from when notice is given and the tenant can terminate the lease (section 64)

    Care should also be taken by a landlord in giving a notice to its tenant offering to renew the lease on terms specified in the notice. If negotiations ensue with the tenant and these continue beyond the expiry of the term of the lease into holdover and the negotiations ultimately break down then, arguably, under RLA a further notice is required to be given by the landlord to the tenant that the lease will not be renewed with the consequence that the lease continues for a further 6 months. To avoid this problem many landlords are now serving notice upon tenants advising that the lease will not be renewed and then proceeding with lease negotiations on a ‘without prejudice basis’

  • The obligation to provide the tenant with a copy of the fully signed lease within 28 days after the tenant has signed the lease or such longer period agreed to in writing by the parties. The consequence of non-compliance is that the tenant can terminate the lease at any time within 28 days of the later if the tenant receiving a copy of the lease or entering into the lease (section 22)
  • The obligation to notify the Small Business Commissioner of lease details within 14 days of a lease being signed by the parties, the consequence of non-compliance is a possible penalty of approximately $1,000 (section 25)
  • The obligation to prepare a written statement that details all expenditure by the landlord, in each of the accounting periods during the term of the lease, on account of outgoings to which the tenant is liable to contribute. This statement must be in accordance with Accounting Standards and provided within 3 months of the end of the accounting period. It must also be accompanied by a report from a registered auditor but does not need to b accompanied by an audit report if the outgoings are for water council rates, insurance and GST (section 47)
  • The obligation to maintain the structure of and fixtures in the premises, the plant and equipment at the premises and all appliances, fittings and fixtures provided relating to utilities and services at the same condition at the time the lease was entered into (section 52)

Author: Evelyn Marcou