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Retail lease reforms lost opportunity

22 February 2017

The retail leasing industry and small businesses throughout NSW have been let down by the government’s failure to introduce a standard mandatory lease for strip shops. 

REINSW President John Cunningham said reforms introduced into state Parliament on 21 February were a major opportunity to make doing business easier for tenants, agents and landlords on the retail strip. 

“REINSW pushed for a standard mandatory lease for strip shops, a similar concept to the residential tenancy agreement (RTA), which would allow for a lease to be entered into on the spot and would make dispute resolution easier,” Mr Cunningham said. 

“If retail leasing had gone this way the retail sector would have enjoyed huge economies and efficiencies. Instead, leaving this out of the reforms is an opportunity lost,” Mr Cunningham said. 

The Retail Leases (Amendment) Bill 2016 was passed through NSW Legislative Assembly following a lengthy review process with the some 44,500 retail businesses throughout NSW affected by the legislation. 

REINSW put forward a submission, which included the key recommendation of a mandatory lease. Read the submission here.

What are the key amendments?


Disclosure of outgoings: Tenants will not be liable for financial obligations that have not been disclosed before the lease was entered into.

The only exemption is new statutory charges that arise under legislation after the landlord's disclosure statement has been provided, if a general obligation to pay statutory charges had been disclosed to the tenant.

Mandatory Registration: The Bill introduces a requirement for leases of more than three years to be registered. This amendment aims to increase certainty for tenants and protect their rights if ownership of the property is transferred.

Registration will also provide tenants with access to market information from the land titles register to improve decision making.

Executed copy of the Lease: Landlords will be required to provide tenants with an executed copy of the lease so that tenants have evidence of their deal.

The timeframe for providing an executed copy of the lease has been aligned with the timeframe for registration to enable both processes to be performed simultaneously, with exemptions for delays beyond the control of the landlord.

Removing the minimum five year term: The minimum five year term has been repealed to allow parties flexibility to determine the length of a retail lease. This amendment will reduce red tape for landlords and tenants.

Bank guarantees: Regulation for the return of bank guarantees is introduced that prohibits landlords from holding on to bank guarantees, after a tenant has discharged all obligations under a lease.

Online Bond Scheme: The Bill makes changes to the operational provisions of the Retail Bond Scheme to transition it to a digital platform in 2017.

Specialist Retail Valuers: The Bill transfers the administrative process for appointing specialist retail valuers from the NSW Civil and Administrative Tribunal (NCAT) to the Office of the New South Wales Small Business Commissioner (OSBC) and increases the number of valuer industry associations identified in the Act.

Lease Assignment: The Bill consolidates and streamlines the provisions which govern assignment of a lease, including additional exemptions from the landlords' obligation to consent to the assignment of a lease, relating to the requirements of a public tender process.

Online Sales: The Bill prohibits collection by landlords of a tenants' turnover data from online sales where goods or services are not collected or provided from the shop or shopping centre where the transaction takes place while the customer is at the retail shop. The amendment ensures that any turnover data collected, must be connected to the bricks and mortar shop.

Increase access to justice:
The Bill increases the financial jurisdiction of NCAT from $400,000 to $750,000 and enables NCAT to rectify a lease or disclosure statement and make orders for compensation.

Clarification of existing provisions: The Bill removes the exemption from the Act of premises located in an office tower to clarify that only retail shops will come under the operation of the Act.

This is to ensure that the application of the Act applies as originally intended, to commercial "retail leases" which are defined as any agreement under which a right of occupation of premises is granted for the predominant use as a retail shop.

"Retail shop" businesses are specified in the Act (in Schedule 1) and also include businesses located in retail shopping centres. Office towers located above shopping centres or shopping arcades, are distinguished from shopping centres, and will not be captured by the operation of the Act.

The Bill clarifies that demolition clauses in leases can only be used for demolition or renovation proposed to a building, or part of a building, where the demolition or renovation cannot be carried out practicably without vacant possession.