7 things landlords’ of shops in NSW should know but often don’t

Article By: Sarah Cappello Cappello Rowe Lawyers Sydney

A copy of the proposed Retail Shop Lease is to be available to prospective Tenants at the negotiation stage

Retail Lease Landlords are required to make a copy of the Lease available to prospective Tenants as soon as they enter into negotiations or they may face fines.

To avoid fines, have us prepare the draft Lease and Disclosure Statement BEFORE you offer a shop for lease.

Don’t take rent or give a Tenant keys before the Lease is signed and Disclosure Statement given

Retail Lease Landlords must give a Tenant a Disclosure Statement at least seven (7) days before a Retail Lease is entered into.

Not doing so can give rise to rights for the Tenant to pull out of the Lease within the first 6 months of the Lease.

Retail Lease Landlords need to make sure the Lease is not signed, and that access to the premises is not given, until 7 days have passed since the Tenant was given the Disclosure Statement. 

A Lease should be fully documented and signed by the Tenant in the form the Landlord requires before the Tenant takes possession or the Landlord accepts rent and a Landlord should continue to delay access and not accept any rent until the Lease is signed as section 8 of the Retail Leases Act says either giving access or taking rent triggers the entering into of a Retail Lease. 

Best practice is to see a solicitor early and make sure a Disclosure Statement is served at least 7 days before the Lease is signed, the keys handed over and rent accepted.

Sometimes a Tenant can end the Lease in the first 6 months and claim compensation from you

Retail Lease Landlords need to give a Tenant a Disclosure Statement. If they do not give a Tenant a Disclosure Statement 7 days before the Lease is entered into or if at the time it is given it contains false or misleading information, the Tenant can terminate within 6 months after the Lease is entered into AND the Tenant can recover costs reasonably incurred in connection with their entering into the Lease including expenditure on fitting out the shop!

Give Tenants Disclosure Statements within the time required and take the time to ensure the content of that statement is accurate.

A lease for more than 3 years MUST be registered.

The term of the Lease is a combination of the initial term and the options to renew so even if the initial term is only for 2 years but the option is for 3 years the Lease must still be registered as it has a combined term of 5 years.

Cash Deposits should be registered on the Personal Properties and Securities Register (“PPSR”)

When a Tenant provides a cash deposit this creates a security interest. If the interest is registered on the PPSR, the Retail Landlord will rank first in line to have that money.  If a Retail Landlord does not register its interest, the deposit will vest in the Tenant on insolvency and the Retail Landlord will be just another creditor in the pool of unsecured creditors. To avoid the additional administrative step of registration many Landlords now prefer bank guarantees over cash deposits.

A Retail Landlord has 28 days to provide consent or a refusal to an assignment

Beware and seek timely legal advice if your Tenant asks for the Lease to be assigned because if a Retail Landlord does not refuse or consent to an assignment of Lease within 28 days in most circumstances it will be taken to have consented!

A Retail Landlord has to give Tenants notice of its intentions at least 6 months before the Lease ends

Not less than 6 months but not more than 12 months before a Lease ends a Retail Landlord must notify the Tenant in writing as to whether or not they propose to offer a renewal or extension of the Lease (unless the Lease contains an option to renew). If a Lease is offered the terms offered must be specified in the notice.  Failure to do so may mean the Lease is extended until 6 months after the Retail Landlord gives the notice, but only if the Tenant gives the written notice required by the Retail Leases Act before the Lease would have otherwise expired.  Different time periods apply for leases of 12 months or less.

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