Retail Lease Disclosure

Posted on Feb 26, 2020 by Liam Tobin   |   Categories: Commercial & Business Law, Commercial & Retailing Leasing


It is important for all parties to understand their obligations before entering into a lease. The
Retail Leases Act 1994 (NSW) seeks to ensure that the important information is at hand
before entering into a retail lease.

Generally, a lease will fall within the definition of a Retail Lease for the purposes of the Act if
the premises are to be used for one of the retail uses listed in the Act, or if the leased
premises are otherwise in a complex that would be considered reasonable to be a retail
shopping centre.

Pursuant to section 11 of the Act, prior to commencement of a retail lease, the lessor must
provide to the proposed lessee a Lessor’s Disclosure Statement. The Lessor’s Disclosure
Statement must be in or very similar to the form prescribed under the Act, provided in writing
at least 7 days prior to the commencement of the lease.

The Lessor’s Disclosure Statement outlines important details of the proposed lease
including:

 term of the lease and option to renew;
 rent and rent review method;
 works, fit-out and refurbishment;
 outgoings and other costs;
 trading hours; and
 any possible disruptions, building alterations or renovations or road works.

Where the shop is in a shopping centre, information is also provided as to the turnover, floor
plan, anchor/major tenants and tenancy mix.

In addition to potential fines for a lessor’s failure to comply with the disclosure requirements
under the Act failure to comply can have very real consequences for the lease.

In the event that a lessor fails to provide a lessee with the required disclosure statement or
where the disclosure statement that was given to the lessee was incomplete or contained
information that at the time it was given was materially false or misleading, the lessee may
be able to terminate the lease at any time within 6 months after the lease was entered into
where the lessee has been disadvantaged.

If the lessee does validly terminate the lease due to this failure by the lessor, the lessee is
entitled to recover compensation from the lessor for costs reasonably incurred by the lessee
in connection with the lessee entering into the lease, including compensation for expenditure
by the lessee in connection with the fit-out of the retail shop.

Within 7 days of the lessee’s receipt of the Lessor’s Disclosure Statement, the lessee must
provide to the lessor a far less onerous Lessee’s Disclosure Statement as required by
section 11A of the Act, confirming:-
 receipt of the Lessor’s Disclosure Statement and proposed lease documents;
 whether legal advice has been sought;
 that the lessee can fulfil the obligations under the lease; and
 a list of any statements or representations by the lessor that the lessee has relied
upon, and that no other statements have been relied upon.

Where a lease is entered into pursuant to the exercise of an option to renew a prvious
lease, the Lessor and Lessee must provide Disclosure Update documentation updating the
information from the previously provided disclosure statements.

It is important that the disclosure documentation properly outlines all outgoings and
contributions that the lessee must pay under the terms of the retail lease. A provision in a
retail shop lease requiring the lessee to contribute toward the costs of finishes, fixtures,
fittings, equipment or services in or for the shop, or pay any outgoings is void unless outlined
or reasonably estimated in the retail disclosure documents.

The Act also places disclosure obligations on the parties to the lease where a retail lease is
to be assigned to an incoming tenant.

The current lessee must provide an Updated Lessor’s Disclosure Statement to the incoming
lessee at least 7 days before the assignment of the retail shop lease. This updated
disclosure comprises of a copy of the previous Lessor’s Disclosure Statement, together with
details of any changes over time.

Should the lessor fail to provide the current lessee with updated information within 14 days
of a request to provide it, the lessee may provide the updated information to the incoming
lessee, to the best of the current lessee’s knowledge with details of current outgoings.

It is important that the disclosure documentation is completed correctly to ensure that both
parties understand their obligations, and that the lessor’s obligations under the lease are
enforceable.

If you require assistance in relation to retail shop leases contact Baker Love Lawyers.