Landlords need to comply with disclosure obligations when leasing retail premises. You will benefit from obtaining our assistance to ensure you comply with your obligations and responsibilities.

On 26 November 2016, new legislation changes the obligations of Landlords and Tenants.

Before sending any lease documents to the Tenant, contact us to review the documents. Do not give possession of the property to the Tenant until all documents are signed and exchanged and the initial rent, bond and costs are paid.

Retail Shop Leases Act

The first question to be answered when reviewing a Lease is whether the Retail Shop Leases Act applies.

Some common terms:

Lessor or Landlord: the owner of the premises
Lessee or Tenant: the person, company or trust renting the premises.
Assignor: the Tenant who transfers their interest in the lease to someone, eg when selling a business conducted on leased premises
Assignee: Someone who takes over an existing lease from a tenant > eg, when buying an existing business carried on at leased premises.
RSLA: Retail Shop Leases Act

Disclosure Obligations – RSLA

Retail Shop Leases Act imposes strict disclosure obligations upon both the landlord and the tenant, which we summarise below:

1. Lessor’s disclosure obligation

At least 7 days before a prospective lessee of a retail shop enters into a retail shop lease (the disclosure period), the lessor must give to the person a draft of the lease and a disclosure statement.
If the lessor does not comply or gives a defective disclosure statement, the lessee may terminate the lease within 6 months after the lessee enters into the lease and the lessor must pay the lessee reasonable compensation for damage suffered. Different obligations apply for a major tenant & there are some limitations and exceptions to these disclosure obligations.

 

2. Lessee’s disclosure obligation

Lessee Disclosure Statement

Before entering into a retail shop lease, the prospective lessee must give the lessor a disclosure statement.

Legal advice report

A prospective lessee or assignee of a retail shop (excluding a major lessee) must obtain a legal advice report from a Lawyer. The Lawyer must review the entire lease and provide the tenant with comprehensive advice before providing the report. The tenant must provide that report to the Landlord.

Financial advice report

A prospective lessee or assignee of a retail shop (excluding a major lessee) must obtain a financial advice report from an Accountant. The Accountant must review the entire lease and provide the tenant with comprehensive advice about the financial costs of the Lease before providing the report.

3. Effect of failure to comply with obligations

If a required document is not provided and the relevant lease or assignment is entered into, a retail tenancy dispute exists and the affected person, within 2 months, may ask the tribunal for an order that the document be provided.

4. Assignment of Lease

Where the Tenant is assigning the lease to a third party, further disclosure obligations apply.

Assignor’s & Assignee’s disclosure obligations

An assignor must give a prospective assignee a disclosure statement at least 7 days before asking the lessor to consent to the assignment.
An assignee must give a disclosure statement to the assignor before the lessor is asked to consent to the assignment.

Lessor’s and Assignee’s disclosure obligations

At least 7 days before an assignment of a retail shop lease is entered into (the disclosure period), the lessor must give the prospective assignee a disclosure statement (Section 1 above) and a copy of the lease. Different obligations apply for a major tenant.

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