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Retail landlords could be in for a shock – are you ready?

The new Retail Leases Act is set to commence on 1 July this year – it will be the biggest shakeup of retail leasing in years.

If you are a landlord with retail leases it is important that you make sure you comply with the new regime.  There are significant cost implications for landlords who don’t.

Some of the key changes include:

  • Outgoings – A tenant will not be required to pay any amount to a landlord for any outgoings (including management fees) unless the liability to pay was disclosed in the Lessor’s Disclosure Statement.  If an estimate for an outgoing is provided in the Lessor’s Disclosure Statement and the estimate is less than the actual amount charged and there was no reasonable basis for the estimate, then the liability of the tenant for payment is limited to the estimated amount.  For example, if a landlord estimates land tax of $5,000 but charges the Tenant $10,000 and there was no reasonable basis for the estimate of $5,000, then the Tenant is only required to pay $5,000.
  • Termination – A tenant may now claim compensation (including the cost of its fitout) if the tenant terminates in the first 6 months for reasons of the landlord’s failure to provide a Lessor’s Disclosure Statement or provided a Lessor’s Disclosure Statement that is misleading or incomplete.
  • Term – The 5 year minimum term for retail leases has been scrapped.
  • Mortgagee consent fees – It has now be legislatively clarified that a landlord cannot charge a tenant mortgagee consent fees.
  • Online sales – Revenue from online transactions will not be included in turnover for the purposes of calculating percentage rent.

It is critical that new retail leases proposed to be entered into after 1 July comply with the new regime.  Get prepared and get in touch now with Ross Fox, Senior Associate, or John Watson, Principal, to review your retail leases.

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