Landlord and Tenant alert: Potential changes following exhibition of Retail Leases Amendment Bill (NSW) 2011

A draft of the Retail Leases Amendment Bill (NSW) 2011 was recently exhibited for public comment. Submissions on the Bill were due to the NSW Department of Fair Trading by mid-February 2011.

The Bill proposes the most significant revision of the retail lease legislation in NSW since the review in 2004-05 which led to the 2006 amendments.

The Bill proposes a raft of changes including disclosure obligations for renewal leases, additional lease registration procedures (including the requirement to lodge a "summary statement"), restrictions on passing on land tax costs, increased notice period for refurbishment works, increased disclosure for tenant's redecoration requirements and obligations to refund any unspent marketing contributions. If passed, the legislation will require landlords to reassess their current documentation and lease administration practices, and changes to both would inevitably be required.

A number of stakeholders have made their submissions to the Department of Fair Trading public, including:

·         Property Council of Australia (PCA): The PCA is particularly opposed to the proposed legislation. It states that it is underpinned by evidence of a failure of existing policy" and would result in increased administration burdens on landlords. The PCA drew particular objection with the proposed restriction on passing on land tax costs to tenants, the proposed increase to notice periods for works (from 2 to 6 months) and other changes which would unnecessarily increase administrative burdens and costs on landlords.

·         Shopping Centre Council of Australia (SCCA): The SCCA was highly critical of the legislation and noted that in a 17- page amendment Bill there is "not a single amendment to the benefit of lessors". The SCCA expressed concerns that changes such as the prohibition on passing on land tax, the increased notice period for refurbishments, new registration requirements and the requirement to refund any unspent marketing contributions will have the effect of unnecessarily increasing administration costs. This may reduce the attractiveness of development and direct investment in retail infrastructure away from NSW.

·         Law Society of NSW (LSNSW): The LSNSW questioned the need for many of the proposed changes with its main criticisms being that many of them do not necessarily add clarity to the legislation whilst other changes appear to impose "public policy objectives on a private commercial arrangement in a way that is not appropriate". The LSNSW draws particular objection to the proposal that the legislation provisions apply to any holding over period, its concern being that the change would have the effect that "the fluidity and practical convenience of a holding over by mutual consent is lost". The LSNSW is also of the view that it is inappropriate to impose penalty provisions on a landlord who does not lodge a lease for registration within a stipulated period of time (or seek an extension of the stipulated period from the Registrar).

The Department of Fair Trading is currently unable to provide any update on the progress of the Bill following the receipt of public submissions. Given the change of state government, it is not clear at this stage as to whether the Bill will proceed or in what form.

Bill Burrough | Partner

T +61 2 8233 9711

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E bill.burrough@dibbsbarker.com