The Retail Leases Act 1994 was introduced to protect small to mid-size retailers and as anyone who has had dealings with it will understand that whilst this has generally been a positive move, due to the specific requirements and penalties provided for in the Act it has essentially created a specialist area in the commercial property field.
The Act itself is now to be further amended to clarify some areas and extend obligations in others, and this has further cemented retail investment as an area that will now more than ever require the assistance of specialist’s retail professionals and legal assistance for the general investor
Whilst not completely finalised and not in full some of the highlights of the proposed amendments are as follows:
Excluded - All leases on areas over 1,000 sqm
Excluded - Non-retail businesses in a multi-level retail shopping center when the area of retail use is under 25% on that level.
Excluded - Buildings were the area of retail use is under 25%
Excluded - ATM’s and vending machines
Options – The Landlord must now provide and updated disclosure statement within 7 days of the option being exercised by the tenant (subject to waiver provisions), the tenant then has 14 days from receipt of the updated disclosure statement to withdraw the option notice.
Subleases and Franchises - The landlord may be required to provide an updated disclosure statement within 28 days of request (at the tenant’s cost).
Assignments – The assignor must provide a disclosure statement to the assignee and also to the Landlord when they request consent to an assignment.
Market rent reviews - There are new provisions around timing for a tenant opting for an early market rent review before exercising the option
Insurance – Any excess paid on a claim is specifically excluded from outgoings
Budget and reconciliations – Failure by the Landlord to comply with the provision of these will now allow the tenant to withhold payments of outgoings until provided
Contracting out of the Act – More stringent provisions are provided to regulate other agreements associated with a retail lease
As noted above this is not a full assessment of the proposed changes that also address issues such as marketing, outgoings calculations, compensation, relocation, assignment liabilities and the transition to mention but a few.
Raine & Horne Commercial has specialist retail mangers that stay up to date with the ever changing landscape of retail and would be happy to assist you with your investment.
Contact Toby Sopp (Associate Director) for more information 07 3216 6666.
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