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LANDLORD’S DISCLOSURE OBLIGATIONS TO TENANTS RENEWING LEASES UNDER RETAIL SHOP LEASES ACT 1994 (‘RSLA’)

LANDLORDS NEED TO BE PREPARED

Retail shop leases commonly contain an option for a tenant to renew or extend the lease on expiry of the initial term.

If you are a landlord of a retail shop, you need to be aware of your disclosure obligations under the RSLA if a tenant exercises its option to extend the term of its lease.

The RSLA contains strict, time sensitive disclosure obligations for landlords.

When do you need to provide disclosure statements?

Disclosure statements are a fundamental component of the retail leasing process. Despite this, there is often confusion over the timing and contents of statements required when a tenant exercises an option under the lease.

When an existing tenant exercises an option to renew its lease, the landlord must serve a current disclosure statement on the tenant within 7 days of receiving notice of a tenant’s exercise of option (unless the tenant has provided a waiver notice to the landlord, waiving this requirement, in the notice).

Within 14 days of receiving such disclosure statement, the tenant may provide the landlord with a written notice stating that its renewal is withdrawn, despite already having exercised the option, without explanation.

What if the landlord fails to disclose, or provides defective disclosure?

Failure to disclose or serving a defective disclosure statement on a tenant can have costly and detrimental effects for landlords.

A landlord’s failure to provide a current disclosure statement (or giving a defective disclosure statement) gives tenants the right to terminate, within 6 months (- notwithstanding the tenant has already given notice exercising the Option !).

[This termination right also applies to prospective lessees entering into new leases.]

Under the RSLA a defective statement is one which is incomplete in a material particular or contains false or misleading information about a material particular.  (A statement is not defective merely because it omits information irrelevant to the lease, or if not in the approved form.)

[A landlord may however, object to a tenant’s termination notice if the landlord acted honestly and reasonably in giving the disclosure statement and if the tenant is in substantially as good a position as it would have been if the statement was not defective.]

Conclusion

It is vital that landlords understand their disclosure obligation to tenants exercising an option to renew a lease (as well as to prospective lessees).

Failing to disclose on time, or providing a defective disclosure statement can be a costly mistake for landlords. It can come as a shock if a tenant exercises a right to terminate the lease 6 months after the landlord provides (or fails to provide) a disclosure statement to the tenant.

We have considerable expertise and many years experience in advising on leases (whether retail, commercial or industrial) on behalf of both landlords and tenants.

This article only provides very general advice, and should not be relied on without proper legal advice on your specific circumstances.

If you would like more information about an existing, or new lease, or an assignment of lease, please call us on (07) 5443 4866 or email advice@gwlaw.com.au.

If you need help, or have a question get in touch with us today.