RETAIL LEASES ACT (NSW) ITEMS TO BE AWARE

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1 RETAIL LEASES ACT (NSW) ITEMS TO BE AWARE 20 June 2015 AUSTRALIAN INSTITUTE OF CONVEYANCERS Catherine Hallgath, Partner Mills Oakley Lawyers 1 TOP 10 ITEMS TO BE AWARE OF IN THE RETAIL LEASES ACT (NSW) Introduction Retail leases are heavily regulated, as you are aware. The provisions of the Retail Leases Act (NSW) 1994 (Act), will often be implied into a lease and so apply regardless of the provisions specified in the lease. This presentation covers the top 10 items to be aware of in the Act and what to do in relation to them. We will cover some items in more detail than others. 1.2 Top 10 list Our top 10 list for today is below. 1 Definitions: Retail Shop and Retail Lease. 2 When a Lease is entered into. 3 Procedure for entering into a retail lease including: (i) (ii) (iii) (iv) When a disclosure statement must be issued; The rights a tenant has if it does not receive one or the information contained in the disclosure statement is incorrect. What to do or look for if a lease has a term of less than 5 years; and How to deal with security bonds. 4 Rent reviews. 5 Assignments. 6 Reporting requirements: Outgoings and marketing funds. 7 Ending a retail lease. 8 Advertising retail premises for lease while they are occupied. 9 Requirement to mediate disputes before going to NCAT. 1

2 10 Notices how to serve them. 2 DEFINITIONS In New South Wales, the Act applies to retail shop leases in NSW subject to the exceptions specified in the Act. In order to understand what a retail shop is and to obtain a full picture of the ambit of the Act, it is necessary to also review the definitions of retail shopping centre and retail shop lease. 2.1 Definition of retail shop A retail shop is defined by section 3 as premises that: are used, or are proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses in Schedule 1 of the Act (whether or not in a retail shopping centre); or are used, or are proposed to be used, for the carrying on of any business (even if it is not a business in Schedule 1 of the Act) if those premises are in a retail shopping centre. Licences of vacant land may not be premises under the Act. Manly Council v Malouf (2004) 61 NSWLR 394; 12 BPR 22, Definition of retail shopping centre Retail shopping centre is defined by section 3 as a cluster of premises that has all of the following attributes: (c) (d) at least 5 of the premises are used wholly or predominantly for the carrying on of 1 or more of the businesses listed in Schedule 1 of the Act; the premises are all owned by the same person, or have (or would if leased have) the same landlord or the same head landlord, or comprise lots within a single strata plan; the premises are located in 1 building or in 2 or more buildings that are either adjoining or separated only by common areas or other areas owned by the owner of the retail shops; and the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade. The promotion of a group of shops and other tenancies as a shopping centre to prospective tenants only and not to the general public is sufficient to satisfy the requirement for promotion as a shopping centre. Mehevi Pty Ltd v Stromboli Pty Ltd [2005] NSWADT 29 2

3 2.3 Definition of retail shop lease A retail shop lease is defined by section 3 as any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop. The definition is very broad and includes: express or implied agreements; oral as well as written agreements and agreements that are partly oral and partly written; and rights to occupy that are not for exclusive occupation. The Act will apply to a lease with a term of 6 months or more. If a lease has a term of less than 6 months and the tenant remains in the premises, the Act will apply once the tenant has been in the premises for one year. (s6a) 3 WHEN A RETAIL LEASE IS ENTERED INTO A lease is considered to have been entered into on the earliest of the following dates: (c) when a person enters into possession of the retail shop as a tenant under the lease; begins to pay rent as a tenant under the lease; and the date both parties sign the lease. If the tenant does either of the actions in paragraph or, the lease has been entered into even if the lease is not signed by either party. A deposit paid to secure premises is not rent paid as a tenant under the lease. (s 8) A lease of a retail shop may not be subject to the Act if it has a term of less than 6 months and no right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise). (s6a). It is important to be aware of the exception to this in s6a(2) which provides that there is an exception to the rule in s6a(1) for lease that are successive leases, extended or renewed leases for more than one year. That section provides that if the tenant has been in possession or entitled to be in possession of the retail shop without interruption for more than one year (whether by means of a series of 2 or more leases or by means of an extended or renewed lease or leases, or by any combination of those means), the Act can apply to that lease: (i) (ii) from the day on which the tenant has been in possession or entitled to be in possession of the shop for more than one year; and any succeeding lease or leases of the shop to the tenant, where the possession or entitlement to possession is not interrupted. 3

4 4 PROCEDURE FOR ENTERING INTO A RETAIL LEASE 4.1 Landlord and agent must have a copy of the lease The landlord and its agent (if any) must have a copy of the proposed retail shop lease before offering to enter into a retail shop lease, inviting an offer to enter into a retail shop lease or indicating by written or broadcast advertisement that a retail shop is for lease. s 9, Retail Leases Act 1994 (NSW) The lease does not need to contain the particulars of the tenant, rent or term. The lease must be in the possession of the person or entity making or inviting the offer to lease. Accordingly, if an agent is making or inviting the offer to lease, the agent must have a copy of the proposed retail lease in its possession. 4.2 Lease and retail tenancy guide made available to prospective tenant The landlord must make the proposed retail shop lease and a copy of the Retail tenant s guide available to any prospective tenant as soon as the person enters into negotiations concerning the lease. s 9, Retail Leases Act 1994 (NSW) 4.3 Consider if the tenant needs to provide a certificate under s 16 of the Act where the lease term is under 5 years Minimum 5 year term Section 16 of the Retail Leases Act 1994 (NSW) (Act) provides that a tenant is entitled to a lease with a minimum term (including any option term) of 5 years.s 16, Retail Leases Act 1994 (NSW) If a lease has a term of less than 5 years, then the term will be extended so that the lease will not breach this section, for example: a lease of a term of 3 years with no option for a further term would be extended to a term of 5 years; a lease for a term of 3 years containing an option for a further term of 1 year will be extended to a term of 4 years; and a lease for a term of 3 years with a 3 year option gives the tenant the ability to occupy the premises for a total of 6 years and so does not breach s 16 of the Act. Section 16 of the Act will not apply to a lease to the extent that its application would be inconsistent with the terms of a head lease under which the landlord holds the retail shops 16(5), Retail Leases Act 1994 (NSW) Certificate can waive the minimum five year term Section 16 of the Act will not apply if the tenant s solicitor or licensed conveyancer provides a certificate which states that: the tenant requested the lawyer or conveyancer to provide the certificate; the lawyer or conveyancer has explained to the tenant the effect of s 16(1) and (2) and that the giving of this certificate will result in those subsections not applying to the lease; and 4

5 any other matters required by the Regulations. When the certificate must be provided The certificate can be provided by the tenant to the landlord before or within 6 months after the lease was entered into. If the lease is entered into before the tenant provides the certificate to the landlord, then s 16 of the Act will continue to apply to the lease until the tenant does provide the certificate to the landlord. When the tenant provides the certificate to the landlord, the extension of time granted by s 16 of the Act will cease to apply.s 16(3), Retail Leases Act 1994 (NSW) 4.4 Disclosure statement given to tenant at least 7 days before the lease is entered into The landlord must provide a disclosure statement for the lease at least 7 days before the retail shop lease is entered into. The disclosure statement must be in the prescribed form, but only to the extent it is relevant to the lease concerned. The form of disclosure statement can be found on the NSW Department of Fair Trading website Opens in a new windows 11(1), Retail Leases Act 1994 (NSW) The disclosure statement must have the lessee s disclosure statement required by s 11A of the Act attached to it to be complete. The disclosure statement does not need to be in the same layout as the layout of the prescribed form.s 11A, Retail Leases Act 1994 (NSW). Consequences of failure to provide the disclosure statement as required If the landlord does not provide a disclosure statement in accordance with s 11(1) of the Act or the disclosure statement given to the tenant either:ss 11(2) & (3), Retail Leases Act 1994 (NSW) was incomplete; or contained information that was materially false or misleading when the disclosure statement was given to the tenant, then the tenant may terminate the lease at any time within 6 months after the lease was entered into unless: the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure to serve a complete disclosure statement or the inclusion of the materially false or misleading information; and the tenant is in substantially the same position as the tenant would have been if the failure had not occurred. If the tenant terminates the lease under s 11 of the Act, the tenant remains liable under the lease for the period of time prior to the termination.s 11(5), Retail Leases Act 1994 (NSW) The failure to provide a disclosure statement will not prevent a landlord from charging a tenant outgoings. The sole remedy for the failure to provide a disclosure statement is the right to terminate the lease within 6 months after the lease was entered into, subject to the limitation in s 11(3) of the Act. Trust Company of Australia Ltd v Skiwing Pty Ltd (2006) 68 NSWLR 366; [2006] NSWCA 387 s 11(3), Retail Leases Act 1994 (NSW) 5

6 Giving a landlord s disclosure statement is making a representation Giving a landlord s disclosure statement to a prospective tenant is making a representation by the landlord to the tenant as to the information in the disclosure statement. s 10(2), Retail Leases Act 1994 (NSW) If the information in the landlord s disclosure statement is false or misleading, then the tenant may have an action for compensation. See Misleading and deceptive conduct. s 10(1), Retail Leases Act 1994 (NSW) When a lease is entered into A lease has been entered into on the earlier of:s 8(1), Retail Leases Act 1994 (NSW) the tenant entering into possession of the retail shop as a tenant under the lease (even if the lease has not been signed); the tenant beginning to pay rent under the lease (even if the lease has not been signed). The Act notes that money paid in advance as a deposit to secure premises is not rent paid under the lease; and both parties signing the lease. 4.5 Tenant to provide tenant s disclosure statement to landlord within 7 days of receipt The tenant must provide the tenant s disclosure statement to the landlord within 7 days after receiving the landlord s disclosure statement. The time period for returning the tenant s disclosure statement can be extended by the agreement of the parties. s 11A, Retail Leases Act 1994 (NSW) If the tenant makes a representation in the tenant s disclosure statement given to a prospective landlord that the prospective tenant has sought independent advice, or as to statements or representations relied on by the prospective tenant in entering into the lease, the tenant has made a representation to the landlord. If those representations are false or misleading, then the landlord may have an action for compensation. s 10(2A), Retail Leases Act 1994 (NSW) 4.6 Provide tenancy fitout guide to tenant A landlord of a shop in a retail shopping centre who requires a particular standard of construction for a fitout to be carried out by a tenant, must provide the relevant information relating to the standard in a tenancy fitout statement (or guide).s 13A, Retail Leases Act 1994 (NSW) The tenancy fitout guide must be with the landlord s disclosure statement or with or included in the lease or any agreement for the lease of the shop. The tenant is not liable to carry out any fitout of the kind described in s 13A(1) of the Act to the extent that fitout is not covered by the tenancy fitout guide. 4.7 Items tenant must provide to landlord before receiving access to the premises 6

7 A landlord will commonly require a tenant to provide the following items before it will give the tenant access to the premises: a correctly signed lease in registrable form, in duplicate; certificate under s 16 of the Act (if required); the security required by the lease (either a bank guarantee or security deposit); certificates of currency for the required insurance; and required cheques. The requirement for the tenant to return these items to the landlord before receiving access is a practical one and not a requirement of the Act. 4.8 Landlord to obtain its mortgagee s consent to the lease 4.9 Landlord to send security bond to Retail Bond Scheme If the landlord has received payment of the security in cash or by cheque (rather than by bank guarantee), the landlord must deposit the security with the Retail Tenancy Bond Board 20 business days after the later of: the date the security is received by the landlord; and the date on which the lease becomes binding on the parties. s 16C, Retail Leases Act 1994 (NSW) The obligations in this section also apply to the landlord s agent Landlord to meet timeframes for signing, registering and returning lease to tenant A landlord must provide the lease signed by the landlord to the tenant within the following timeframes: if the lease is not going to be registered, within 1 month after the lease is returned to the landlord after payment of stamp duty. Stamp duty is not currently payable on leases in NSW. Accordingly, the most appropriate practice would be to return the lease signed by the landlord to the tenant within 30 days after receiving it from the tenant; and if the lease is going to be registered, the landlord must lodge the lease for registration within 1 month after the lease is returned to the landlord s lawyer after payment of stamp duty and must provide the tenant with a signed and registered lease within 1 month after the lease is returned to the landlord or its lawyer after registration. s 15, Retail Leases Act 1994 (NSW) The timeframes above are extended for the time necessary to obtain the consent from a head landlord or mortgagee. 7

8 5 RENT REVIEWS 5.1 Restrictions on the adjustment of Rent under the Act Rent review in retail leases is highly regulated. The relevant sections are sections 18, 19, 19A, 31, 31A, 32 and 32A. I summarise the clauses briefly below, however, I do not propose to consider them in detail in this paper as that is a subject large enough for a separate paper! A retail shop lease must not: provide for change to base rent: (i) (ii) less than 12 months after the lease is entered into; or less than 12 months after any previous change to that rent, except a change by a specified amount or specified percentage. (section 18(2)); reserve or have the effect of reserving to one party a discretion: (i) (ii) as to which of 2 or more rent review methods will be used to carry out a particular review; or as to whether or not the rent will be reviewed on a particular occasion. A clause in breach of these prohibitions is void. (section 18(3)); (c) (d) provide for the rent to be reviewed in accordance with whichever of 2 or more methods will produce the highest rent. A clause in breach of these prohibitions is void. (section 18(3)); and must not prevent the rent from falling on a rent review or limit the amount by which the rent can fail on a particular rent review. A rent review provision is void to the extent that it breaches this section. (section 18(4)). Section 19 implies a market rent review clause into a lease for use in a midterm market rent review. Section 31 implies a market rent review clause into a lease for use in a market rent review which determines the rent payable by a tenant during the first year of an option lease. Sections 19A and 31A contain directions to the valuer concerning confidentiality of the information the valuer receives during the rent review and makes the valuer liable for damages if the valuer breaches those directions. Section 32 allows the tenant to request that the market rent be determined between 3 and 6 months before the last day for the exercise of the option under the lease. Section 3 defines a 'specialist retail valuer' as: for the purposes of a valuation relating to a retail shop in a retail shopping centre, a valuer having not less than 5 years' experience in valuing retail shops located in regional and sub-regional shopping centres; or 8

9 for the purposes of a valuation relating to any other retail shop, a valuer having not less than 5 years' experience in valuing retail shops. As you will see later, this definition is quite limited and may not give as much protection to either a landlord or a tenant as either may wish. 5.2 Examination of how the Act applies in practice Requirements and shortcomings of section 19 of the Retail Leases Act 1994 Section 19 of the Retail Leases Act (NSW) 1994 specifies a strict procedure for the review of market rent. This applies if the parties cannot agree on the market rent for the premises. The procedure is not a complete procedure however and applies if the parties fail to agree on the market rent. Accordingly, it can be helpful and it is common, for a retail lease to contain a clause which specifies the procedure the parties will follow when attempting to reach an agreement. This is useful to ensure that it is clear when the parties have failed to reach agreement. Mr Andrew Lang also comment in Commercial Leasing in Australia at paragraph that a retail market rent review clause should also address: 1 when and how frequently a market rent review should occur and also that the rent should be reviewed to the current market rent ; and 2 the time limits for the appointment of the valuer; 3 what happens if the valuer fails to act, becomes incapacitated or dies; 4 how rent is paid until the new rent is determined; and 5 the timing and method for dealing with an over or underpayment of rent. The Administrative Decisions Tribunal of NSW considered a valuation of market rent for retail premises where the valuation did not did not refer to either the Retail Leases Act or section 19 of the Retail Leases Act in Perri v Exego Pty Ltd [2009] NSWADT 170. The Tribunal held that the valuation of the market rent of retail premises was void and of no effect because the valuer relied on the definition of market rent by the Australian Property Institute and did not apply the specific criteria of section 19 of the Retail Leases Act. This meant that the valuation was not made in accordance with that section Difficulties with the procedure for the early determination of market rent under section 32 Section 32 of the Retail Leases Act gives the tenant the ability to request the landlord to determine the market rent review before the tenant is required to exercise an option for a further term. 9

10 Section 32 of the Act contains strict timelines and, if the procedure is followed it requires the tenant to exercise its option within 21 days after the determination of the rent is made and notified to the tenant. If a tenant requests that the rent be determined early under section 32 of the Act, then section 32(1)(c) of the Act requires the rent to be determined in accordance with the procedure in section 31 of the Act. This procedure provides for: the parties to agree on the market rent; and if they cannot agree, for a valuation by a specialist retail valuer. The key flaw with section 32 of the Act is that it seemingly does not address when the option must be exercised in a case where the tenant requests an early determination of the market rent in accordance with the section and the parties agree on the market rent between themselves. The section refers to a determination of the market rent and section 32(1)(c) of the Act provides that the tenant must exercise an option within 21 days after the determination of the market rent is made and notified to the tenant. If the parties agree on the market rent, then there will never be a determination and notification to the tenant. That said, I recommend that caution be exercised and a tenant exercise its option (if it wishes to) within 21 days after the landlord and tenant agree on the rent, to prevent an argument that the option has been lost. 6 ASSIGNMENT OF LEASES 6.1 Relevant provisions of the Act Assignment of retail leases is governed by: Part 5 of the Retail Leases Act 1994 (NSW). The relevant sections are ss 39, 40, 41, 41A and Procedure for consent to assignment The tenant must follow the procedure contained in section 41 of the Retail Leases Act (NSW) 1994 to obtain consent to an assignment. The provisions of section 41 of the Act are implied into a retail shop lease. (c) The tenant must give a proposed assignee a copy of any disclosure statement given to the tenant in respect of the lease, with details of any changes that have occurred in respect of the information in the disclosure statement since it was given to the tenant. The changes are changes of which the tenant is aware or could reasonably be expected to be aware of. The tenant may ask the landlord to provide a copy of the disclosure statement to assist the tenant to comply with the requirement in paragraph. If the landlord is unable or unwilling to comply with the request, then the requirements in paragraph do not apply to the tenant. The request for the landlord s consent must be made in writing. 10

11 (d) (e) The tenant must provide the landlord with the information the landlord reasonably requires in relation to the financial standing and business experience of the proposed assignee. A landlord is taken to have consented to a request for an assignment if: (i) (ii) the tenant has complied with its obligations contained in section 41 and of the Act; and the landlord has not given written notice to the tenant within 28 days after the later of the tenant complying with its obligations contained in section 41 and of the Act or making the request for the landlord s consent. 6.3 Ability of Landlord to withhold consent A landlord is only entitled to withhold consent to an assignment on the grounds specified in s 39 of the Retail Leases Act (NSW). A landlord is not entitled to withhold consent in any other circumstances. A landlord in NSW is entitled to withhold consent in three main situations: (c) When the proposed assignee proposes to change the use to which the shop is put. When the proposed assignee has financial resources or retailing skills that are inferior to those of the proposed assignor. When the tenant has not complied with s 41 of the Retail Leases Act (NSW), the procedure for obtaining consent to assignment. There are also some special exceptions for shops at airports. While the Retail Leases Act 1994 (NSW) requires a landlord to consent to an assignment on certain conditions, there is no obligation placed on a landlord to agree to the termination of one lease and the grant of a new lease to the replacement tenant. Prsa & Anor v Polymeris [2000] NSW ADT Describing the permitted use If a landlord does not wish to consent to a particular assignment, it is important to check the case law and not to make an assumption that a proposed use is the same as the proposed use. The Administrative Decisions Tribunal has demonstrated that it is willing to examine both the existing use and the proposed use in great detail: Jewell Bay Pty Ltd v DPT Operator Pty Ltd [2009] NSW ADT 225 The actual use of the premises is important. If a landlord has allowed a change in use to develop over the term of the lease, it will be bound by the width of the use which it had allowed to develop, rather than the more restricted use contained in the lease: Castle Mall Fine Foods Pty Limited v Queensland Investment Corporation [2003] NSW ADT

12 6.4 Retailing skills of the tenant The restrictions on the landlord's ability to withhold consent to an assignment of the lease if a proposed assignee has financial resources or retailing skills inferior to those of the existing tenant may work against an experienced tenant who has a number of premises. This is because a proposed assignee may well have sufficient financial resources and retailing skills to run a business from the premises, but, because they are inferior to those of the existing tenant, the landlord is entitled to refuse consent. This section in the retail tenancy legislation may well prevent a larger tenant from being able to assign the lease as any potential assignee may simply not be able to match the tenant's financial resources or retailing skills. 6.5 Release of assignors and guarantors Section 41A of the of the Retail Leases Act (NSW) provides a limited protection for assignors and guarantors of leases after assignment. An assignor or guarantor will be released from obligations to pay money under a retail lease if (and only if): the retail shop will continue to be an ongoing business; and the assignor gave (before the start of 7 clear days before the date of assignment): (i) (ii) the landlord a copy of the assignor s disclosure statement; and the proposed assignee a copy of the assignor s disclosure statement, provided that the assignor s disclosure statement does not contain information that is materially false or misleading or incomplete. It is important to be aware that this release is not a full release from all obligations under the lease. 7 REPORTING REQUIREMENTS: OUTGOINGS & MARKETING FUNDS The Act regulates the types of items that a landlord can charge a tenant for, including through the outgoings. I will not go into that point further here. The Act also regulates the reporting a landlord must provide to a tenant if the tenant is required to contribute towards outgoings or a marketing/promotion fund. A landlord must: give a tenant an estimate of outgoings in respect of each accounting period of the landlord during the term both before the lease is entered into (this can be done in the disclosure statement) and during the term of the lease at least 1 month before the commencement of each accounting period. Section 27 of the Act contains this requirement and also specifies the details that must be contained in that report; and an outgoings statement to the tenant within 3 months after the end of each accounting period. This obligation is imposed by section 28 of the Act. The 12

13 Act specifies the details that must be contained in the statement and the types of reports that must accompany the statement. If the lease requires a tenant to contribute towards a marketing/promotional fund, then the landlord must provide the following reports: (i) (ii) (iii) at least 1 month before the start of each accounting period of the landlord, make a marketing plan available to the tenant, that gives details of the landlord s proposed expenditure on advertising and promotion during that accounting period (s53); and make a statement on actual expenditure available to the tenant at least twice in each accounting period (once in relation to the expenditure in the first 6 months and once in relation to the expenditure in the second 6 months). The statement must be available within one month after the period it relates to (s 54); and a statement to the tenant within 3 months after the end of each accounting period. This obligation is imposed by section 55 of the Act. The Act specifies the details that must be contained in the statement and the types of reports that must accompany the statement 8 ENDING A RETAIL LEASES ACT LEASE Section 44 of the Act requires the landlord to give tenant written notice not less than 6 months and not more than 12 months before the expiry of a lease, either: offering the lessee a renewal or extension of the lease on terms specified in the notification (including terms as to rent), or informing the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease. An offer made under section 44 is not capable of revocation within one month after it is made. If the landlord does not serve a notice under section 44 within the required timeframe, the tenant can request a notice and then receive an extension of the lease expiry date to the date 6 months after the landlord gives the notice, at any time up to the expiry date. This means that if the landlord does not issue a notice under s44, the landlord is not able to enter into any agreements to lease the premises until after the landlord knows whether the tenant will or will not exercise its right to ask for a notice under s44. That is, the situation as to whether or not the existing tenant can remain in the premises is uncertain until the expiry date. If the tenant does request a notice and then obtains an extension of the lease expiry date under s44, the tenant is entitled to leave, without penalty before the new expiry date. This means that the landlord faces a period of time during which the shop may be vacant. 13

14 If the landlord could cure a failure to give a notice under s44 on time, then it would give the landlord more certainty around the timing for putting a new tenant in the premises. 9 ADVERTISING PREMISES FOR LEASE WHEN THE PREMISES ARE OCCUPIED Section 44A of the Act controls what the landlord must do in order to advertise premises which are already occupied. It provides that: (1) A lessor of a retail shop must not, by written or broadcast advertisement, indicate the availability of the shop for lease or invite tenders or expressions of interest for tendering, during the term of the lease, unless: (c) (d) (e) the lessor has offered the lessee a renewal or extension of the lease under section 44 (1), the offer has not been accepted and (not earlier than one month after the offer was made) the lessor by written notice informs the lessee that negotiations are concluded without result, or the lessor by written notice informs the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease and there are no arrangements to allow the lessee to remain in possession of the shop, or the lessee by written notice informs the lessor that the lessee does not wish to enter into negotiations for the renewal or extension of the lease or that the lessee wishes to withdraw from the negotiations, or the lessee has vacated or agrees in writing to vacate the shop, or the lessee consents in writing to publication of the advertisement. (2) This section does not affect the industry practice of testing the market, otherwise than by written or broadcast advertisement, in connection with the leasing of a retail shop. 10 DISPUTES AND MEDIATION 10.1 Relevant parts of the Act The provisions of Part 8 of the Act deal with disputes and apply to: s 63, Retail Leases Act 1994 (NSW) retail shop lease that was entered into before the commencement of s 6 of the Act or under an option granted or agreement made before the commencement of s 6 of the Act; s 6, Retail Leases Act 1994 (NSW) dispute that arose before the commencement of s 6 of the Act or which concerns a liability or an obligation that arose before the commencement of s 6 of the Act. 14

15 In this section, a reference to the Registrar is a reference to the Registrar of Retail Tenancy Disputes. The former Retail Tribunal is now part of NCAT NSW Civil and Administrative Tribunal. NCAT is now responsible for retail leasing disputes. Costs are generally not awarded in NCAT Meaning of retail tenancy dispute A retail tenancy dispute is defined to mean any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligation which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates. s 63(1), Retail Leases Act 1994 (NSW) The Act does not define the word dispute. GPT Management Ltd v Spa Heaven Pty Ltd discussed the meaning of dispute. A dispute can exist even if there is no legal basis for it. A dispute between a tenant and the guarantors can be a retail tenancy dispute for the purposes of s 63(1) of the Act.GPT Management Ltd v Spa Heaven Pty Ltd [2005] NSWSC Mediation A retail tenancy dispute or other dispute or matter referred to in s 65(1)(a1) of the Act may not be taken to court unless and until the Registrar has certified in writing that mediation under Pt 8 of the Act has failed to resolve the dispute or matter or the court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or matter.ss 68(1) &65(1)(a1), Retail Leases Act 1994 (NSW). The application forms for mediation of a retail lease dispute, retail bond dispute as well as the mediation agreement and a mediator s report can be found on the NSW Fair Trading website Opens in a new window. Any party or former party to a retail shop lease can refer a retail tenancy dispute or other dispute or matter referred to in s 65(1)(a1) of the Act to the Registrar for mediation of the dispute.s 66, Retail Leases Act 1994 (NSW) The costs of formal mediation before a mediator are payable in the proportions agreed by the parties and, failing agreement, in equal shares. s 66, Retail Leases Act 1994 (NSW. Statements made during mediation pursuant to arrangements made by the Registrar under Pt 8 of the Act are not admissible at a hearing of a claim under Div 3 of Pt 8 or in any other legal proceeding.s 69, Retail Leases Act 1994 (NSW) 11 SERVICE OF NOTICES The lease will specify how notices are to be served under it. Notices must be signed and served in accordance with the procedure contained in the lease in order for the notices to be effective. You are not entitled to assume that a 15

16 solicitor is entitled to sign a notice on behalf of the landlord or the tenant. If a lease does not contain any clause specifying how notices can be served, you can serve a notice in accordance with the procedure in s 170 of the Conveyancing Act 1919 (NSW) or, if it is being served on a company, in accordance with s109x of the Corporations Act 2000 (Cth). Some leases use to require notice to be given by certified mail. This category of mail no longer exists. If notices are delivered to premises and left with a person on the premises, that person must be over 16 years old. If it is important to confirm that a notice was delivered on a particular date and time, keep a record of the delivery of the notice, such as a statutory declaration in relation to the manner and time of delivery of the notice. Catherine Hallgath Mills Oakley Lawyers T: (02) E: challgath@millsoakley.coml.au Twitter:@challgath Copyright These materials are subject to copyright which is retained by the author. No part may be reproduced, adapted or communicated without consent except as permitted under applicable copyright law. Disclaimer This seminar paper is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. Readers should not act on the basis of any matter contained in this seminar paper without first obtaining their own professional advice. 16