Retail Leases Amendment Bill 2019 - Sam Hopper Barrister



Retail Leases Amendment Bill?2019Introduction PrintEXPLANATORY MEMORANDUM591043BILL LA INTRODUCTION 29/10/2019GeneralThe Bill includes amendments to the Retail Leases Act 2003 and the Building Act 1993 to increase certainty in retail leasing arrangements about who pays for costs relating to the installation, repair and maintenance of essential safety measures. The Bill also includes amendments to the Retail Leases Act?2003 to implement reforms from the Small Business Regulation Review into the retail sector. The amendments make retail leases fairer and easier to understand by improving the information provided to tenants to facilitate more informed decisions about whether to enter into a lease or exercise an option to renew a lease and to clarify the timeframe for the return of security deposits to tenants. A cooling off period has been introduced to allow a tenant who exercises an option to renew to change their mind if the tenant has not engaged in an early rent review process.Clause NotesPart 1—PreliminaryClause 1sets out the purposes of the Bill. One of the purposes of the Bill is to amend the Building Act?1993 (the Building Act) and the Retail Leases Act 2003 (the Retail?Leases Act) to clarify the obligations of landlords and tenants under retail premises leases in respect of essential safety measures.Other purposes of the Bill are to amend the Retail Leases Act to—require landlords to give more timely information to tenants entering or renewing retail premises leases;clarify the timeframe within which landlords must return security deposits to tenants under retail premises leases;create a new early rent review process for tenants under retail premises leases;establish a cooling off period for tenants renewing retail premises leases in certain circumstances.Clause 2provides for the commencement of the Bill. Parts 1 and 2, Division?1 of Part 3 and Part 4 of the Bill will come into operation on the day after the day on which the Bill receives the Royal Assent. Division 2 of Part 3 of the Bill will come into operation by proclamation, or on 1?October 2020 if not proclaimed earlier.Part 2—Amendment of Building Act 1993Clause 3amends section 251 of the Building Act by inserting new subsection (2A), which provides that an occupier cannot recover from a building owner expenses relating to the installation, repair or maintenance of essential safety measures that the occupier has agreed to bear under a retail premises lease to which the Retail Leases Act applies.The clause inserts new subsection (7) which defines essential safety measure to have the same meaning as in the Building Regulations 2018 or any future remake of those regulations. Lease and retail premises are also defined to have the same meaning as in the Retail Leases Act.Part 3—Amendment of Retail Leases Act 2003Division 1—Essential safety measuresClause 4inserts a new definition of essential safety measure into section 3 of the Retail Leases Act and amends the definition of outgoings in that section. Essential safety measure is defined to have the same meaning as in the Building Regulations 2018 or any future remake of those regulations.The definition of outgoings is amended to include the following—the cost, or part of the cost, of repairs and maintenance work in respect of an essential safety measure;the cost, or part of the cost, of the installation of an essential safety measure that relates to fit out of the premises for which the tenant has agreed to pay.Clause 5inserts a note at the end of section 29 of the Retail Leases Act to draw attention to the revised definition of outgoings in section 3 of the Retail Leases Act, which will affect the operation of section 29. Section 29 defines outgoings to which a tenant under a retail premises lease contributes or is liable to contribute, for the purposes of Part 5 of the Retail Leases Act, by reference to the definition of outgoings in section 3 of the Retail Leases Act.Clause 6substitutes section 41(2) of the Retail Leases Act.Section 41(1) renders void a provision in a retail premises lease to the extent it requires the tenant to pay an amount in respect of capital costs, subject to exceptions in section 41(2).The clause substitutes section 41(2) and inserts new exceptions that enable the lease to require the tenant to pay for the cost, or part of the cost, of carrying out repairs or maintenance work in respect of an essential safety measure, or the installation of an essential safety measure relating to fit out of the retail premises for which the tenant has agreed to pay.Clause 7inserts new section 52(6), (7) and (8) into the Retail Leases Act.New section 52(6) provides for the landlord and tenant to agree for the tenant to carry out (or cause to be carried out) repairs or maintenance work in respect of an essential safety measure on behalf of the landlord. However, such an agreement is not intended to displace the landlord's obligations as a building owner under the Building Act and regulations under the Building Act in respect of essential safety measures.New section 52(7) makes clear that the landlord remains responsible to comply with their obligations under the Building Act and regulations under the Building Act.New section 52(8) provides that the existing and new provisions in section 52 are not intended to limit the obligations of a tenant under a retail premises lease to contribute to outgoings for repairs and maintenance work in respect of an essential safety measure for which the tenant has agreed to contribute under the lease.Clause 8inserts a new Part 15 into the Retail Leases Act. The new Part contains transitional provisions relating to amendments made by the Bill.New section 122 contains transitional provisions relating to amendments made by Division 1 of Part 3 of the Bill. New section 122(1) sets out the retail premises leases that are covered by the transitional provision. New section 122(2) provides that in respect of outgoings incurred after the amendments have commenced retail premises leases covered by the transitional provision have the same force and effect as they would have had if the amendments had been in operation at the time the leases were entered into.This provision is intended to give effect to the intention of the parties at the time the lease was entered into and clarify the future operation of provisions in existing retail premises leases relating to essential safety measures. The provision seeks to address uncertainty in the retail leases sector as a result of an advisory opinion provided by the Victorian Civil and Administrative Tribunal (VCAT) suggesting that provisions in retail premises leases that provide for tenants to pay costs associated with essential safety measures are void as they are inconsistent with the Building Act.Division 2—Other mattersClause 9makes various amendments to section 17 of the Retail Leases Act. Subclause (1) substitutes the heading of section 17 of the Retail Leases Act to better describe the section. The section imposes requirements on landlords to provide tenants with a disclosure statement and a copy of the proposed lease. The new heading refers to the disclosure statement and proposed lease, whereas the current heading only refers to the disclosure statement.Subclause (2) substitutes section 17(1) of the Retail Leases Act—to amend the timeframe within which the disclosure statement and a copy of the proposed lease in writing must be provided to tenants to at least 14 days before entering into a retail premises lease; andto clarify that the copy of the proposed lease provided to the tenant must include the particulars of the tenant, the rent and the term of the proposed lease.The revised timeframe for provision of the disclosure statement and copy of the proposed lease provides tenants with more time (14 days under the revised section compared with 7 days under the current section) to consider the disclosure statement and proposed lease before entering into the lease.Subclause (3) inserts new section 17(1B) and (1C) into the Retail Leases Act.New section 17(1B) requires a landlord to notify the tenant of changes to the previous copy of the lease provided when providing a copy of the proposed lease. The penalty for noncompliance with this provision is 50 penalty units in the case of a natural person and 250 penalty units in the case of a body corporate. The penalties are intended to deter landlords from not complying with the requirement. The requirement is intended to ensure that tenants are made aware of changes to the proposed lease.New section 17(1C) provides that if the landlord gives the tenant the disclosure statement and proposed lease less than 14 days before the lease is to be entered into, the lease is taken to commence 14 days after those documents are given to the tenant. This ensures the tenant has 14 days to consider the information before the lease commences.A reference to a tenant in new section 17(1), (1B) and (1C) includes a prospective tenant, in accordance with section 17(8) of the Retail Leases Act.Subclause (4) removes the word "substantially" from section?17(7) of the Retail Leases Act.Section 17(7) currently provides that if the landlord has given a tenant a disclosure statement before entering into an agreement for a retail premises lease, the landlord is not required to give a further disclosure statement before subsequently entering into a retail premises lease if the lease is substantially in accordance with the earlier agreement for the lease.The amendment will remove uncertainty about the extent to which the lease must be in accordance with the earlier agreement for the lease.Amended section 17(7) will provide that the landlord is not required to give a further disclosure statement before subsequently entering into a retail premises lease if that lease is in accordance with the earlier agreement for lease.Clause 10amends section 24(1)(d) of the Retail Leases Act by substituting "as soon as practicable" with "within 30 days", to require landlords to return security deposits to tenants within 30 days after the end of the lease. Currently section 24(1)(d) requires the security deposit to be returned as soon as practicable after the lease ends.Clause 11substitutes section 26(2) of the Retail Leases Act to include in that section a requirement for a landlord who provides a disclosure statement under section 26(1) in relation to the renewal of a lease to set out any changes to the previous disclosure statement provided to the tenant in respect of the lease. This change is intended to ensure that tenants are made aware of the changes to the disclosure statement.Clause 12amends section 28 of the Retail Leases Act. The amendments change the timeframe within which the landlord must provide notice to the tenant in relation to an option to renew a lease and the information that must be included in the notice.Substituted section 28(1) will provide that the section applies if a retail premises lease contains an option exercisable by the tenant to renew the lease for a further term.New section 28(1A) will require the notice to be provided by the landlord at least 3?months before the last date for exercising the option to renew (the option date) and will require the following information to be set out in the notice—the option date;the rent payable for the first 12 months of any renewed term of the lease;the availability of early rent review under section 28A and a cooling off period under section 28B (these sections are inserted by clause 13 of the Bill);any changes (excluding rent related changes) to the most recent disclosure statement provided to the tenant.Section 28(2) provides for automatic extension of the option date and lease end date if a landlord does not provide the notice required under section 28(1A) within the required timeframe.Amended section 28(2)(a) will provide for the option date to be extended to the date that is 3 months after the landlord provides notice. This ensures that the tenant has 3 months to consider the information in the notice before they are required to make a decision about whether to exercise the option.Amended section 28(2)(b) will provide for extension of the lease up to the option date, if the option date is extended past the lease end date under section 28(2)(a). The extension will be on the same terms and conditions unless the landlord and tenant agree otherwise.Existing section 28(2)(c) will remain. It enables the tenant to terminate the lease between the lease end date and extended lease end date by providing written notice to the landlord. This provision ensures that a tenant is not forced to accept a longer lease as a result of the landlord's delay in providing notice under section 28(1A).New section 28(2A) and (2B) applies to the extended period of?a?retail premises lease if the lease is extended under section?28(2) as a result of the landlord providing late notice under section 28(1A).New section 28(2A) provides that if the tenant requests early rent review under new section 28A (inserted by clause 13 of the Bill) and the rent determination under the early rent review is less than the rent payable under the terms and conditions of the lease, the lower rent is deemed to be payable during the extended period.New section 28(2B) provides that if the tenant does not request an early rent review, but the rent stated in the notice provided by the landlord under section 28(1A) is lower than the rent payable under the terms and conditions of the lease, the lower amount of rent stated in the notice is deemed to be payable during the extended period.New section 28(2A) and (2B) is intended to protect tenants from landlords seeking to intentionally delay the provision of notice under section 28(1A) to obtain an extension of the lease at a higher rent.Clause 13inserts new sections 28A and 28B into the Retail Leases Act.New section 28A(1) and (2) provide for an early rent review to inform a tenant's decision about whether to exercise an option to renew a lease. The tenant may request an early rent review within 28?days after the landlord provides notice under section 28(1A) of the Retail Leases Act in relation to an option to renew a retail premises lease, if the lease provides for rent review based on the current market rent.A note under new subsection (1) indicates that in an early rent review the current market rent is to be determined in accordance with section 37 of the Retail Leases Act.New section 28A(3) requires a tenant to notify the landlord whether the tenant exercises the option to renew by the last date that the option may be exercised (the option date), which is the later of the following dates—the last date that the option may be exercised under the lease (or extended date for exercise of the option under section 28(2)(a) of the Retail Leases Act);the extended date for exercise of the option under new section 28A(4), which is 14 days after the tenant is notified of the current market rent determined under the early rent review, if the date is extended.New section 28A(4) ensures that the tenant has at least 14 days after being notified of the rent determination to decide whether to exercise the option to renew the lease, by providing that the option date may be extended. If the landlord fails to notify the tenant of the current market rent at least 14 days before the option date, the option date is extended to 14 days after the date on which the tenant is notified.New section 28A(5) provides for extension of the lease to the option date. This extension applies if the option date is extended beyond the end of the lease under subsection (4) and the tenant exercises the option.New section 28A(6) provides for extension of the lease to the date that is 3 months after the option date. This extension applies?if the date that is 3 months after the option date is beyond the end of the lease and the tenant does not exercise the option. This extension is intended to provide a 3 month period for the landlord and tenant to make alternative arrangements after the tenant has confirmed that they do not wish to exercise the option.Under new section 28A(7), if the rent determination under the early rent review is less than the rent payable under the terms and conditions of the lease, the lower rent is deemed to be payable during the extended period.New section 28B(1) provides a tenant who has exercised an option to renew without requesting an early rent review a 14-day cooling off period. The cooling off period is defined in new section 28B(3) to mean the period ending 14 days after the day on which the tenant exercises an option to renew a retail premises lease. The tenant may exercise their cooling off rights under new section 28B(1) by providing written notice to the landlord.Under new section 28B(2), if the tenant exercises their cooling off rights—the renewed term of the lease under the option to renew will not apply; andthe lease term (before renewal) is extended by 14 days unless the landlord or tenant otherwise agree; andthe tenant cannot again change their mind and exercise the option to renew, after giving notice under section?28B(1).Clause 14inserts new sections 123 to 125 into the Retail Leases Act. New section 123 provides that the amendments made by clause 10 of the Bill (clarifying the timeframe for returning security deposits to tenants) apply to existing retail premises leases entered into and in operation at the?time that clause 10 comes into operation. This provision does?not otherwise affect the application of clause?10 of the Bill. Accordingly, amendments made by clause?10 would also apply to retail premises leases entered into after that clause comes into operation.The existing provision, which requires the security deposit to be returned as soon as practicable after the lease ends, will apply to leases that end before the amendments commence.New section 124 provides that the amendments made by clause?11 of the Bill, which introduce additional requirements for disclosure statements provided under section 26(1) of the Retail Leases Act, apply to retail premises leases in operation at the time clause 11 comes into operation, unless at that time there is less than 21 days before the end of the current term of the lease. This makes clear disclosure statements given under section 26(1) after the amendments commence must comply with the new requirements even if they relate to renewal of a retail premises lease that was entered into before the amendments commenced. This provision does not otherwise affect the application of clause?11 of the Bill. Accordingly, amendments made by clause?11 would also apply to disclosure statements given in relation to the renewal of a retail premises lease entered into after that clause comes into operation.New section 125 clarifies the application of amendments made by the Bill in relation to the provision of information by landlords for options to renew a retail premises lease. The amendments will not apply to an option to renew in a retail premises lease where the last date for exercise of the option is less than 3 months from the date the amendments commence. In these circumstances it would not be possible to comply with the new requirements, which require a landlord to provide information in relation to the option at least 3 months before the last date for exercise of the option.The amendments will apply to options under existing retail premises leases where the last date for exercise of the option is at least 3 months after clause 12 of the Bill comes into operation, regardless of whether notice has been given under existing section 28(1) before the amendments commence. The amendments will also apply to options under retail premises leases entered into after clause 12 of the Bill comes into operation. Part 4—Repeal of this ActClause 15provides for the automatic repeal of the amending Act on 1?October 2021. The repeal of the amending Act does not affect the continuing operation of the amendments made by it (see?section 15(1) of the Interpretation of Legislation Act?1984). ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download