Insights Paper | Amendments to the Retail and Commercial Leases ActJuly 2020
At a glance
- The Retail and Commercial Leases (Miscellaneous) Amendment Act 2019 (Act) has significantly amended the Retail and Commercial Leases Act 1995 (RCLA).
- The Act is supplemented by the Retail and Commercial Leases (Miscellaneous) Variation Regulations 2020, which has varied the accompanying Regulations.
- The amendments commenced on 1 July 2020.
- The Act has built on existing protections for tenants and removed ambiguities in the legislation, rather than implementing extensive reform. However, there are some key changes that both landlords and tenants need to be aware of.
The key changes to the RCLA are as follows:
- It has been clarified that leases can move into and out of the jurisdiction of the RCLA if the rent falls below or is increased above the prescribed threshold (for example, as a result of a market rent review).
- There is an exception to the above where the lease is lodged for registration by the landlord within 3 months of execution and the prescribed threshold is exceeded at the time the lease is lodged. In such a case, the RCLA will not apply to the lease at any time during the term, even if the rent subsequently falls below the threshold.
- The Valuer-General is required to review the prescribed rent threshold by 30 October 2021 and every five years thereafter, and it has been clarified that the threshold is exclusive of GST.
- The requirement to issue a disclosure statement for renewal of a lease has been removed.
- There is a new exclusion from the operation of the RCLA where land is leased by a council to a prescribed class of lessees (the regulations have not yet provided for the prescribed class, but it is intended to apply to community leases granted for nominal rent).
- The maximum amount for a security bond has been increased from 4 weeks’ to 3 months’ rent, and landlords are required to return bank guarantees within 2 months of expiry of the lease.
- Additional disclosure obligations have been imposed on landlords, including a requirement to provide an information brochure published by the Small Business Commissioner.
- The decision in Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc  SASC 18 has been addressed by ensuring that holding over after expiry of the lease for more than 6 months will not give rise to a new 5 year term.
- Tenants that are ‘public charitable companies’ (public companies limited by guarantee that are registered with the ACNC) will now have the protections of the RCLA, whilst other public companies and their subsidiaries will remain excluded.
- The Small Business Commissioner can now provide Exclusionary Certificates (currently at a cost of $200).
- Several of the monetary penalties for non-compliance with the RCLA have been increased.
What the changes mean for landlords and tenants
If landlords enter a lease where the rent is above the prescribed threshold, they should be careful to meet the registration requirements to prevent the lease being captured by the RCLA at a later date if the threshold increases or the rent decreases.
Landlords should make sure they are familiar with the expanded disclosure obligations as failure to meet them can incur significant penalties. Fortunately, landlords will be relieved of the disclosure obligations upon renewal of a lease.
Landlords should also be aware of the requirement to return a bank guarantee within 2 months of expiry of the lease, as they could be liable to pay compensation if a tenant suffers loss as a result of the landlord’s failure to do so.
Councils should be aware that until a class of lessees is prescribed, the RCLA will apply to leases and licences granted to community groups, unless an exemption is sought from the Small Business Commissioner or the Magistrates Court.
If you are a landlord, tenant or property manager and want to understand the potential implications of the amendments please contact our Property specialists.
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The content of this newsletter is for general information purposes only and should in no way be treated as formal legal advice.