New legislation has been introduced into the New South Wales Parliament that, if passed, will make a welcome change to the lessor disclosure statement for retail shop leases in New South Wales. Partner John Beckinsale and Special Counsel Christine Adamson report on this proposed change.
When the Retail Leases Act 1994 (NSW) (the RLA) was amended effective 1 July 2017, there was a small change made to the lessor disclosure statement in Schedule 2 which meant that landlords were required to provide outgoings estimates for the first 12 months of the term of the lease. Previously, the disclosure statement in schedule 2 simply referred to a 12-month period, and landlords generally provided estimates based on their accounting periods.
The Statute Law (Miscellaneous Provisions) Bill (No 2) 2017 changes the reference in the lessor disclosure statement from a requirement to provide estimates for outgoings for the 'first 12 months of the lease or, if the lease is for less than 12 months for the term of the lease' to the following:
Estimates are for the accounting period of the lessor that is current when this disclosure statement is given or (if this disclosure statement is given less than 1 month before the start of the next accounting period of the lessor) for that next accounting period
This will be a welcome change for landlords who work on an accounting year basis, as many items of outgoings are charged on a financial year basis (eg rates and other authority charges).
We expect this proposed change will reduce some of the administrative time currently spent by landlords in calculating outgoings estimates for individual lease terms and allow for pro forma disclosure statements to be completed with the outgoings estimates for a particular accounting period.
Each tenant would still receive specific information on outgoings, including the 'total estimated lessee contribution to outgoings' as a dollar amount.
At this stage, it is not known when the Bill will become law, or if the Bill may be amended before being enacted. Landlords should keep up to date with the likely timing of the enactment so that they will be in a position to update their disclosure statements once the Bill commences.