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Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.*
( a ) to make it clear that the assignment of a lease not currently subject to
the Principal Act will not bring the lease under the Principal Act,
( b ) to impose greater sanctions on lessors under retail shop leases who fail
to give disclosure statements to lessees before the lease is entered into,
( c ) to impose a requirement on proposed lessees under retail shop leases to
give disclosure statements to lessors before entering into leases,
( d ) to enable licensed conveyancers to sign certificates enabling
requirements relating to the term of retail shop leases not to apply,
( e ) to prevent certain decreases in rent being specified or limited under
retail shop leases.
Amended in committee--see table at end of volume.
(f)
to provide for the appointment and powers of specialist retail valuers
in relation to the detemination of current market rents for the purposes
of retail shop leases and to limit the information that may be disclosed
by valuers,
to prohibit provisions in retail shop leases that require lessees to pay
(g)
amounts in respect of interest and other charges incurred by lessors,
to prohibit provisions in retail shop leases that require lessees to pay
(h)
amounts in respect of land other than land associated with the retail
shop concerned,
to establish requirements relating to sinking funds and to provide for
(i)
their distribution,
to apply provisions relating to forced relocation to retail shops not
(j)
located in retail shopping centres,
to make compensation available for a fitout paid by a lessee where a
(k)
retail shop lease is terminated on the ground of proposed demolition,
to provide for statements to be given by assignors of leases to
(l)
assignees and to provide protection from liability for assignors who
give such statements and guarantors of assignors,
to prohibit lessors and lessees from engaging in unconscionable
(m) conduct in connection with retail shop leases and to provide for a
remedy for any loss or damage caused by unconscionable conduct,
to confer jurisdiction on the Administrative Decisions Tribunal (the
(n) Tribunal) to deal with claims under the Principal Act and to set out the
powers of the Tribunal when doing so and to make other provision
with respect to dispute resolution. claims and proceedings under the
Principal Act,
to extend the period within which the Principal Act must be reviewed
(o) from 5 years to 7 years,
to make savings and transitional provisions consequent on the
(p) enactment of the proposed Act.
The Bill also amends the Administrative Decision Tribunal Act 1997 to
establish a Retail Leases Division of the Tribunal to deal with the new
jurisdiction imposed by the Bill and makes a consequential change to the
proposed Fair Trading Tribunal Act 1998.
Clause 2 provides for the commencement of the proposed Act on a day or
days to be appointed by proclamation.
Explanatory note page 2
Clause 3 is a formal provision giving effect to the amendments to the Retail
Leases Act 1994 set out in Schedule 1.
Clause 4 is a formal provision giving effect to the amendments to other Acts
set out in Schedule 2.
Schedule 1
Amendment of Retail Leases Act 1994
Application of Act
Schedule 1 [7] excludes from the operation of the Principal Act any lease
that is not subject to that Act and that is assigned after that Act commences.
Disclosure statements by lessors
Lessors under retail shop leases are required to give to lessees disclosure
statements (now called lessor's disclosure statements). Currently, a lessee
who is not given a disclosure statement may terminate the lease at any time
within 3 months after it is entered into if a statement is not given to the
lessee. The proposed Act extends this period to 6 months (Schedule 1 [12])
and also makes i t an offence for a lessor to fail to give a lessee a lessor's
disclosure statement. with a maximum penalty of $5,500 (Schedule 1 [15]).
Schedule 1 [2], [8], [10], [11], [13], [14] and [24] make consequential
amendments.
Disclosure statements by lessees
The proposed Act inserts proposed section 11A which requires a proposed
lessee under a retail shop lease to give the proposed lessor a lessee's
disclosure statement not later than 7 days (or within such further period as
may be agreed) after receiving the lessor's disclosure statement. The
statement is to contain the matters set out in Part 2 of the form contained in
proposed Schedule 2, including a statement that the lessee has or has not
sought independent advice in relation to the lease and the representations that
the lessee is relying on in entering into the lease. It will be an offence for a
lessee to fail to give a lessor a lessee's disclosure statement as required by the
proposed section. with a maximum penalty of $5,500 (Schedule 1 [16] and
[59]).
Schedule 1 [9] applies provisions that give a party a right to compensation
for damage attributable to the party's entering a lease as a result of a false or
misleading statement by or on behalf of another party, to certain
representations made by lessees in disclosure statements. These provisions
also apply to lessor's disclosure statements.
Schedule 1 [3] makes a consequential amendment.
Explanatory note page 3
Licensed conveyancers
Currently, the term of a retail shop lease must not be less than 5 years, except
where a lawyer certifies in writing that the right to that length of term has
been explained to a lessee as has the effect of the certificate on that right.
Schedule 1 [17] enables licensed conveyancers under the Conveyancers
Licensing Act 1995 to sign the certificates, as well as lawyers.
Schedule 1 [3]. [5] and [32] make consequential amendments.
Decreases in rent
Under the Principal Act, a provision of a retail shop lease is void to the extent
that it prevents or enables the lessor or any other person to prevent base rent
decreasing pursuant to a provision of the lease that provides for such a
change in base rent. Schedule 1 [18] makes a provision of a lease void to the
extent to which it limits or specifies, or allows the limitation or specification
of. the amount by which the base rent is to decrease.
Current market rent
The Principal Act contains provisions relating to retail shop leases that make
provision as to events when rent is to be changed to current market rent and
provide for the appointment of a person to determine the amount of the rent
where the parties fail to agree on the actual amount of the rent. Schedule l
[19] sets out the factors to be considered when determining current market
rent and provides that a specialist retail valuer (who is a person having at
least 5 years' experience in valuing retail shop leases) is to be appointed
where parties fail to agree. In making a valuation the specialist retail valuer is
to take into account specified factors but is not to take into account the value
of the goodwill or the lessee's fixtures and fittings. A valuation is to be in
writing and contain specified matters and the lessor must supply relevant
information to assist the valuer in determining the current market rent not
later than 14 days after being requested to do so. The valuation must be made
not later than 1 month after the appointment is accepted. The proposed
section also enables a valuer to apply to the Tribunal for an order that a lessor
comply with a request for relevant information.
Schedule 1 [6] defines specialist retail valuer.
Schedule 1 [20] inserts proposed section 19A which makes it an offence for a
specialist retail valuer to use for another purpose. or communicate or divulge.
information supplied by a lessor or a lessee for the purpose of determining
Explanatory note page 4
the amount of rent, or to permit another person to do so. Information may be
communicated or divulged with the consent of both the lessor or the lessee or
in making the determination (but only in a way that does not identify a
particular lease or lessee or disclose information relating to the lessee's
business). The maximum penalty will be $5,500. A valuer who contravenes
the proposed section is liable to pay compensation to the lessor or lessee for
any loss or damage resulting. The Tribunal may determine the amount of any
compensation if no amount is agreed.
The Principal Act contains provisions relating to retail shop leases that make
provision as to events when rent for a lease that is to be renewed is to be the
current market rent and provide for the appointment of a person to determine
the amount of the rent where the parties fail to agree on the actual amount of
the rent. Schedule 1 [25] sets out the factors to be considered when
determining current market rent and provides that a specialist retail valuer
(who is a person having at least 5 years' experience in valuing retail shop
leases) is to be appointed where parties fail to agree. In making a valuation
the specialist retail valuer is to take into account specified factors but is not to
take into account the value of the goodwill or the lessee's fixtures and
fittings. A valuation is to be in writing and contain specified matters and the
lessor must supply relevant information to assist the valuer in determining the
current market rent not later than 14 days after being requested to do so. The
valuation must be made not later than 1 month after the appointment is
accepted. The proposed section also enables a valuer to apply to the Tribunal
for an order that a lessor comply with a request for relevant information.
Schedule 1 [26] inserts proposed section 3 1 A which makes it an offence for a
specialist retail valuer to use for another purpose. or communicate or divulge.
information supplied by a lessor or a lessee for the purpose of determining
the amount of rent, or to permit another person to do so. Information may be
communicated or divulged with the consent of both the lessor or the lessee or
in making the determination (but only in a way that does not identify a
particular lease or lessee or disclose information relating to the lessee`s
business). The maximum penalty will be $5,500. A valuer who contravenes
the proposed section is liable to pay compensation to the lessor or lessee for
any loss or damage resulting. The Tribunal may determine the amount of any
compensation if no amount is agreed.
Prohibited payments
Schedule 1 [21] inserts proposed sections 24A and 24B. Proposed section
24A makes a provision in a retail shop lease void to the extent that it requires
a lessee to pay an amount in respect of interest and other charges incurred by
the lessor on amounts borrowed by the lessor.
Explanatory note page 5
Proposed section 24B makes a provision in a retail shop lease void to the
extent that it requires a lessee to pay an amount in respect of rent and other
costs associated with unrelated land.
Sinking funds
Currently. amounts payable by lessees under retail shop leases for major
items of repair or maintenance are required to be paid into a sinking fund, if
the lease provides for the establishment of a sinking fund to fund provision
for such items.
Schedule 1 [22] adds to the provisions taken to be included in leases
provisions limiting the items of repair and maintenance for which
contributions may be required. limiting the amounts payable to the maximum
amounts set out in the Principal Act. requiring full and accurate accounts to
be kept in relation to a sinking fund. requiring statements as to the fund to be
given to lessees and setting out the accounting standards applicable to
sinking funds.
Schedule 1 [23] inserts proposed sections 25A and 25B. Proposed section
25A provides that only one sinking fund at any one time is to be established
by a lessee in relation to any one building or retail shopping centre. A lessor
must not require or accept total contributions relating to a retail shop in a
retail shopping centre exceeding 5% of the lessor's estimated total outgoings
for the year concerned for the centre. The lessee must not require or accept
further contributions to the sinking fund if the amount outstanding to the
credit of the sinking fund exceeds $250,000. It will be an offence for a lessor
to contravene the proposed section (maximum penalty $5,500).
Proposed section 25B provides for the repayment to lessees of money
outstanding to the credit of a sinking fund in the event of the destruction or
demolition of a building or retail shopping centre. or of a retail shopping
centre ceasing to operate. Each lessee is entitled to a proportion equivalent to
the proportion of the total lettable area of their retail shop to the total lettable
area of the retail shops of the contributors to the sinking fund.
Relocation of retail shops
Currently, section 57 of the Principal Act sets out requirements to be included
in retail shop leases relating to retail shopping centres if those leases provide
for the business of the lessee to be relocated. The provisions relate to the
giving of sufficient notice and other entitlements.
Explanatory note page 6
Schedule 1 [27] re-enacts section 57 as proposed section 34A, so that it
applies to other retail shops in addition to retail shops contained in retail
shopping centres.
Schedule 1 [33] repeals section 57.
Compensation for demolition
Currently. the Principal Act includes provisions in retail shop leases that
provide for the termination of the lease on the grounds of proposed
demolition where demolition does not proceed. The lessor is liable to pay
reasonable compensation to the lessee for damage suffered as a consequence
of the early demolition.
Schedule 1 [28] provides a right to reasonable compensation for the fitout of
a retail shop if the lessee is required under the lease to fitout the retail shop
and the retail shop lease is terminated on the ground of demolition. where the
demolition does not proceed within a reasonably practicable time.
Assignment of leases
Schedule 1 [29] and [30] provide for an assignor of a retail shop lease that is
assigned in connection with the lease of a retail shop that will continue to be
an ongoing business to give a statement (assignor's disclosure statement) to
the proposed assignee. and a copy to the lessor. The form of the statement is
to be set out in proposed Schedule 2A (see Schedule 1 [59]) and contains
information about outstanding notices. the lessor's disclosure statement.
encumbrances and other matters relating to the lease.
Schedule 1 [31] inserts proposed section 41A which provides that an
assignor of a retail shop lease that is assigned in connection with the lease of
a retail shop that will continue to be an ongoing business. and any guarantor
of the assignor. is not liable for any amounts payable to the lessor by a person
to whom the lease is assigned. if the assignor has given copies of the
assignor`s disclosure statement. as provided for in section 41 of the Principal
Act.
Schedule 1 [l] makes a consequential amendment.
Explanatory note page 7
Unconscionable conduct
Schedule 1 [34] inserts proposed Part 7A (proposed sections 62A and 62B).
Proposed section 62A applies the proposed Part to retail shop leases entered
into before the commencement of the Principal Act, if the Act would apply to
them had they been entered into after that commencement. Proposed section
62B prohibits both lessors and lessees from engaging in unconscionable
conduct in connection with a retail shop lease. The proposed section sets out
the matters to be considered by the Tribunal in determining whether there has
been a contravention of the proposed section and requires the Tribunal not to
have regard to any matters not reasonably foreseeable at the time of the
alleged contravention. A person will not be taken to have engaged in
unconscionable conduct by reason only that the person commences legal
proceedings or fails to renew a lease or issue a new lease. The remedy
available for a contravention is a claim for loss or damage suffered as a result
of the contravention.
Schedule 1 [49] inserts proposed section 71A which enables unconscionable
conduct claims to be lodged.
Schedule 1 [51] inserts proposed section 72AA which sets out the orders the
Tribunal may make in relation to unconscionable conduct claims.
Schedule 1 [55] inserts proposed section 76A which enables a party in
proceedings before the Tribunal for an unconscionable conduct claim to
apply to have the proceedings transferred to the Supreme Court. The Tribunal
is required to transfer the proceedings if the claim is one that may be more
effectively and appropriately dealt with by the Supreme Court and the
interests of justice do not require the matter to continue to be dealt with by
the Tribunal. Jurisdiction is conferred on the Supreme Court to deal with a
transferred matter.
Schedule 1 [48] and [52] make consequential amendments.
Administrative Decisions Tribunal, alternative dispute
resolution and proceedings under the Act
Schedule l [35] makes it clear that a retail tenancy dispute can arise in
relation to former parties to former leases.
Schedule 1 [37] and [38] enable the Registrar of Retail Tenancy Disputes
(the Registrar) to facilitate the resolution of retail tenancy and other disputes
under the Principal Act by mediation or other appropriate forms of alternative
dispute resolution.
Schedule 1 [39] makes it clear that the Registrar has power to take
proceedings for an offence under the Principal Act or regulations under that
Act or to authorise persons to take any such proceedings.
Explanatory note page 8
Schedule 1 [40][42] and [44][46] extend the application of the mediation
provisions to unconscionable conduct claims and other claims relating to
valuations that are proposed to be inserted by the proposed Act.
Schedule 1 [43] gives a mediator exercising functions under the Principal
Act the same protections and immunities as a Judge of the Supreme Court.
Schedule 1 [49] substitutes section 71. The proposed section enables the
lodging of claims under the Act with the Tribunal and imposes a time limit of
3 years after the liability or obligation the subject of the claim arose.
Schedule 1 [50] substitutes section 72. The proposed section sets out the
orders that the Tribunal may make with respect to retail tenancy claims.
These orders include orders requiring money to be paid, that a party to
proceedings do specified work or perform a specified service and other
orders. including orders relating to rights and liabilities under a retail shop
lease. The Tribunal may also make ancillary and interim orders. Schedule 1
[36] and [47] make consequential amendments.
Schedule 1 [53] increases the monetary limit on the Tribunal's jurisdiction
from $250,000 to $300,000.
Schedule 1 [54] makes it clear that the provisions relating to alternative
dispute resolution contained in the Administrative Decisions Tribunal Act
1997 do not apply to proceedings under the Principal Act.
Schedule 1 [56] inserts proposed sections 7777C. Proposed section 77
applies the appeal provisions under the Administrative Decisions Tribunal
Act 1997 to claims made to the Tribunal under the proposed Act (other than
unconscionable conduct claims). These enable an appeal to an Appeal Panel
of the Tribunal. both on the merits and a question of law. and also an appeal
on a matter of law from a decision of the Appeal Panel to the Supreme Court.
The proposed section also enables an appeal against a decision relating to an
unconscionable conduct claim to be made to the Supreme Court on a
question of law and also. with the Court's leave, a review of the merits of the
Tribunal`s decision to be sought before the Court.
Proposed section 77A enables the Tribunal to award costs.
Proposed section 77B excludes provisions relating to assessors from applying
to the Tribunal when exercising its jurisdiction under the Principal Act.
Proposed section 77C gives parties the right to be represented at proceedings
before the Tribunal.
Explanatory note page 9
Review of Act
Currently, the Principal Act provides for the Act to be reviewed as soon as
possible after the period of 5 years from the date of its assent.
Schedule 1 [57] extends this to as soon as possible after the period of 7 years
from the date of its assent.
Savings and transitional provisions
Schedule 1 [60] and [61] insert savings and transitional provisions
consequent on the enactment of the proposed Act.
Schedule 2
Amendment of other Acts
Administrative Decisions Tribunal Act 1997
Schedule 2.1 [l] and [2] establish a Retail Leases Division of the Tribunal.
The Divisional Head is to be
a Deputy President of the Tribunal. The Retail
Leases Division is to exercise the functions of the Tribunal under the Retail
Leases Act 1994.
Schedule 2.1 [3] inserts savings and transitional provisions consequent on
the enactment of the proposed Act.
Fair Trading Tribunal Act 1998
Schedule 2.2 makes
a consequential amendment to the Fair Trading Tribunal
Act 1998.
Explanatory note page 10