A new discussion paper has tackled major concerns in the retail tenancy market amongst small and medium businesses.
Releasing the paper Issues Affecting the Retail Leasing Industry in NSW on 14 April, State Small Business Minister Joe Tripodi said of particular concern is the possible imbalance between shopping centre landlords and their tenants.
"Landlords control rents in shopping centres, and have the potential to exploit their negotiating power when dealing with tenants seeking lease renewals," he said.
"Tenants don't have a lot of bargaining power when it comes to negotiating a new lease. Sometimes they face the choice of staying and paying an exorbitant rent, or losing their business.”
According to Mr Tripodi, NSW has of the best regulatory systems in Australia when it comes to retail leases. About 80 per cent of disputes are resolved through mediation, with minimal cost to tenants and landlords.
The Retail Leases Act 1994 (NSW) currently governs the relationship between tenants and landlords. The primary objective of the Act is to ensure fair and efficient dealings between parties to retail leases, recognising the power imbalance between small to medium businesses and landlords. However the Act has undergone substantial review in response to industry concerns that it does not adequately address the dynamic retail leasing market.
Since 2004, amendments have been made in order for the Act to:
- improve access to information;
- improve the effectiveness of rent review provisions;
- create a Retail Bond Scheme;
- streamline the process for assignment of a lease; and
- increase the effectiveness of the dispute resolution provisions.
In 2007, the Productivity Commission released a Draft Report recommending the progressive unwinding of retail tenancy legislation on the basis that the industry is over-regulated. However, the NSW Government maintained the legislation as necessary to provide a clear framework for the conduct of parties to retail leasing matters and in dispute reduction.
The latest Discussion Paper outlines a number of issues facing the retail leasing industry including:
- statutory appointment of a Retail Advocate;
- mandatory education for retail tenants;
- the time period for bringing pre-lease misrepresentation claims;
- remedies for non-disclosure or incomplete disclosure;
- the provision of disclosure statements when an agreement to lease has been entered into;
- registration of leases and lease documentation
- landlord use of advertising or promotional funds contributed by tenants;
- introduction of competition or change of tenancy mix in a shopping centre;
- strata schemes causing significant disturbances to a tenant’s business;
- failing businesses in statutory five year leases;
- bank guarantees;
- the passing on of land tax to tenants;
- end of lease issues;
- unconscionable conduct and unfairness;
- the conduct of parties in mediation; and
- the monetary jurisdictional limit of the Administrative Decisions Tribunal.
Among suggested amendments to the Retail Leases Act 1994 (NSW) is a rent reduction for tenants facing uncertainty at the end of their lease.
“The proposed rent reduction would allow tenants to pay 90 per cent of their original rent during the period between a lease ending and a new lease being agreed to by both parties," Mr Tripodi said.
The Productivity Commission seeks submissions from interested parties by 26th May 2008.
For more information visit http://www.retailtenancy.nsw.gov.au/staticsite/index.aspx
To download the discussion paper visit
http://www.retailtenancy.nsw.gov.au/downloads/discussion-paper.pdf