Small Business Victoria has released for public comment proposed new regulations for retail leases in Victoria (the Retail Leases Regulations 2013 (VIC) (Proposed Regulations).
The Proposed Regulations are intended to replace the current Retail Leases Regulations 2003 (VIC) (Current Regulations) which are due to sunset on 23 April 2013.
The major changes which would be effected by the proposed regulations compared to the Current Regulations are:
- the replacement of the current multi-function disclosure statement with four separate disclosure statements to be used in the following situations:
- new leases of premises located in a retail shopping centre;
- new leases of premises not located in a retail shopping centre;
- renewals of lease; and
- assignment of leases that involve the sale of the business operating from the retail premises;
- relieving landlords of the obligation to provide an auditor's report together with an annual outgoings statement if this statement does not relate to any outgoings other than water, sewerage, drainage and Council rates and charges, insurance, fire services property levies, owners corporation fees and GST. Previously an auditor's report was required if the outgoings statement included fire services property levy and/or owners corporation fees; and
- where an auditor's report is required, decreasing from 10% to 0.1% the percentage of all outgoings above which any an item of outgoings must be confirmed as correct in the auditor's report.
The form of disclosure statement for new leases of retail premises located within a shopping centre is similar to the existing form of disclosure statement except the key disclosures section has been removed, meaning landlords do not need to repeat information contained elsewhere in the disclosure statement. There are also a small number of other changes some which draw more similarities to the statements prescribed for Queensland and New South Wales, and others that create more differences to the statements prescribed for those jurisdictions.
The form of disclosure statement for new leases of retail premises not located within a shopping centre largely reflects the form proposed for new leases of retail premises located within a shopping centre, except the shopping centre specific provisions have been removed, as have the items requiring specific disclosures concerning turnover rent, advertising and promotion costs and trading hours.
The form of disclosure statement for a renewal of lease is four pages long (compared to 16 pages for the disclosure statement for new leases of retail premises located within a shopping centre and 12 pages for the disclosure statement for new leases of retail premises not located within a shopping centre) and requires disclosures only in relation to the date on which the tenant exercised its option (or the parties' agreed to renew the lease), any alteration works planned by or known to the landlord, any other matters which may materially affect the tenant's ongoing business which are not referred to in the lease (e.g. current legal proceedings or planned changes to tenancy mix) and any other costs arising under the renewed lease.
The form of disclosure statement for assignments that involve the sale of the business operating from the retail premises of lease is 5 pages long, and is required to be given by the outgoing tenant to the incoming tenant. The statement requires the outgoing tenant to make disclosures concerning the provision of business records to the incoming tenant, landlord notices received during the term, material variations to the lease, the type and value of outgoings which the outgoing tenant was liable to pay in the last 12 months, any current disputes between the landlord and outgoing tenant and other matters not connected to the lease agreement planned or known to the outgoing tenant that may materially affect the viability of the ongoing business over the remaining lease period.
For national shopping centre landlords it is unfortunate that the form of disclosure statement for shopping centres is changing so soon after the new semi-national form was implemented in Victoria, New South Wales and Queensland, and to a form still inconsistent with those States.
There is a Regulatory Impact Statement (RIS) accompanying the proposed regulations which explains the expected impacts and assesses the costs and benefits of the proposed regulations.
If enacted in their current form the Proposed Regulations will apply from 22 April 2013.
The Proposed Regulations and RIS are available on the Department of Business and Innovation’s website.
Submissions on the proposed regulations can be made up until 5.00 pm on Monday, 25 March 2013.
Minter Ellison is available to provide further details and/or to assist with submissions should you wish.