NSW Leasing 101 – Lessor and Lessee Disclosure Statements
So, you are a tenant and think you have found the perfect retail property, or you are a landlord and think you have found the perfect tenant. Both parties have successfully negotiated commercial terms, and it is time to formalise the arrangement.
What is a Lessor’s Disclosure Statement?
In NSW, the Lessor’s Disclosure Statement must:
- be in writing and (substantially) in the prescribed form under the Retail Leases Act 1994;
- contain the Lessee’s Disclosure Statement; and
- contain lease information and be accompanied by the relevant material that is required to complete the Lessor’s Disclosure Statement.
The aim of the Lessor’s Disclosure Statement is to provide tenants with a snapshot view of their financial obligations and position concerning common leasing issues including:
- rent payable;
- rent reviews and their frequency;
- outgoings payable;
- any other costs associated with the lease;
- the security required to be provided by the tenant, such as a bond and personal guarantees;
- tenancy mix (if the property is in a shopping centre); and
- other important key provisions.
Per section 11 of the Act, the landlord must provide the tenant with the Lessor’s Disclosure Statement at least 7 days before a lease is signed by the tenant. Where the landlord does not provide the Lessor’s Disclosure Statement as required by the act, a penalty of up to 50 penalty units ($5,500) may be imposed.
Per section 11A of the Act, the tenant must return to the landlord the Lessee’s Disclosure Statement no later than 7 days after receiving the Lessor’s Disclosure Statement.
If the tenant is not given a Disclosure Statement, or if the Disclosure Statement provided is incomplete or contains materially false or misleading information, the tenant may be entitled to terminate the lease within the first 6 months. If the tenant terminates the lease, then they may be entitled to seek compensation from the landlord.
However, if the landlord has acted reasonably and honestly, and the tenant is otherwise in substantially the same position that they would have been if the failure had not occurred, then the tenant may not be entitled to terminate the lease. Tenants should therefore be very careful when seeking to exercise this right, as if they seek to terminate the lease and are not entitled to, they may be expose themselves to a claim by the landlord for wrongful termination.
If you have further questions or are uncertain about any aspect of your lease, please contact us, we are here to help.