Blog/News

Landlord & Tenant Reminder: Disclosure Rights & Obligations

Monday October 14, 2019

Landlord & Tenant Reminder:  Disclosure Rights & Obligations

The purpose of Retail Leases Act 2003 (Act) is to “enhance the certainty and fairness of retail leasing arrangements between landlords and tenants and the mechanisms available to resolve disputes concerning leases of retail premises”. One mechanism used to enhance that certainty and fairness is the requirement that certain information about the premises be disclosed to the tenant to ensure the tenant is aware of the implications of entering into a lease. 


The disclosure statement basically seeks to provide the tenant with as much information as possible regarding the premises before the lease is executed.

The Act contains strict disclosure requirements which may have severe consequences for a landlord, and in some circumstances for the tenant, if they are not complied with.

Form of Disclosure Statement

The Retail Leases Regulations 2013 (Vic) (Regulations) prescribe four disclosure statements to be used in the following circumstances:

Schedule 1 - New lease if the retail premises are not located in a retail shopping centre.

Schedule 2 - New lease if the retail premises are located in a retail shopping centre.

Schedule 3 - On renewal of lease for retail premises not located in a retail shopping centre as well as those located in a retail shopping centre.

Schedule 4 - On assignment of lease where ongoing business, the form of tenant’s disclosure statement is in Schedule 4.

Consequences

If a landlord does not give the tenant the correct form of disclosure statement within the timeframes provided under the Act the tenant may:

  • withhold rent until the day on which the landlord gives the tenant the disclosure statement; and
  • not be liable to pay rent attributable to the period from and including the day on which the notice was given until and including the day on which the landlord gives the tenant the disclosure statement; and
  • give the landlord a written notice of termination at any time up to 7 days after the landlord gives the tenant the disclosure statement.

Landlord’s defence

Where a tenant exercises its right to terminate the lease, the landlord may object to the termination of the lease within 14 days after being given the notice on the grounds that:

  • the landlord has acted fairly and reasonably and ought to be excused for the contravention; and
  • the tenant is substantially in as good a position as the tenant would have been in if there had been no contravention.

If the tenant accepts the landlord’s notice of objection or the tenant does not advise the landlord in writing within 14 days after being given the notice whether or not it accepts it, the lease will continue.

Tenant's Disclosure Statement

If the assignment relates to premises to be used for an on-going business, the tenant must give both the landlord and the proposed new tenant a disclosure statement set out in Schedule 4.  This will release the tenant and any guarantor from the assignment date so long as the disclosure statement does not contain information that is false, misleading or materially incomplete.

If the assignment does not relate to an ongoing business, an outgoing tenant must give the incoming tenant a copy of any disclosure statement given to the tenant concerning the lease and details of any changes of which the tenant is aware, or could reasonably be expected to be aware, that have affected the information in the disclosure statement since it was given to the tenant.  The outgoing tenant can request the landlord provide a new disclosure statement in order to comply with its obligation and the landlord must do so within 14 days.

It is important that both landlords and tenants are aware of and comply with their disclosure rights and obligations under the Act in order to avoid the harsh consequence of non-compliance.

Contact Dianne Hodge, Senior Associate, LIV Accredited Specialist - Commercial Tenancy Law, on 9550 4600 for leasing advice.


Author:
Dianne Hodge