Understanding the disclosure obligations under the Retail Shop Leases Act 1994 (Qld) (the Act) is essential for landlords, tenants and commercial agents involved in retail leasing. This refresher aims to remind parties of their disclosure obligations under the Act, ensuring compliance and avoiding potential legal pitfalls.
When is a landlord required to provide a disclosure statement to a tenant?
Under the Act, a landlord must provide a prospective tenant with a copy of the draft lease and a disclosure statement (the Disclosure) at least seven (7) days before the tenant ‘enters into’ a retail shop lease. The Act defines ‘entering into’ as the earliest of the following times:
- The date all parties sign the lease; or
- The date the tenant first takes possession of the premises; or
- The first day the tenant pays rent under the lease (not a deposit to secure the premises).
What happens if the landlord doesn’t give the disclosure statement within the required time?
Failure to provide Disclosure, or providing defective Disclosure, i.e. being incomplete in a material way, can have significant consequences for the landlord. If the landlord does not comply with the Disclosure requirements, the tenant has an ongoing right during the first six (6) months of the lease to terminate the lease. Additionally, the landlord may be liable to pay the tenant reasonable compensation for any loss or damage suffered due to the noncompliance or the defective disclosure statement.
Can the requirement for Disclosure be waived?
No. While the tenant can waive the seven (7) day notice period by providing the landlord with a waiver notice and a legal advice report, it does not absolve the landlord of their Disclosure obligation. A waiver notice must be signed by the tenant, confirming their agreement to waive the prescribed notice period and can only be given after the Landlord has made Disclosure.
What is a defective disclosure statement?
Disclosure is considered defective if it contains an omission that is material or includes false or misleading information. It is important to note that a statement is not deemed defective merely because it omits irrelevant information or does not comply with the approved layout. The critical factor is whether the omission or false information materially impacts the tenant.
Is a disclosure statement required for retail shop leases that are renewed under an option?
Yes, the obligation to provide Disclosure also applies when a lease is renewed under an option. The landlord must provide the tenant with updated / current Disclosure within seven (7) days of receiving notice from the tenant exercising their option to renew. Within fourteen (14) days of receiving the current Disclosure the tenant may withdraw the renewal notice and if the landlord fails to comply with the Disclosure obligation, the tenant can terminate the renewed lease within the first six (6) months. However, current Disclosure is not required if the tenant provides the landlord with a waiver notice in conjunction with the renewal notice.
Is a head lessor required to provide a disclosure statement?
In cases involving subleases, the head lessor must provide the sublessor with Disclosure within twenty-eight (28) days of receiving the sublessor’s request to sublease. The sublessor is responsible for the reasonable expenses incurred by the head lessor for preparing the Disclosure. Subsequently, the sublessor must provide the updated Disclosure to the sublessee at least seven (7) days before entering into the sublease. Additionally, the sub-lessor must provide a written statement of any matters affecting the accuracy of the information in the head-lessor’s Disclosure.
Is a tenant required to provide a disclosure statement?
Yes, tenants also have disclosure obligations. They must provide a disclosure statement to the landlord at least seven (7) days before entering into a retail shop lease. This reciprocal requirement ensures transparency for both parties.
Landlords should note prospective tenants (with the exception of major lessees) are also required to provide legal and financial advice reports before entering into a lease
Key Takeaways
- Timely Disclosure: Landlords and managing agents must ensure that disclosure statements are provided to tenants at least seven (7) days before entering or renewing a retail shop lease.
- Non-Waivable Obligation: Even if a tenant waives the seven (7) day notice period, landlords cannot avoid the obligation of providing Disclosure.
- Consequences of Noncompliance: Failure to comply with the disclosure obligations allows a tenant to terminate the lease within the first six (6) months and claim compensation for any loss or damage suffered due to the noncompliance or defective statement.
For more detailed information about disclosure statements and retail shop leases, please contact our commercial team for expert advice and guidance.