Standard retail leases will give retailers a lift at this critical time

As we await the economic fallout of the end of JobKeeper, the Real Estate Institute of NSW (REINSW) has devised a way for retail businesses to save thousands of dollars at a time when they need all the help they can get.

According to the REINSW, with a Government-prescribed retail lease agreement, retailers and landlords could avoid waiting months for leases to emerge from an unnecessarily long and costly legal process.

Just like standard residential lease agreements enable tenants to move in quickly once signed, a standard retail lease could enable retailers to get to work straight away.

“The overwhelming majority of retail tenants and landlords find themselves at the mercy of unnecessary legal negotiations even though they’ve reached an agreement,” says REINSW CEO Tim McKibbin.

“This means businesses otherwise ready to trade, and landlords requiring income in the form of rent, are made to wait and wait. The end of JobKeeper heightens the urgency of addressing these pointless delays,” he says.

In a submission to the Office of the NSW Small Business Commissioner, the REINSW has proposed the introduction of a standard retail lease as a “natural evolution” of the Retail Leases Act and to “better reflect Parliament’s legislative intent.”

“Retail businesses everywhere need support as JobKeeper ends. Government must look for every opportunity to reduce costs for these businesses as they tackle the nonstimulus future,” Mr McKibbin says.

“Wasting time and money on legal fees for an unnecessarily complex retail lease, when a simpler and cleaner pathway is available, is unacceptable.”

As a prime example, Mr McKibbin points to the concept of rent. Those who currently prepare retail leases have taken this simple concept and developed no less than ten industry terms, such as “face rent”, “base rent”, “gross rent”, “effective rent”, “turnover rent” and more.

“What’s the point of this?” Mr McKibbin asks rhetorically.

“It is a typical scenario for tenants and landlords to agree the fundamental terms of a lease, only for their legal representatives to be unable to resolve the peripheral terms. This puts a roadblock in front of an otherwise mutually beneficial relationship.

“There is an opportunity for Government to prescribe a standardised, broadly applicable, simple to decipher retail lease to help retail tenants and landlords get back to business sooner and more cost-effectively.

“Like there is for residential landlords and tenants, the opportunity to streamline retail lease agreements in the interests of retail tenants and landlords has never been more timely,” Mr McKibbin says.

According to the REINSW, the introduction of a standard retail lease would also have significant advantages in dispute resolution, as there would be no need for the NSW Civil and Administrative Tribunal to labour over the precise interpretation and application of disputed clauses, as well as advantages in education, as a standard agreement would promote a better understanding of the rights and obligations of landlords and tenants.

Additionally, for landlords and tenants for whom English is not their first language, a standard retail lease presents the opportunity to prepare explanatory documents to assist with an understanding of their rights and obligations.

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