Why is a disclosure statement so important in a retail lease?

Why is a disclosure statement so important in a retail lease?

Let’s start with an obvious question that most clients ask, what even is a Disclosure Statement?

A Lessor disclosure statement is a document that both Tenants and Landlords must sign BEFORE entering into a Retail Lease Agreement.

The disclosure statement has 2 parts: the Landlord signs (Part A) known as the Lessor’s Disclosure Statement and the Tenant signs (Part B) known as the Lessee’s Disclosure Statement.

A requirement of the Retail Leases Act 1994 (NSW) as outlined in Schedule 2 of the act, requires a disclosure statement must be issued 7 days prior to the commencement of the lease agreement and should be signed within 7 days after receiving the signed Part A.

The whole point of the Landlords Disclosure Statement is to provide an opportunity to note any statements or representations made by either party that may influence their decision to enter into a formal Retail Lease Agreement which is one of the reasons WHY the disclosure statements are so important.

Another reason is that the statement contains important information about the premises, the lease particulars and the Tenants full financial obligations.

The lessor’s disclosure statement includes important details such as:

·        the term of the lease and option to renew

·        the rent and rent review method

·        works, fit-out and refurbishment

·        outgoings and other costs payable by the Lessee

·        trading hours

·        any planned or known disruptions e.g renovations

If the shop is in a shopping centre, the statement should include details about the centre, such as annual turnover, anchor tenants and floor plan.

As a standard practice, both parties (Landlord and Tenant) should always obtain independent legal and financial advice before signing the lease or the disclosure statement.

If you have any questions in relation to the above, or have any other property management queries please do not hesitate to contact the Property Management team on 02 4731 3399.