Background/ Contents
Over the past few years, the retail landscape has evolved, and numerous new business models have emerged. To make sure that these new business models, whether they are situated in shopping centres, shopping strips, or standalone properties, are subject to the leasing practises imposed by the regulatory framework, the list of the businesses covered under Schedule 1 of the Retail Leases Act 1994 (NSW) (the RL Act) must be updated on a regular basis. The Retail Leases Regulation 2022 (Draft 2022 Regulation) remains in public consultation, however, is expected to be introduced on or around 1 January 2023.
The parties involved in Leases within the retail sector range in size, type, and degree of authority. All states and territories regulate the retail leasing industry, however, the types of enterprises that are covered by the regulations vary from state to state. Whether an enterprise that sells products or services through retail establishments is covered by the RL Act relies on whether it conforms to the definition of a "retail shop".
The NSW Small Business Commission has identified that Schedule 1 of the RL Actneeds to be amended in order to reflect the trends and business models that have emerged or changed since the Act's inception. The following companies are proposed to be included in Schedule 1 of the Draft 2022 Regulation:
- Business tenancies in the health and fitness industry (including gymnasiums, yoga, barre and dance studios) that provide services directly to consumers; and
- Small bars (with a modification to remove current exclusion for ‘beer wine and spirit shops’).
What is the difference between the Retail Leases Act 1994 (NSW) and the Draft Retail Leases (Schedule 1) Regulation 2022?
For the purposes of the definition of "retail shop" in Section 3 of the RL Act, a new list of prescribed enterprises is included in the proposed changes to Schedule 1 of the RL Act.
Currently small bars and enterprises in the health and fitness industry are not included in Schedule 1 and therefore do not have the benefit of various legal protections and the dispute resolution mechanism provided by the RL Act.
The catalyst of this reform were discovered during the COVID-19 Pandemic whereby gyms and bars did not have the benefit of specifically the dispute resolution mechanism provided by the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (COVID-19 Leasing Regulation). The COVID-19 Leasing Regulation established temporary rules to divide the pandemic's financial effects between commercial lessors and lessees. The COVID-19 Leasing Regulation also increased the number of enterprises that might reopen after public health restrictions were eliminated.
Small Bars
Small bars do not currently have access to the legal protections provided by the RL Act importantly including the dispute resolution mechanism. Restaurants with liquor licences, on the other hand, benefit from distinct protections because they are included in Schedule 1. Small bars that serve as both a bar and a restaurant are recently developed industries that did not exist when the RL Act was first proposed. A small bar will not be protected by the RL Act if it cannot demonstrate that it is run primarily as a restaurant, as required by Schedule 1.
Health and Fitness Enterprises
Currently health and fitness businesses that are located in retail shopping centres are considered a “retail shop” for the purposes of the RL Act given that the definition of “retail shop” includes any businesses located in a shopping centre. The proposed inclusion of the various types of health and fitness businesses in Schedule 1 of the RL Act has the potential to remove the distinction between those businesses located in shopping centres and those outside of them, for example, standalone premises or those located within shopping strips.
Purpose of the Proposed Changes
The purpose of the proposed amendments are to ensure that the retail leasing industry operates as intended by the law. The transformation of Schedule 1 of the RL Act will include the new and emerged businesses since the introduction of the RL Act in 1994.
The amendments seeks to decrease the number of conflicts by improving access to affordable dispute resolution options by extending the scope of the businesses covered by Section 1 of the Act. This serves as an extra means of resolving more conflicts than would have been the case without the amendment.
The proposed introduction of the Draft 2022 Regulationaims to correct the imbalances and add more businesses to Schedule 1 of the RL Act that do not already fall under its jurisdiction because of their location or because they form part of a newly-emerging industry.
By making it clear that businesses outside of a shopping centre are covered by the RL Act, it is ensured that all parties to a lease benefit from the expansion of the businesses mentioned in Schedule 1 of the RL Act and that enterprises outside of shopping centres have better access to legal protections.
Overall, the goal is to make sure that the list of companies accurately reflects the developments that have occurred in the retail leasing market since the RL Act was introduced in 1994.
Deletions/ Amendments of the RL Act
The Draft 2022 Regulation proposes to delete the words “except where goods are for consumption on the premises” from “beer, wine and spirit shops” under Schedule 1 of the RL Act. As a result, the Draft 2022 Regulation allows for locations such as wineries and cellars to fall under the RL Act and be treated as a retail lease.
In addition “any other businesses as from time to time may be prescribed by regulations” has been removed from Schedule 1 of the RL Act. This indicates that the only companies that are protected by the law are those who are included in Schedule 1 of the RL Act. Any company that is not included in Schedule 1 is exempt from the RL Act’s protections.
Here to Help
If you are a Tenant or Landlord and require advice with respect to the Draft 2022 Regulation or the RL Act, please do not hesitate to reach out to our Property Department here at Marsdens Law Group.
