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HG Alert: Department of Justice to Release New Lessor Disclosure Statement - 8 Dec 2010

The Department of Justice and the Attorney General are expected to release a new lessor disclosure statement this Friday, 10 December 2010. The new disclosure statement will likely apply from 1 January 2011, and is intended to make disclosure requirements in Queensland consistent with those in New South Wales and Victoria.

What should you do now?

If you are a landlord, you will need to:

  • collect and update information to comply with new disclosure requirements;
  • update precedents and make sure your agents are using the new lessor disclosure statement as of 1 January 2011;
  • provide full details to your solicitors if instructing them to prepare a lessor disclosure statement on your behalf;
  • clarify your fitout guides and standards, if you have not already done so; and
  • give new tenants a correct lessor disclosure statement at least seven days before a lease is signed and the tenant is allowed into the premises.

The final form of the lessor disclosure statement has not yet been released, but we expect the Department to release it on its website in the near future.

The major changes

The new lessor disclosure statement requires more detailed and specific information about the premises, lease, centre, commercial terms and other matters. The major changes are as follows:

  • Monetary obligations (other than rent and outgoings) must be disclosed, including interest and legal costs. This could be an extensive list given the range of situations common in leases in which tenants may be liable for the landlord's costs, or liable to undertake obligations at their own costs, or indemnify in respect of claims.
  • The total estimated outgoings and promotion costs are to be disclosed. In addition to rent free periods, any moratorium on outgoings (and the date on which the payment of outgoings is to begin) must now be disclosed.
  • Some disclosure, which was previously only required if the premises were part of a retail shopping centre, is required even for individual retail premises.
  • The landlord must give more details of anticipated works and the contributions of the parties, and must provide a copy of its fitout guide (or details of requirements). The landlord also has to disclose works it knows about (such as third party works), including to surrounding roads.
  • When signing the disclosure, the landlord must now make a series of acknowledgements in relation to the information disclosed.
  • The landlord must disclose current legal proceedings in relation to the lawful use of the premises or building/centre.
  • The landlord must disclose whether it adheres to the Casual Mall Licensing Code of Practice, and provide its policy if applicable.
  • The lessor disclosure statement now contains an acknowledgement by the tenant to draw the tenant's attention to a number of issues that should be considered. To avoid doubt, landlords should consider specifically addressing or excluding warranties in relation to these matters in the body of the statement.

The consequences of failing to disclose

The Retail Shop Leases Act 1994 requires a landlord to give the tenant a draft lease and a lessor disclosure statement in the form required by the Act at least seven days before entry into a retail shop lease (which could be the date the lease is signed, or the date the landlord gives the tenant possession of the premises).

If the landlord does not give the tenant a lessor disclosure statement, or if the statement is defective, the tenant may be able to terminate the lease within six months after entering into it, and claim damages.

For more information about the new lessor disclosure statement, please contact HopgoodGanim's Commercial and Retail Leasing team.