Written by Retail leasing in NSW is governed by the Retail Leases Act 1994 (NSW), and for lessors, compliance is not optional. Any term in your lease that contradicts the Act is automatically void. The consequences of overlooking key provisions can be commercially damaging—and legally enforceable.
Section 18(2) states that a retail shop lease must not provide for a change to base rent less than 12 months after the lease is entered into, and must not allow for any subsequent change to that rent within 12 months of the previous change. In short, rent reviews must be spaced at least a year apart. There is, however, a narrow exception: this 12-month rule does not apply to increases by a specified amount or percentage. For example, your lease can lawfully increase rent by $100 every six months, or by 2% every six months. But you cannot schedule multiple market rent reviews, or CPI-based adjustments, within the same 12-month period. Any attempt to do so will be invalid under the Act.
This distinction matters. A clause that provides for a market rent review after six months, or attempts to double up with CPI and market reviews in quick succession, will breach the Act. And because the Act overrides inconsistent lease provisions, these clauses will have no effect— even if the tenant does not object or is unaware that the lease has expired. A tenant’s silence or lack of awareness does not validate a non-compliant rent review mechanism. In Pozetu Pty Ltd v Alexander James Pty Ltd, the court found that a rent review clause in a Retail Lease offering two alternative methods of market and fixed rent increases (with the higher result to apply) was invalid. Without an enforceable mechanism to determine rent, the provision of the lease was void to the extend of that inconsistency, despite the tenant exercising its option to renew.
Section 44 introduces further obligations. Between six and twelve months before lease expiry, lessors must provide written notice to tenants either offering renewal on specified terms or stating there will be no renewal. Failure to comply gives the tenant the right to extend the lease by six months from when the notice is eventually given on top of the date the lease originally expires. Advertising the premises for lease without first providing this notice may also attract financial penalties. Even attempts to sidestep the Act—such as by calling an agreement a “licence”—won’t protect lessors. In Cameli Pty Ltd v Place Management NSW, the court found that despite the parties’ intentions, the arrangement was a retail lease and subject to the Act. The lessor’s failure to issue a compliant notice under section 44 meant the lease was extended by law.
These provisions are strictly applied. Lease terms that conflict with the Act will be struck out, regardless of mutual agreement. Lessors must ensure their leases are reviewed, their notice obligations diarised, and their compliance strategies watertight.