Where a tenant has an option to renew to extend the term of an existing retail lease the tenant is usually required to give the landlord a renewal notice. Here, partner Mark Lyons explains the landlord's disclosure obligations when the tenant has exercised its renewal option and the consequences for non-compliance.

Disclosure obligation

The Retail Shop Leases Act (Queensland) requires the landlord to give the tenant a disclosure statement within seven days after the landlord receives the tenant's notice exercising its option to renew. Within 14 days of receiving the disclosure statement, the tenant may, whether or not the renewed lease period has commenced, give the landlord a written notice stating the renewal notice is withdrawn. The lease then expires on the expiry date of the lease. Alternatively, the tenant may begin to negotiate the renewed lease terms.

It is not ideal for a landlord to negotiate with the tenant for an extended period regarding the renewed lease terms before issuing the disclosure statement. The disclosure statement, along with the relevant renewal document outlining the renewed lease terms, should be prepared and issued to the tenant within seven days after the tenant has given the landlord its renewal notice, so the landlord can comply with its disclosure obligations. The parties can then negotiate the renewed lease terms as necessary.

Waiver of disclosure obligation

The landlord's disclosure obligation is waived if the tenant gives the landlord a waiver notice. This waiver notice must be given to the landlord at the same time as the tenant's renewal notice.

There is no guarantee the tenant will do this, so it is prudent for the landlord to ensure the disclosure statement and renewal documents are issued within seven days of the landlord receiving the tenant's renewal notice.

Non-compliance with disclosure obligation

If the landlord does not provide a current disclosure statement to the tenant within the seven day disclosure period and the tenant does not give the landlord a compliant waiver notice, then the tenant may terminate the lease by giving written notice to the landlord, within six months of entering into the renewal option. It is not clear when the renewal option is 'entered into'. However, it is likely to be from the commencement date of the renewal option.

In addition, the landlord is liable to pay the tenant reasonable compensation (decided by way of a dispute resolution process) for loss or damage suffered by the tenant because of the landlord's failure to give the tenant a current disclosure statement.

If you have any queries about the impact of this obligation, please contact a member of our Real Estate team.