One of the most important obligations the Retail Leases Act 1994 (NSW) places on a landlord is the requirement to provide a disclosure statement before the lease is signed. This is not a formality. It is a mandatory document with a prescribed form, and a landlord who fails to provide it, or who provides one that is materially inaccurate, faces real legal consequences.
In practice, we see disclosure statements that are served late, statements that are incomplete, and statements that contradict the terms of the lease itself. Each of these problems creates risk, and that risk does not necessarily fall equally on both sides.
This article explains what a disclosure statement must contain, when it must be served, and what happens when those requirements are not met.
Why the Disclosure Statement Exists
A retail lease is a long-term financial commitment. Terms of three to five years are quite common, and with option periods, a tenant can find themselves bound to a set of conditions for ten years or more. The disclosure statement requirement exists because the legislature recognised that a prospective retail tenant is often in no position to extract the information they need by negotiation alone.
Landlords, particularly those managing shopping centres or large commercial properties, hold most of the information relevant to the transaction: the precise outgoings the tenant will be required to contribute to, the condition and configuration of the premises, any planned works that might disrupt the tenant's business, and the full scope of the landlord's existing obligations in the building.
The disclosure statement is the mechanism by which that information must be provided, in a standardised form, before the tenant is bound.
The Seven-Day Rule
The Retail Leases Act requires the landlord to provide the disclosure statement to the tenant at least seven days before the earlier of:
the date the lease is entered into; or
the date the tenant first takes possession of the premises.
That seven-day window is the minimum time the Act gives a tenant to read the disclosure statement, compare it against the draft lease, identify any inconsistencies, and take legal advice before committing. The consequence of failing to honour it is not merely a technical breach. Under section 11(2) of the Act, a tenant who was not given a disclosure statement as required has the right to terminate the lease by written notice to the landlord at any time within six months of the date the lease was entered into. Subject to section 11(3) of the Act, that right exists regardless of whether the tenant has already taken possession and begun trading.
We see attempts to compress or ignore the seven-day requirement in time-pressured negotiations fairly often. A landlord or their agent may indicate that the lease needs to be signed quickly, or that the disclosure statement will follow shortly after. Neither of those positions is consistent with the Act.
For a landlord, the exposure created by skipping this step is significant: a tenant who signed without a compliant statement has up to six months to walk away from the lease entirely.
What the Disclosure Statement Must Contain
The form of the disclosure statement is prescribed by the Retail Leases Regulation 2022. This means the landlord cannot simply prepare a summary in whatever format they choose. The document must follow the structure set out in the regulations, and it must address each of the required matters.
The prescribed disclosure statement must set out:
The key commercial terms of the lease, including the rent, the lease term, any option periods, the permitted use, and the basis on which rent will be reviewed.
A detailed breakdown of the outgoings the tenant is expected to contribute to, and an estimate of those outgoings for the first year of the lease.
The landlord's fixtures, plant and equipment in the premises at the commencement of the lease.
The operating hours of any shopping centre or building in which the premises are located.
Any works to the premises, the building, or surrounding roads or infrastructure that the landlord knows about or has planned, and that are likely to affect the tenant's use of the premises or their customers' access to it during the lease term.
Any demolition clause or other provision in the lease that allows the landlord to terminate the lease early.
The list above captures the core requirements, but the prescribed form goes into considerable detail. The outgoings section in particular requires a line-by-line breakdown rather than a global estimate, so that the tenant can understand exactly what categories of expenditure they are taking on.
Comparing the Disclosure Statement to the Lease
The disclosure statement and the lease document should be consistent with each other. In our experience, they often are not.
A common problem is that the heads of agreement is negotiated and signed, the disclosure statement is prepared on the basis of those terms, and the lease is then drafted independently by the landlord's solicitor. If the lease contains provisions that differ from what the disclosure statement records, the tenant may be agreeing to something they were not told about.
We always recommend reviewing the disclosure statement and the lease document side by side. That comparison is one of the most important things a retail leasing lawyer does for a tenant. It is not enough to read the lease without the disclosure statement in front of you, or to read the disclosure statement without then checking it against the lease.
Landlords should carry out the same comparison from their side. A disclosure statement that does not accurately reflect the lease terms is not just a technical non-compliance. It is a document that misrepresents the transaction to the tenant, and the consequences of that can be significant.
The Consequences of Non-Compliance
Section 11(2) of the Act sets out three situations in which a tenant has the right to terminate the lease by written notice:
where no disclosure statement was provided at all;
where the statement provided was incomplete; and
where the statement contained information that was materially false or misleading at the time it was given.
The same six-month window applies to all three. The tenant may serve written notice of termination at any time within six months of the date the lease was entered into, subject to section 11(3) of the Act.
What amounts to materially false or misleading is not always a straightforward question. A minor discrepancy in an outgoings estimate is unlikely to carry the same weight as a failure to disclose a demolition clause, planned construction works that will close off customer access, or a significant known liability the tenant will inherit. The practical question is whether the inaccuracy or omission was the kind of thing that would have affected the tenant's decision to sign, or the terms on which they were prepared to do so.
For landlords, the implications of non-compliance go beyond the immediate risk of the tenant walking away. A landlord who has failed to meet the disclosure statement requirements is in a weaker position if any dispute arises during the term of the lease. Courts and tribunals take the statutory disclosure regime seriously, and a landlord who ignored it at the outset may find that this colours how the broader dispute is approached.
Landlords preparing disclosure statements should treat accuracy and completeness as non-negotiable. The temptation to understate estimated outgoings or omit reference to planned works that might deter a prospective tenant creates a legal exposure that can far exceed whatever short-term benefit the omission was meant to deliver.
The Tenant's Acknowledgement
Once the tenant has received the disclosure statement, the Act requires them to provide a signed acknowledgement confirming receipt. This acknowledgement forms part of the lease documentation.
Tenants should not treat the signing of this acknowledgement as a formality. It is a record that you have received and had the opportunity to review a specific document before entering into the lease. If there is anything in the disclosure statement that is inaccurate, incomplete, or inconsistent with the lease, the time to raise it is before that acknowledgement is signed, not after.
Signing the acknowledgement without having properly reviewed the statement, or without having compared it against the lease, is one of the more avoidable mistakes we see. The disclosure statement is not long, and the time spent reading it carefully is almost always worthwhile.
A Note for Landlords Preparing the Statement
The disclosure statement is typically prepared by the landlord's agent or solicitor as part of the lease documentation package. But the information that goes into it comes from the landlord. An agent or solicitor can only work with what they are given, and a disclosure statement prepared on the basis of incomplete or inaccurate instructions is a problem that goes back to the source.
Landlords should be prepared to provide their solicitor with a clear and accurate account of the outgoings structure, the condition of the premises and what fixtures are in it, and any works or plans that might affect the tenant's use of the building or access to it. If that information changes between the time the disclosure statement is issued and the time the lease is signed, an updated statement may need to be provided.
The time and cost of getting the disclosure statement right is a small fraction of the legal cost of defending a termination claim or a dispute at NCAT because it was wrong.
Getting the Process Right
The disclosure statement requirement is one of the areas where specialist retail leasing experience makes a real difference. Getting the prescribed form right, ensuring the outgoings breakdown is complete, and identifying any inconsistencies with the lease before the statement is served are all things that require familiarity with the regime and attention to detail.
At Thornton + King, we have prepared and reviewed retail lease documentation for hundreds of landlords and tenants across NSW. If you are a landlord preparing a disclosure statement, or a tenant who has received one and is unsure whether it is accurate or complete, give us a call or submit an enquiry to speak to a specialist retail leasing lawyer today.
Related articles in this series:
Retail Leases in NSW: A Complete Guide for Tenants and Landlords
What Is the Retail Leases Act 1994 (NSW) and Does It Apply to You?
Outgoings in Retail Leases: What You Are and Are Not Required to Pay
Disclaimer
The information in this article is intended as a general guide only and does not constitute legal advice. Retail leasing is a specialist area and the law can change. You should obtain advice from a qualified retail leasing lawyer in relation to your specific circumstances.
