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Why honesty is so important when leasing a property

Last week on the blog we discussed the obligation of the Landlord to provide the Tenant with a Disclosure Statement when leasing retail premises.

Landlords must be honest
Honesty between the Landlord and the tenant allows the tenant to make an informed choice about whether they will accept the lease. If essential facts are withheld from the tenant - they are able to terminate the lease under certain circumstances.

The Disclosure Statement, along with the government mandated information guide, informs the tenant of their rights and responsibilities under the lease, and the tenancy law in general.  One of the aims of providing these documents, is to assist tenants in making an informed decision about whether or not it is viable to enter into the Lease.

Disclosure Statements should contain all of the pertinent information relating to the Lease, which is laid out in an easy to read format.

Requiring both landlords and tenants to be completely up front with each other at the outset, limits any big surprises for the tenant and reduces the potential for disputes or conflicts occurring later in the tenancy.

False, misleading or incorrect statements

Complete honesty and transparency is required of landlords, to ensure the purpose and efficacy of Disclosure Statements is not undermined.

The significance placed on the landlord’s honesty, is reflected in the remedies available to the tenant should the landlord have been less than truthful.  If the landlord:

  • does not provide the tenant with a Disclosure Statement; or
  • provides an incomplete, materially false, or misleading disclosure statement,

then the lessee may terminate the lease, at any time within 6 months of the lease being entered into, by notice in writing to the landlord.

The tenant cannot terminate the lease, if:-

  • the lessor acted honestly and reasonably, and ought reasonably to be excused for the failure concerned; and
  • the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred.

It pays for landlords to be open and transparent

When providing a Disclosure Statement, the Landlord must be completely honest and transparent.

Anything that may adversely affect a tenancy must be disclosed, including any plans to demolish, renovate, extend or redevelop the premises or relocate the tenant. 

All of the tenants’ obligations under the lease should be stated, both financial (such as rent, outgoings and any other monetary charges), and non-financial (such as fit-out and refurbishment obligations).

All representations or verbal agreements that either the tenant or landlord seek to rely on should be included in the Disclosure Statement (and ideally the lease too).  Diligence by the landlord and tenant in this regard is crucial to avoid disputes.

The tenancy law regarding Disclosure Statements differs slightly from state to state.  This article has been written based on the NSW tenancies legislation.

Need more resources?

The Retail Leasing Kit provides you with the Disclosure Statement, and all other necessary information and resources, to safely and effectively manage your own retail property lease or portfolio. See more here.

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