The law which governs the relationship between most retail landlords and tenant in NSW is the Retail Leases Act 1994 (NSW) (RTA). If you are running a retail business, it is likely that this law applies to your lease. It is important that you understand your rights and responsibilities as a tenant under the RTA.

The legal effect of assignment of a commercial lease under the RTA is that the new tenant takes the place of the old tenant on the lease. This means that they take on the responsibilities and obligations of the old tenant, and the old tenant is then released from those obligations. The old tenant (lessee) becomes the Assignor of the lease, and the new tenant becomes the Assignee. The procedure for assigning a lease is governed by the RTA, and the requirements of the process are usually also set out in the ‘assignment’ section of the commercial lease. The steps involved must conform with those set out in the RTA to be legally valid.

Under the RTA, it is possible for an old tenant to ensure that they are no longer liable to pay any money in respect of the lease once the assignment is complete. This is sometimes considered a “full release” and is provided for under section 41A of the RTA. In order for a release to operate here however, the conditions set out in the section must have been performed. This includes the provision of an assignor’s disclosure statement within the specified period. In addition, the assignment of the lease must be of a retail shop that will continue to be an ongoing business. Further, all material information given the new tenant must not have been false or misleading. If the requirements are not fulfilled however, the tenant may remain liable for the obligations of the new tenant.