Stating the obvious, why you need an ACT Disclosure Statement
The Leases (Commercial and Retail) Act 2001 (ACT) states that a Disclosure Statement must be issued to a tenant but by who, when and what information needs to be included?
For a new lease, the landlord must give the tenant a Disclosure Statement. Where there is an assignment of lease, the tenant must provide a copy of the Disclosure Statement (issued by the landlord) to the assignee.
Where the tenant intends to exercise an option to renew and the tenant requests a Disclosure Statement, the landlord must give the tenant a Disclosure Statement. If the tenant can’t find their copy, they can ask the landlord for a copy to give to the potential assignee or subtenant.
What is it?
A summary of the terms of the lease and a statement as to the outgoings to be recovered from the tenant (if any).
It is important to note that the Leases Act doesn’t just apply to a ‘lease’, it also applies to some licences meaning that a landlord may be required to provide a Disclosure Statement to a licensee.
A landlord must provide the Disclosure Statement at least 14 days prior to the lease being entered into. That is, upon execution of the lease by the parties or the tenant entering into possession of the premises (whichever is earlier).
If a tenant exercises an option to renew a lease and requests a Disclosure Statement, a landlord must provide the Disclosure Statement within 14 days of the tenant’s request.
What information should it include?
A Disclosure Statement must be in the prescribed form, state the landlord’s accounting period (if not a financial year) and contain a written estimate of the outgoings to be recovered from the tenant. It is particularly important for the nature of all outgoings to be stated as they may not otherwise be recoverable from the tenant.
Where the landlord becomes aware of a significant change to the information contained in the Disclosure Statement, the landlord must tell the tenant as soon as possible in writing.
What happens if a Disclosure Statement is not provided?
If the landlord is required to provide a Disclosure Statement and fails to do so within the required timeframes, the tenant may terminate the lease within the first three (3) months of the term. In some circumstances though, the landlord may not be able to meet those time frames and in those cases the landlord should request that the tenant waive the time limits. This requires the tenant to obtain independent legal advice and have a “Section 30 Certificate” signed by a solicitor.
The Disclosure Statement is an important part of the lease agreement and the landlord should consider the information to be included in the Disclosure Statement carefully. A failure to state certain information (such as the nature of the outgoings) or state information correctly can lead to serious financial consequences.
Seeking legal advice will ensure that you are aware of your obligations and understand the importance of the Disclosure Statement. If you have any questions about leasing, please get in touch with Benjamin Grady, Sandy Meaney or reach out to our Real Estate Team.