The current financial climate has had far-reaching affects on the business market, with many businesses now facing financial difficulty.  Disputes between Landlords and Tenants and claims on the bond money are becoming a great deal more common.

Two issues in this area that merit discussion are:

  1. A reminder that Landlords must correctly deal with the Lease bond and lodge it within the prescribed timeframes; and
  2. Steps prescribed under the legislation where disputes arising between the Landlord and Tenant cannot be readily resolved.

Requirements on Landlords to lodge the Bond

All retail Leases within NSW fall within the ambit of The Retail Leases Act 1994 (NSW) (“the Act”). The Act provides strict provisions regulating the lodgement of bonds under a retail Lease.

Section 16C(2) of the Act provides that the Landlord must deposit with the Director-General an amount of money equivalent to the amount of the security bond not later than 20 business days after:

  • the date of receipt of the security bond, or
  • the date on which the Lease became, or the proposed Lease becomes, binding on the parties,

whichever is the later.

Landlords may face a penalty of up to $2,200.00 for failure to comply with the time limits above.

The bond must be lodged through the NSW Retail Tenancy Unit, and must be accompanied with the prescribed form. Further information, including how to obtain the correct form, can be found on the NSW Fair Trading website (www.fairtrading.nsw.gov.au).

Disputes arising between the Landlord and Tenant

Disputes between Landlords and Tenants are particularly prevalent at present. The disputes commonly relate to a breach under the Lease, usually in relation to  payments under the Lease that the Tenant has failed to make. Regardless of the content, where the dispute cannot be resolved, the Parties must have regard to the Act to try to resolve the dispute, prior to litigation being considered.

Section 68(1) of the Act provides that a retail tenancy dispute cannot be the subject of proceedings before any court until the dispute has been referred to mediation.

Mediationis a process in which the Parties identify the issues in dispute, with a mediator present, working together to reach an agreement. The mediator does not provide advice, but rather the mediator’s role is designed to facilitate an agreement.

Section 67 of the Act outlines that mediation is not limited to formal mediation procedures but may include:

  • preliminary assistance in dispute resolution, such as the giving of advice designed to ensure that the parties are fully aware of their rights and obligations and that there is full and open communication between the parties concerning the dispute; and
  • other appropriate forms of alternative dispute resolution.

Mediation (or another form of alternative dispute resolution) provides an environment in which Parties to the dispute are able to discuss the dispute openly and freely. Section 69 of the Act provides that any statement or admission made in the course of the mediation is not admissible at a hearing or any other legal proceeding.

Although there are a number of types of alternative dispute resolution (ADR), the more common forms are:

  • Arbitration: Both the Landlord and Tenant put forward their arguments and evidence which is reviewed by the arbitrator, a neutral third party, who then reviews the case and imposes a decision that is legally binding on both sides.
  • Facilitation: A process in which the Landlord and Tenant, with the assistance the facilitator, identify problems and disputed issues to be resolved. The facilitator has no advisory or determinative role on the content or outcome, but may advise on or determine the process of facilitation.
  • Conciliation: The conciliator meets the Landlord and Tenant separately in an attempt to resolve their differences. The conciliator attempts to lower tensions, improves communications, interprets issues, provides technical assistance, explores potential solutions and brings about a negotiated settlement. The conciliator does not determine the dispute.

Conclusion

Landlords need to be aware of their obligations relating to lodging the bond under their Lease. Where the Landlord is legally represented, their lawyer will advise them on this, and arrange for the correct bond lodgement, to avoid breaching the Act and resulting penalty.

With regard to disputes, the Act notes that the first step in any dispute is to ensure that the parties have read their Lease and have spoken to one another about their concerns in an effort to resolve the dispute. If the dispute is not resolved at this stage, we suggest contacting your lawyer to assist in resolving the dispute quickly, before the expense of mediation, ADR or potential litigation is incurred.

Attwood Marshall has lawyers available who specialise in Leasing and would have happy to discuss your leasing matter with you.
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