Retail leasing law changes for NSW - key impacts for councils

Retail leasing is not typically a primaryfocus for councils. However, most councilsdeal with it in some form -cafés in parks, kiosks, small shops in civic buildings and mixed‑use community spaces.

Some of these arrangements may fall within retail leasing laws, depending on how they are structured and used. 

With NSW retail leasing law proposing to undergo its most significant reform in decades, that risk becomes more relevant - making this something councils should keep on the radar.

What’s proposed to change

The Retail Leases Amendment (Review) Bill 2025 (NSW) is the next stage of reform to the Retail Leases Act 1994 (NSW). It has been introduced to Parliament but is not yet in force.

Although much of the reform is framed as procedural and structural, there are two significant shifts relevant to how councils approach retail leasing in practice.

1. Broader approach to what is “retail”

Earlier changes (from 1 January 2023) already expanded the types of businesses treated as retail - for example gyms and small bars are now captured regardless of location.

The proposed reforms go further, moving away from traditional ‘shops’ and whether retail is the dominant use, towards a more practical question – how the premises are actually used in practice. In other words, even a part retail use may be enough in some circumstances.

2. Ancillary areas likely to be caught

The Bill also indicates that areas ancillary to a retail use, such as:

• car parks

• storage areas

• signage or display rights

may be treated as part of the retail lease and covered by the Act if the reforms proceed.

This is a significant shift. Rather than focusing only on the core tenancy, it looks at the overallarrangement, including the spaces and rights that support the retail use.

Why this matters for councils

For councils, the issue is the risk of unintended application of the Act. Council arrangements may not be structured as “retail leases” but may function like them in practice.

Common examples include:

• community centres with a café or kiosk

• aquatic or recreation facilities with food operators

• visitor or tourism sites with small retail components

• civic buildings with incidental commercial uses

These are often mixed‑use arrangements, where retail is only one part of the overall purpose.

If an arrangement is characterised as a retail lease under the Act, a different set of rules applies and those rules may even override already agreed terms.

Some of those rules include:

• additional disclosure obligations

• limits on the recovery of certain outgoings

• restrictions on clauses dealing with matters such as relocation, demolition, assignment and termination.

If the proposed reforms are passed, it will become easier for a whole arrangement to fall within the Act, even if this was not the original intention.

The proposed treatment of ancillary areas is another key issue for councils. It is common to lease a café or shop, while separately licensing things like parking, storage, outdoor seating or signage. Currently, those “side” arrangements are often treated and documented separately from the retail lease itself.

If the reforms proceed, that distinction becomes much less reliable. Where those areas support the retail use, they may be treated as part of the same retail lease - even if documented separately. This may affect how income is structured, what costs can be recovered, and overall flexibility.

Practical considerations

Councils should take a closer look at where retail risks may arise:

1. Focus on mixed‑use sites - Identify premises with any customer-facing or retail element, even if retail is not the primary purpose.

2. Look beyond labels - Whether it is called a “licence” or “commercial lease” is less important than how the space actually functions.

3. Pay attention to ancillary arrangements - Separate agreements for parking, storage, signage or outdoor areas are the most likely to be drawn into the Act if the reforms proceed.

4. Check key compliance points - Where an arrangement may be retail, confirm whether disclosure requirements were triggered, whether outgoings are recoverable as drafted, and whether key clauses would hold up.

5. Keep an eye on the reforms - The Bill is not yet law, but it signals where things are heading, with much of the detail to be set out in regulations, which can change more readily.

Other reforms to keep in mind

The Bill also proposes a number of more administrative changes, including:

• updates to disclosure requirements

• greater flexibility around disclosure timeframes

• changes to when lease preparation costs can be recovered.

These changes will affect how councils approach retail leasing in practice, particularly around process, timing and cost recovery. They also reinforce a broader shift towards a more regulated and standardised retail leasing framework. 

Authors: Melissa Potter & Stella Sun

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This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.