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Are you meeting your obligations under the Retail Leases Act (NSW) 1994 to disclose and report on your marketing levies?

Whilst landlords are often aware of the need to disclosure the outgoing budgets, expenditure and recoveries to comply with the Retail Leases Act (NSW) 1994 (RLA)……..are they meeting the requirements under the RLA in respect of the marketing levy?

The RLA provides as follows:

  • Section 53 provides that at least one month prior to the start of each accounting period (usually the financial year), the lessor must provide the lessee with a marketing plan, that gives details of the lessor’s proposed expenditure for the marketing fund, for the next financial year.
  • Section 54(1) provides that the lessor must make a written statement available for examination by the lessee detailing all expenditure for the building/centre on account of advertising and promotion costs to which the lessee has contributed – i.e. The lessee’s marketing levy payments.  The statement must be made available at least 1 month after each 6 month period (i.e. 2 statements for each financial year).
  • Section 54(2) provides that the statement under section 54(1) must include:
    1. in respect of expenditure by the lessor on account of advertising and promotion costs of the lessor:
  1. a statement of the amount contributed by the lessor in respect of expenditure relating exclusively to the building or centre, and
  2. a statement of the total of the amounts contributed by the lessees, and
    1. in respect of contributions by the lessor on account of advertising and promotion costs of the lessor relating exclusively to the building or centre and in respect of contributions by the lessees on account of advertising and promotion costs of the lessor:
  1. a statement of the total unspent amount carried forward to that period, and
  2. a statement of the total unspent amount to be carried forward to the next period, and
    1. any other statements prescribed by the regulations.
  • Section 55(1) provides that the lessor must give the lessee a written annual written statement that contains the detail of all expenditure relating exclusively to the building / centre in which the retail shop is located in each financial year during the term of the lease.  The advertising statement is to be prepared in accordance with the Australian Accounting Standards.  The statement is to be given to the lessee within 3 months after the end of the accounting period to which it relates and contain a report (an “auditor’s report” ) which includes a statement by the auditor as to whether or not the advertising statement correctly states the expenditure by the lessor during the financial year concerned.
  • Section 55(2) provides the details to be provided in an advertising statement given under section 55(1).
  • Section 55(3) provides the lessee must be given a reasonable opportunity to make a written submission to the auditor on the accuracy of the report under section 55(1)(d).

In summary:

  1. The lessor must provide to each lessee who contributes to the marketing levy, an annual marketing plan 1 month before the start of each financial year.
  2. The lessor must make available to each lessee who contributes to the marketing levy, a written statement for each six month period available 1 month after the expiry of each 6 month period the actual expenditure of the marketing levy.
  3. The lessor must provide to each lessee who contributes to the marketing levy, the written annual statement of all expenditure within 3 months of the end of each financial year (or part thereof if the lease ends prior to 30 June).

Deanne Methven
Special Counsel

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