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Important Changes to Retail Leasing

The Retail Shop Leases Amendment Bill 2015 (Qld) recently received royal assent is expected to commence later this year. This will mean important changes for retail landlords and tenants.  The following is a summary of the key changes to the Retail Shop Leases Act 1994 (Qld) (“Act”).

 Application of the Retail Shop Leases Act

The Act will no longer apply to certain tenancies such as:

  • shops with a floor area of more than 1,000 m²;
  • non-retail areas of a shopping centre where only 25% or less of the total lettable area of the relevant level of the centre is used for retail purposes;
  • areas occupied by the landlord’s employees or agent (e.g. centre management); and
  • some common area tenancies such as ATM and vending machines tenancies.

Disclosure Requirements

  • Tenants will have the ability to waive the 7 day disclosure period for new leases and lease assignments, but not the obligation for the landlord to give a disclosure. Similarly, assignees may waive the disclosure period for an assignor disclosure statement.
  • Sub-landlords and franchisors can request updated disclosures from the head-landlord.
  • Landlords must give tenants updated disclosures after the tenant exercises the option to renew, and tenants will be able to withdraw the exercise of its option within 14 days if it does not wish to renew the lease after receiving the disclosure.
  • Tenants will be required to give disclosure to the landlord 7 days before entry into a lease.

Market Reviews and Financial Matters

  • Market reviews conducted under the Act will be on an effective rent basis.
  • Where rent is to be decided by market review on commencement of an option period, the tenant will have an ongoing right to exercise the option until 21 days after market rent is determined (even if the option exercise date has passed and the lease expires).
  • There are more stringent requirements for recovery of outgoings (e.g. the landlord’s outgoings estimates and annual audited statements must provide a detailed breakdown of administrative costs and to centre management) and tenants may withhold payment if the landlord fails to comply with the requirements under the Act.
  • The Act will no longer require tenants to provide turnover reports if they are required to pay turnover rent, this will need to be covered under the lease.
  • If tenants are required to contribute towards the landlord’s promotion and advertising costs, a marketing plan must be made available to tenants with an audited annual statement.
  • If a lease is prepared but the tenant does not enter into it, the landlord will be able to recover its legal costs from the tenant.
  • Landlords will not be allowed to recover mortgagee consent costs from tenants.

Compensation

  • Landlords will not be liable to tenants for compensation for business disruptions in an emergency.
  • For tenants seeking compensation for defective lessor disclosure statements, they will need to give the landlord written notice of the loss or damage as soon as practicable otherwise they will run the risk of reducing the compensation payable;
  • A landlord will be able to limit the tenant’s right of compensation if the business disruption occurs during the first lease year and the landlord has given the tenant notice of the potential business disturbance before the lease was entered into.

Other Changes

  • Guarantors will be released from their guarantees on assignment of a lease.
  • Redecoration clauses will be void unless they specify the general details of the nature, extent and timing of the refurbishment or refitting required.

In anticipation of these important changes, it will be prudent for all retail landlords and tenants to be aware of the changes and to review their current leasing practice to ensure that they are appropriately prepared.

Elicia Lin
Associate

supervising partners

Gavin McInnes

Partner
Office 07 3009 8444
Email g.mcinnes@rclaw.com.au

lawyers

Elicia Lin

Associate
Office 07 3009 8444
Email e.lin@rclaw.com.au