By Natalie Smyth
The Retail Shop Leases Act 1994 (Qld) (“the RSLA”) regulates the retail shop leasing sector in Queensland. It was introduced in an effort to address the imbalance of negotiation power between large landlords and small retail tenants by imposing mandatory minimum standards for retail shop leases.
On 25 November 2016, the Retail Shop Leases Amendment Act 2016 (“RSL Amendment Act”) came into effect, imposing a number of key changes to the RSLA. The Amendments offer further protection for retail tenants by imposing additional disclosure requirements on retail landlords. Some of the key changes to the Act can be summarised as follows:-
What is a retail shop lease?
The definition of “retail shop lease” has been amended to exclude the following lease categories from the operation of the RSLA:-
- retail shops with a floor space of more than 1000m2;
- leases of premises for the conduct of a retail business by a tenant who is the landlord’s employee or agent; and
- certain non-retail leases located within a retail shopping centre that are ‘not used wholly or predominantly for carrying on a retail business’.[1]
This change will see a number of tenants excluded from the protection offered by the Retail Shop Leases Act, but will also allow these tenants the ability to negotiate commercially agreeable lease terms.
Major Lessees
Tenants who operate five or more retail shops in Australia (“major lessees”) will no longer need to obtain legal and financial advice in order to waive minimum standards imposed by the RSLA with respect to the timing and calculation of rent reviews (e.g. the rent may not be reviewed more than once in each year of the lease). Now, major lessees will be able to negotiate rent review terms that are commercially agreeable to both landlord and tenant, provided that they give a written waiver notice to a landlord.[2]
Outgoings
Under the new amendments, a retail tenant is permitted to withhold payment of outgoings until such time as the landlord has provided the tenant with an estimate of the outgoings[3]. The estimate of outgoings prepared by landlords must also now include a breakdown of the centre management and administrative fees.[4]
For those tenants who contribute towards a landlord’s marketing and advertising costs, the landlord must now issue a marketing plan at least one month prior to the start of each accounting period outlining the landlord’s proposed promotion and advertising costs.[5]
Tenants that pull out of the Lease
A retail tenant will now be required to pay a landlord’s reasonable legal fees if the parties agree on the terms of the lease and the lease has been prepared by the landlord but the tenant fails to execute/enter into the lease with the landlord.[6]
Disclosure requirements
Under section 22 of the RSLA, landlords are required to provide tenants with a disclosure statement and a draft copy of the lease at least 7 days prior to entering into the lease. Tenants are now able to agree to shorten or waive the 7 day disclosure period by providing the landlord with a legal advice report and waiver notice.[7]
Section 22(5) of the RSLA has been removed. This section imposed a limitation on the rights of a tenant to terminate a Lease based on a defective statement if the landlord had acted reasonably and honestly and the lessee is in substantially as good a position as the lessee would have been if the disclosure statement were not a defective statement.[8]
Tenants will now be required to provide landlords with a lessee disclosure statement at least seven days before entering into the lease, rather than simply prior to entering into the lease.[9]
Options
Unless the tenant provides a signed waiver form to the landlord, landlords will now need to provide tenants with a current disclosure statement within 7 days of the tenant providing notice to the landlord exercising their option to renew the lease. After receiving the updated disclosure statement, the tenant will have 14 days to withdraw from exercising the option.
The tenant will now have the right to terminate the lease within 6 months of the option date in the event that the landlord does not comply with this condition or the disclosure statement provided by the landlord to the tenant is defective.[10]
Conclusion
The amendments certainly offer additional protection for tenants, especially with the additional disclosure requirements imposed on retail landlords.
Landlords, in particular, will need to ensure that they are fully across the new amendments, update their standard leasing documentation and ensure they have diarised important dates to ensure they comply with the new disclosure requirements around renewals/options. Failure to comply with these new disclosure obligations could see a tenant exercising their right to terminate the lease.
If you have any questions about retail leasing in Queensland, or require the drafting of a commercial lease, please don’t hesitate to contact our property and commercial solicitor, Natalie. Call/email Just Us Lawyers – we have extensive experience in dealing with commercial and business transactions and with business planning, structuring and compliance issues.
[1]S5A(3) RSL Amendment Act.
[2]S24(2) RSL Amendment Act. The Notice will need to state that section 27(2) – (7) does not apply.
[3]S33(4) RSL Amendment Act.
[4]Ibid.
[5]S35 RSL Amendment Act.
[6]S49 RSL Amendment Act.
[7]S21B(2).
[8]S15 RSL Amendment Act.
[9]Ibid.
[10]Ibid.
