14 October 2015
The Queensland Parliament passed the Retail Shop Leases Act in 1994, the object being to “… promote efficiency and equity in the conduct of certain retail businesses in Queensland.”
This is said to be achieved through setting “… mandatory minimum standards for retail shop leases and a low cost dispute resolution process for retail tenancy disputes.”
The Act was introduced following on complaints of arbitrary and unreasonable conditions and charges imposed by some lessors (landlords) in respect of retail shop tenancies.
The Act defines a retail shop as premises that are:
(a) situated in a retail shopping centre; or
(b) used wholly or predominately for the carrying on of one or more retail businesses
By regulation, a list of tenancies that fall within the jurisdiction of the Act are listed.
These include (but are not limited to) goods and services such as antique and used goods retailing, pawn broking, bread and cake retailing, delicatessens, pharmaceuticals, cosmetics and toiletry retailing, clothes retailing, florists and butchers.
A lease can also be deemed a retail shop lease in other circumstances.
The Act specifically defines what constitutes turnover rent; banned ratchet rent provisions and payment by lessees (tenants) of the landlord’s land tax; and governs payment of the landlord’s legal costs, but not in all cases e.g. a landlord can still claim the legal costs of obtaining the mortgagees consent to a lease.
The Act also provides for disclosure obligations by both the lessor and the prospective lessee, provided that the prospective lessee has “… received appropriate financial and legal advice about the lease …” (unless the prospective lessee was a major lessee who waived that entitlement).
In certain circumstances, the Act also enables a lessee to terminate the lease if a lessor does not make disclosure or if a ‘defective statement’ is given.
The Act specifically states that “… rent may not be reviewed more than once in each lease …”, and that a rent review must consist of a single basis; for example, a CPI increase, a fixed percentage or a fixed annual increase.
If agreement cannot be reached on the as to current market rental, a specialist retail valuer must determine the rent.
The Act also stipulates the lessee’s liability in relation to payment of the lessors outgoings for the shopping centre or building.
Particulars must be provided in the retail shop lease as to determination and recovery of outgoings.
In addition, “… the lessor must give to the lessee an annual estimate in the approved form of the lessor’s outgoings, other than specific outgoings …” and an “… audited annual statement in the approved form of the outgoings within three months after the end of the period to which the outgoings relate.”
When disputes arise between lessor and lessee, provision exists in the Act for mediation.
When a retail shop lease is assigned, the Act provides that “… the assignor is released from any liability under the lease to which the assignor would otherwise be subject if there is any default by the assignee …”, but only if disclosure has correctly been given by all parties.
The end result is that the Act provides some certainty to a retail lessee in protecting that lessee against unreasonable charges or arbitrary clauses that could have previously been inserted into retail shop leases which could previously have had the effect of making such leases unviable.