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Retail Tenancy Agreements in Australia

Written by: Ian Macleod

Article Overview: Australian Retail Tenancy Laws and Contract Kits Retail tenancy laws through out Australia have been developed to protect the interests of small business consumers and to assist in leveling the playing field for the parties involved.They seek to provide this protection by making sure that prospective tenants have sufficient information to make a sound business decision about entering into or renewing a Retail Shop Lease rental Agreement.

Retail Tenancy Agreements in Australia

Queensland Retail Lease

Many Australian state governments have expanded their concept of consumer protection to include small business consumers who were bargaining on a far from level playing field, where owners of large shopping centres had all the advantages and all the power. They seek to provide this protection by making sure that prospective tenants have sufficient information to make a sound business decision when entering into or renewing a lease.

Recent amendments clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions. As a result, the amendments require greater responsibility and pro-active behaviour from the Landlord.

The Retail Shop Leases Act 1994 (“the Act”) does not apply to a shop with a lettable area of 1,000 square metres or more but will apply to a sub-lease of space in the shop if the space which is sub-let has a lettable area of less than 1,000 square metres. A lease for a term of less than 6 months (without any option of the tenant to renew) is excluded. There is some discussion as to whether void areas, such as, for example, stairwell areas and areas adjacent to mezzanine floors, are part of the lettable areas as they are not be used to provide the retail services for which the premises are dedicated even if the landlord pays rent on them.


Disclosure statements:

The Law in Queensland, is very clear:

A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.
If the landlord now does not provide a statement or provides a statement that is incomplete or contains information that is false or misleading in a material particular, then the landlord is deemed to have issued a defective statement, both which entitle the tenant to terminate the lease by written notice to the landlord within six months after the tenant enters into the lease. The landlord is also liable to pay reasonable compensation for any loss or damage suffered by the tenant because of such non-compliance or defective statement.

If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct. At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into. The law requires the landlord to give the tenant a disclosure statement at least seven days before entering into the lease. Tough penalties apply if it isn’t, or if the statement is inaccurate. In particular, the Act renders void lease provisions which require any tenant’s payment for contribution to fit out that has not been disclosed in a disclosure statement. In most states law entitles the tenant, if he/she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent paid is non refundable).

In Queensland, the disclosure statement requires the landlord to reveal if the relevant local authority has approved plans for future alterations or additions to the shop, and, if so, whether it is presently intended that these works will be commenced during the term of the lease.

The only way a tenant cannot end the lease in case of inadequate disclosure is where:

a) the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
b) the tenant is in substantially as good a position as the tenant would have been if the failure had not occurred.

Queensland disclosure forms are available at the Queensland Government website:

If a lease is entered into by way of the renewal of a lease on the exercise of an option, a landlord should make a fresh disclosure statement.


Disclosure - tenant’s/assignee’s obligations

The requirement for a tenant to give a landlord a disclosure statement is now mandatory, although there is no reciprocal right of termination for a landlord should a tenant fail to provide one. It will, however, create a retail tenancy dispute at the landlords’ election.

Similarly, the requirement for an assignee to give a landlord a disclosure statement and for an assignee to give an assignor a disclosure statement is now mandatory.

For new leases a copy of the unsigned agreement must be provided (with the names and addresses of the parties included), along with a disclosure statement, In all states, landlords should provide the tenant with a copy promptly.

A copy of the proposed lease has to be provided once it has been signed. The copies can be photocopies. If a full copy of the lease isn’t supplied, or isn’t within 28 days of it being signed, or the disclosure statement is wrong, the tenant can also end the lease.

The tenant doesn’t have to pay for any fit-out contributions if the liability to pay them is not disclosed in the disclosure statement.

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time. This can particularly occur in the case of providing estimates or statements of outgoings. Strata levies are also to be included in the list of outgoings.

The landlord can’t demand that a tenant pay key money.



No Minimum term 5 years in Queensland.

However, where a lease does not contain an option the tenant does have a right to request a renewal and the landlord is under an obligation to respond in an approved form stating the terms on which the lease will be renewed. Refer generally to section 46 of the Act.


Rent Increases.

At the end of each lease period, In Queensland, only one rental increase a year is allowed except in the first year.


Outgoings.

A written estimate must be provided, before entering into the lease and 1 month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions) otherwise the tenant does not have to pay them. If the tenant is required to pay for a share of other expenses (other than usual outgoings – such as marketing expenses) an audited account must be provided, which is generally both too hard and too expensive. Any outgoings statement must be audited by a registered company auditor.

The landlord can’t ask a tenant for capital costs or interest on their loans. In Queensland, the landlord also can’t ask the tenant to pay legal or other expenses relating to drawing up of the lease, the disclosure statement or other documents required by the Act.

The landlord can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability. However, the Queensland Act seeks to limit recovery for operating expenses by providing that the annual statement of expenditure, which must be furnished by the landlord to the tenant within three months after the termination of an accounting period. This statement must be itemised so that the amount allocated to each item shall not exceed five per cent of the total expenses shown except in relation to any tax, impost or charge levied by the State, or any one component that cannot be dissected so as to comply with the limiting provision.

There may be special additional outgoings, special items of equipment and additional insurance risks that may need to be covered – for example chemicals used in beauty salons may need chemical storage cupboards, extractor fans and special insurance provisions with the additional outgoing of a special fire levy.


Bond.

The landlord may ask for a bond, or security deposit. If received, in Queensland it is not compulsory to put it in an interest bearing account , or otherwise leave it in a lawyer’s or realtor’s trust account… the interest belongs to the tenant. The landlord must return a security deposit to the tenant as soon as practicable after the lease ends where the tenant has performed all obligations under the lease.

The tenant has the option to provide a bank guarantee instead of a security deposit. Any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.


Breaches.

The landlord is required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to the landlord entering the premises.


Renewal – options.

In all states, if an option for renewal is not exercised at the right time it will be lost.
The tenant can exercise an option for renewal even if there has been a breach of the lease – generally the lease will set out the provisions for exercise of the option. At least two months, but no more than six months, before the option date, the landlord must give the tenant written notice of the option date. Failure to comply may result in a maximum penalty of at least $3000.

If a lease does not provide for an option to renew or extend the lease, or it is not the subject of an agreement for renewal or extension, a landlord will be required to give written notice to the tenant as to whether or not it intends offering a new lease. This notice period will vary depending upon the length of the lease term. In the case of a lease longer than one year it must be given at least six months, but no longer than one year, before the lease is due to end. The failure to provide the notices in a timely manner can result in a monetary penalty being imposed upon the landlord or an unexpected lease extension.


Registration.

If the term of the lease is more than three years the Property Law Act 1974 requires that the lease be registered. Although it is not compulsory, leases of less than three years may also be registered. The Department of Natural Resources and Water (Titles Registration) is responsible for the registration of leases.

You can access more information at the Queensland Government site:

The registration process is designed to protect both landlords and tenants by creating an official record of the lease. If the leased premises are sold, the tenant would be afforded protection under a registered lease. A landlord can require the tenant to contribute to the expenses associated with the registration of a lease, including survey fees.



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Article Tags: amendments, australian state governments, business consumers, consumer protection, deceptive conduct, disclosure statements, guarantor, landlord, leasing transactions, mezzanine floors, premises, prospective tenants, queensland, retail lease, retail leasing, retail services, retail shop leases, small business, sound business decision, void areas



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