The Casual Mall Licensing Code of Practice (the Code) is a set of guidelines that the National Retail Association and the Shopping Centre of Australia follow. These guidelines are designed to protect retail tenants from pop-up stores who:
- block the visibility of their retail shop; or
- sell similar goods or services.
It is a voluntary code, so it only applies to retail landlords who have agreed to comply with the guidelines. The application is also limited to retail shops that are regulated by the retail leasing legislation in each state and territory in Australia, except for South Australia. In this article, we will explain the obligations of retail landlords to their tenants under the Code.
Casual Licence Policy
Under the Code, before a landlord can grant a licence to a pop-up store owner, it must provide a casual mall licence policy to all retail tenants in the shopping centre. This policy must include a floor plan, showing the:
- areas of the shopping centre where they may grant licences; and
- contact details of the representative who deals with complaints about licences.
This policy must be provided to the retail tenant at the time of entering into the lease, together with their disclosure statement. The disclosure statement should be provided:
- at the same time as the casual mall licence policy, if it is available; or
- a minimum of 14 days before the granting of the first licence.
Shop Front Visibility
The Code provides that the landlord must ensure that a pop-up store does not substantially interfere with the visibility of any retail shop. The exception to this guideline is where the landlord:
- informs the tenant that the grant of a casual mall licence may interfere with the visibility of their shop; and
- obtains the written consent of the retail tenant before granting the licence to the pop-up shop.
In addition to protecting shop front visibility, the Code also provides that a landlord must not grant a casual mall licence to a pop-up shop if it will cause an unreasonable introduction of external competitors to the retail tenant.
For example, a pop-up store that creates a significant adverse effect on the sales of the retail tenant will be considered unreasonable. This means that a competitor cannot set up a pop-up store in front of, or immediately adjacent to, a retail shop that it may reduce the trade of. This is the case unless the landlord notifies the retail tenant about the potential effect on their trading.
An internal competitor is a pop-up store owner that also owns a retail shop in the same centre. A landlord may grant a casual mall licence to an internal competitor in the following if it is:
- in the same retail precinct as the retail shop;
- in the closest area to their retail shop that was available at the time the licence was granted; or
- within the centre court of the shopping centre.
Exception for Special Events
Regular restrictions on granting casual mall licences will not apply for special events. Special events include those that are:
- related to community, culture, the arts, entertainment, sport, recreation or are promotional; and
- held over a limited period.
This exception applies as long as the landlord:
- reserves the right to do so in their casual mall licence policy; and
- gives the retail tenants at least 24 hours’ notice containing details of the special event.
Adjustment of Outgoings
If a landlord grants a casual mall licence, the Code provides that they must reduce the total amount of non-specific outgoings that retail tenants pay.
The reduction will be based on the:
- total amount of outgoings;
- total lettable area of the retail shops in the shopping centre; and
- length of the casual mall licence.
In practice, this means that retail tenants benefit from the presence of pop-up stores in a retail shopping centre – this being a reduction in outgoings.
Other Benefits for Retail Tenants
While the Code is designed to limit the grant of casual mall licences and the impact on existing retail tenants, it can also provide many other benefits for retail tenants of a shopping centre. In addition to reducing non-specific outgoings, it can:
- add to the variety of the retail offering in the shopping centre; and
- help attract customers and enable existing retail tenants to add to their normal sales.
Dispute Resolution Process
Additionally, the Code provides a specific dispute resolution procedure to follow where tenants believe that there has been a breach of the Code. If a retail tenant considers that there has been a breach of the Code, the process for dispute resolution is generally as follows:
- the retail tenant must notify the representative who is responsible for dealing with complaints;
- then, the representative must respond to the complaint as soon as practicable; and
- all of the parties to the complaint must attempt to resolve the complaint using negotiation and in good faith.
Where the complaint cannot be resolved, it can be referred to mediation, a form of alternative dispute resolution. Here, an independent mediator will be appointed by the relevant retail tenancy official in each state or territory. The retail tenant and the landlord will also be equally responsible for the cost of the mediation.
In South Australia, the Code is not voluntary because it forms part of the Retail and Commercial Leases Act 1995 (the Act), which must be complied with. The terms of the Code and the Act are very similar. However, there are a few differences which include:
- the Code sets out a specific dispute resolution procedure; and
- the Code is administered by a Code Administration Committee whose role is to promote and publicise the Code, monitor the operation of the Code and report regularly on the operation and effectiveness of the Code; and
Additionally, the Act provides that no proceedings are to be initiated against the landlord as a result of a breach, unless the:
- retail tenant requests that the landlord rectify the breach in writing; and
- landlord fails to rectify the breach as soon as reasonably possible after receiving the written request.
With the rise of pop-up stores in recent years, it is important that retail tenants are aware of their rights under the Code and, for premises in South Australia, rights under the Act. These rights can protect retail tenants from a pop-up store:
- blocking their shopfront; or
- which is a competitor to the retail tenant opening in the same precinct.
These regulations also have other flow on benefits, including a likely reduction in non-specific outgoings payable. If you have any questions, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.
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