Do you operate a car wash? If you do, you will have undoubtedly entered into a lease with your landlord or a sublease with the tenant of the property. You may have also heard about recent legislative changes to the unfair contracts regime that may affect your car wash lease. What do these changes mean? What can I do if I have been affected? We answer these questions below.

What Are the Changes to the Unfair Contracts Regime?

On 12 November 2016, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Unfair Contract Law) came into effect.

Previously, the unfair contracts regime only protected consumers. This amendment extends the protections afforded by the Australian Consumer Law (ACL) and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) to small businesses who have signed on to standard form contracts.

This means that the amendment will protect small businesses, such as your car wash, from unfair contract terms in your lease.

Do These Changes Affect My Car Wash Lease?

Changes to unfair contracts will affect your car wash lease if:

  1. You have less than 20 employees;
  2. The car lease is a “standard form” contract (i.e. the landlord or sublessor uses the lease agreement for all of its premises);
  3. Assuming your car wash lease extends over one year, then the value of your contract is no more than $1,000,000 up-front (or $300,000 if your lease is for less than a year);
  4. You entered into, renewed, or varied your car wash lease after 12 November 2016; and
  5. You were not given an opportunity to negotiate the “standard terms” of the car wash lease beyond the commercial terms.

Examples of Unfair Standard Terms in Car Wash Leases

If you satisfy the above criteria, then an unfair term in your car wash lease will likely be inoperable and void. Standard clauses found in car wash leases which might fall foul of the new regime include:

  • A term that seeks to stop you from claiming compensation if the landlord or sublessor develops an adjoining lot next to the car wash even if this causes disruption to the business (e.g. the petrol station owner decides to open up a mechanic next to your car wash);
  • A term that states you must pay the landlord or sublessor liquidated damages (i.e. compensation) if the car wash is not kept open during specified trading hours;
  • A term that appoints the landlord or sublessor as your attorney to sign documents if you default under the lease; and
  • A term that releases the landlord or sublessor from all liability, even when they do not perform their duties as a landlord or sublessor under the car wash lease.

The clauses listed above are not exhaustive. These terms are likely deemed unfair because:

  • The terms cause a significant imbalance of power between the landlord/sublessor and you (i.e. the terms are biased in favour of the landlord/sublessor);
  • These terms are not reasonably necessary to protect the landlord/sublessor; and
  • The terms may cause a detriment to you (the car wash operator).

If the terms in your car wash lease meet these criteria, then the Unfair Contract Law may also consider them unfair.

What Can I Do If My Car Wash Lease is Unfair?

Before entering into a lease, you should have a lawyer review the document for any unfair terms. You should negotiate amendments to make the lease a more balanced and fairer document.

If you have already entered into an unfair contract, the onus will be on you to take action to prove that the terms are unfair. Alternatively, the ACCC may seek a declaration that certain terms be considered unfair or void. Importantly, in these circumstances the remainder of the lease will continue to operate.

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If you are unsure whether a particular clause in your car wash lease is unfair, get in touch with our leasing lawyers on 1300 544 755.

Emma Heuston

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