Many retail leases include a relocation clause. Such a clause allows a landlord to relocate a tenant to comparable alternative premises to carry out repairs, refurbishment, redevelopment or extension. If the landlord wants to exercise these relocation rights, they must abide by the lease and retail leasing legislation. If your landlord is looking to relocate your business, you have a right to:
- receive notice, including details of the proposed works and alternative premises;
- terminate the lease early; and
- costs and compensation.
This article explains these requirements and rights.
The landlord must provide you with a written relocation notice within the timeframe set out by the retail leasing legislation. The usual time frame for providing this notice is at least three months before the relocation date (for the Australian Capital Territory (ACT), New South Wales (NSW), the Northern Territory, Queensland, South Australia and Victoria) but can be extended to at least six months in other states (Tasmania and Western Australia).
Like any other notice which the landlord provides to you, the delivery of the relocation notice must comply with the notice clauses in the lease. This may mean that the landlord has to deliver the notice in person, by post or by email.
The relocation notice must provide the tenant with a “genuine proposal” which contains enough detail about the proposed repairs, refurbishment, redevelopment or extension to show that the works will be carried out within a reasonably practicable time after the landlord relocates you. To show that their proposal is genuine, the landlord may choose to include a copy of:
- construction quotes;
- the contract with their construction company;
- plans and specifications (noting this must be provided in the ACT only);
- building permits; and
- marketing materials.
The relocation notice must also describe the alternative premises so that the tenant can decide if these premises are “reasonably comparable” to their existing premises. The type of detail that a tenant can expect in their relocation notice includes:
- size and layout (preferably with plans);
- existing fittings and fixtures;
- location within the shopping centre;
- rent (noting the rent may be adjusted to take into account the difference in the commercial value of the alternative premises at the time of relocation);
- outgoings (noting this may be more or less than the amount payable for the existing premises if the alternative premises are a different size); and
- any information which may be relevant to the type of business that the tenant runs.
If alternative premises have already been built, you should also arrange to inspect the premises to determine their suitability in terms of:
- general appearance;
- neighbouring businesses; and
- level of foot traffic.
If you reject the alternative premises, you may terminate your existing lease within one month of receiving the relocation notice. The existing lease will then come to an end after three months of the landlord providing the relocation notice (unless otherwise agreed by the parties).
If you accept the alternative premises or do not provide notice to terminate your existing lease in time, the landlord must offer you a new lease on the same (or no less favourable) terms and conditions as the existing lease.
The term of the new lease should also be the length of time remaining on the existing lease. For example, if you had to relocate in the first year of a five year lease, the term of the new lease should be at least four more years.
Before you sign the new lease, it is important to get a leasing lawyer to review it to ensure its terms have not changed substantially from the existing lease. The existing lease will also need to be formally terminated to make sure that you are no longer liable for the former premises.
Additionally, the landlord has to pay your reasonable costs of relocating to the alternative premises. In some states and territories, the retail leasing legislation gives examples of these relocation costs, which include:
- dismantling and reinstalling fixtures, fittings, equipment or services;
- packaging and removal costs; and
- legal costs and expenses associated with the relocation.
However, if the landlord and you disagree on which costs the landlord must pay, you can have an independent quality surveyor determine the amount (in NSW and Victoria only). Otherwise, you can use the dispute resolution procedure set out in the retail leasing legislation.
The landlord may also have to pay compensation to the tenant because:
- you have incurred loss or damage because of the relocation (ACT and Queensland only);
- your profit has been reduced in the period between closing the existing premises and opening the alternative premises (Tasmania only); or
- the landlord does not offer you an alternative lease (Western Australia only).
It is common for retail leases to include a relocation clause (unless you have negotiated otherwise). Accordingly, it is important for you, as a retail tenant, to understand your rights under the retail leasing legislation in your state or territory.
Unfortunately, these legal protections may not be enough to cover your financial losses if a landlord forces you to relocate your business within the shopping centre or sign a new lease elsewhere. For this reason, you should have a lawyer review and negotiate your retail lease before you sign. If you need your lease reviewed or have received a relocation notice, get in touch with LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.
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