From 25 November 2016, the Retail Shop Leases Amendment Act (Qld) (the Amendment Act) changed the existing retail leasing legislation, the Retail Shop Leases Act 1994 (Qld). Below, we unpack what these changes mean for both landlords and tenants.
When Will the Amendment Act Apply?
The Amendment Act states that all changes will apply to any retail shop lease:
- Commenced on or after 25 November 2016; and
- Containing “transitional provisions” to set out how the Act will apply in different circumstances.
Note that this will depend on the definition of entered into, being the earliest of the following:
- The date that the tenant enters into possession of the premises;
- The date both parties sign the lease; or
- The date the tenant first starts paying rent.
The definition of “retail shop” has changed under the Amendment Act. Some shops defined as retail under the old Act may now be considered commercial premises. Even if the new Act no longer covers a permitted use, the Amendment Act will still cover any retail shop lease current as of 25 November.
New Disclosure Arrangements
New disclosure arrangements which came into force on 25 November 2016 provide that a lessee must provide the “lessee disclosure statement” at least seven days before the start date of the lease.
Regarding the disclosure surrounding option periods, a landlord must give the tenant a current disclosure statement within seven days after the tenant gives notice exercising its option to renew the lease. However, the tenant can waive their right to receive the disclosure statement by notifying the landlord in writing.
After receiving the disclosure statement, the tenant has 14 days to withdraw its renewal notice for the option, regardless of whether the option period has begun or not. This provides the tenant with greater leeway – particularly when there is a rent review or outgoings dispute.
A tenant who assigns a lease (the Assignor) is automatically released from ongoing responsibilities under the lease, provided they comply with the assignor disclosure obligations.
Tenancies Covered by the Act
The definition of a retail shop has changed and so, the Amended Act now excludes the following:
- Certain businesses that are not considered retail but operate in a shopping centre (e.g. a dentist’s surgery in a large Westfield shopping centre may now be excluded);
- Premises that have a floor area of 1,000 square metres;
- Food vending machines, Automatic Teller Machines and other leases termed “common area tenancies”.
Promotional Levies/Advertising Plans
The Amendment Act provides that if a tenant must pay a promotional levy, then the landlord must submit marketing plans detailing the proposed spending on promotion and advertising funds. The landlord must do this at least one month before the start of each accounting period.
The Amendment Act sets out when a disclosure statement is defective (i.e. when it is missing information, or has errors, in respect of a material particular). If a disclosure statement is defective, the tenant may have a right to compensation/termination of the lease if they provide written notice setting out the details of any damage.
The Amended Act also places a limit on lessees claiming compensation where the lessor has caused or contributed to delay to their business when dealing with an emergency. Landlords can now under the Act limit compensation for the lessee of any disclosed work (e.g. renovations to the Centre) during the initial year of the lease term.
Under the Amendment Act, redecoration clauses are void unless they specify the nature, extent and timing of the works the tenant must perform. This is a big advantage for tenants where Landlord’s attempt to insert “catch all” redecoration clauses in retail leases.
Changes to costs in the Amendment Act include:
- Landlords cannot pass on costs to tenants for obtaining mortgagee consent to a lease or any dealing with a lease; and
- If the tenant does not enter into a lease that a landlord has prepared, the landlord can recover its legal costs from the tenant for lease preparation.
Finally, the new unfair contracts legislation will also apply to all retail leases in Queensland entered into on or after 12 November 2016.
If you have any questions about complying with the Amendment Act or need assistance reviewing your retail lease, get in touch with our leasing team on 1300 544 755.