On 10 May 2016, the Queensland Parliament passed a bill to substantially amend the Retail Shop Leases Act 1994 (Qld) (RSLA). The key objectives of the bill were to streamline the RSLA and cut red tape, but still safeguard the interests of retail lessees.
Set out below are some key issues for landlords.
1. Definition of “retail shop lease”
Retail shops with a floor area larger than 1,000m2 (whether or not it is leased by a listed corporation or a listed corporation’s subsidiary), will be excluded from the RSLA (section 5A). This amendment makes the large premises exclusion easier in that you are no longer required to ascertain public ownership of a tenant.
2. Retail shops in a Retail Shopping Centre
A retail shop lease does not include a lease of premises in a retail shopping centre if the premises are not used wholly or predominantly for carrying on a retail business and when the lease is entered into, either:
- if the premises are located on a level of a multi-level building – the retail area of the level is 25% or less of the total lettable area of that level; or
- if the premises are located on a single level building – the retail area of the building is 25% or less of the total lettable area of the building.
Example: an accounting practice on level 4 of a retail shopping centre is not a retail shop lease if 75% of the total lettable area of level 4 is used wholly for professional or commercial offices (section 5A).
3. Excluded retail shops
Automatic teller machines and vending machines are now expressly excluded from the RSLA
.4. Increased disclosure obligations
Where a lessee renews its retail shop lease under an option, the lessor must give the lessee a current disclosure statement within 7 days after the day on which the lessor receives the lessee’s notice exercising the option to renew (section 21E).
5. Defective lessor disclosure statements
A lessor disclosure statement will now only be defective if it:
- is incomplete in a material particular; or
- contains information that is false or misleading in a material particular (section 21F).
6. Void refurbishment and refitting clause
A provision requiring the lessee to refurbish or refit the leased shop is void unless the lease gives general details of the nature, extent and timing of the refurbishment or refitting required (section 50B). This means that the lessor will need to include more descriptive and technical requirements for any refurbishment to avoid the risk that the refurbishment clause is unenforceable.
7. Outgoings annual estimate
Lessors must now provide an annual estimate of apportionable outgoings in the approved form and the proportion that the lessee will be liable for under the lease. The estimate must be given at least 1 month before the start of the outgoings year. If the outgoings estimate relates to a retail shopping centre, it must also include a breakdown of estimated fees to be paid on administration costs or to a centre management entity (section 38A).
8. Marketing plan for promotion and advertising
Where a lessor requires payment from the lessee for promotion and advertising, the lessor must make available to the lessee a marketing plan that gives details of the lessor’s proposed spending on promotion and advertising. That marketing plan must be given at least one month before the start of each accounting period (section 40A).
9. Market rent reviews for option periods
A lessee needs to exercise an option to renew no later than 21 days after the lessee receives written notice of the current market rent determined under section 27A(6).
10. Release of guarantors
Guarantors are now released from any liability under the lease arising from a default by the assignee of the lessee (section 50A).
The transitional arrangements for this Act are to be outlined in the regulations which are not yet available. We are therefore unable to comment on whether the regulations adequately address all of the transitional requirements. Transitional provisions are key to ensuring compliance with new legislation.
As it stands, section 15 of the RSLA provides that the RSLA does not apply to a lease of premises that becomes a retail shop after the commencement of the lease, an assignment of the lease, or a renewal of the lease under an option under the lease. The RSLA continues to apply to a lease of premises that ceases to be a retail shop after the commencement of the lease or a renewal of the lease under an option under the lease.
Once the regulations are available, we will circulate these with our analysis of their impact.
Commencement & compliance timeframe
The amending Act is to commence on a day to be fixed by proclamation. During the submission stage, the Shopping Council of Australia asked for the commencement to be delayed by 6 months after the bill receives assent so that lessees and lessors can have adequate notice of the proposed changes, get their documents and practices in order and appropriately deal with current and future agreements and the negotiations leading to those. At the committee stage of the bill, the Attorney-General in her response to the Council’s submission, acknowledged that a 6 month starting provision is an appropriate period before the Amending Act will take effect.
Landlords should ensure they become familiar with the amendments so they can consider whether they should review their existing leases and lease precedents and consider the need for amendments in order to comply with the amended RSLA. If you would like to receive further information regarding this, please do not hesitate to contact us.