In a recent decision[i], the Queensland Civil and Administrative Tribunal (QCAT) confirmed that parties to a lease cannot agree that the Retail Shop Lease Act 1994 (Qld) (Act) applies, in circumstances where the lease does not meet the criteria for a “retail shop lease” under the Act.
The relevant lease required a market rent review. The landlord and tenant could not agree on the market rent, or on a specialist retail valuer to determine the market rent. Because the parties could not agree on a specialist retail valuer, QCAT nominated a valuer.
The valuer determined the market rent, but the landlord did not agree with the determination. The landlord filed a notice of dispute at QCAT, seeking to set aside the market rent determination of the valuer.
Months into the QCAT dispute process, the tenant applied to QCAT to strike out the landlord’s notice of dispute, on the grounds that QCAT did not have jurisdiction to hear the dispute. The tenant claimed the dispute was not a “retail tenancy dispute” under the Act.
Under the Act, QCAT has jurisdiction to hear retail tenancy disputes, being:
“any dispute under or about a retail shop lease, or about the use or occupation of a leased shop under a retail shop lease, regardless of when the lease was entered into”[ii]
At the time the lease was entered into (15 June 2012), the Act provided that a lease is not a retail shop lease if:
- the premises area is more than 1,000m2; and
- the tenant is a listed corporation, or a subsidiary of a listed corporation[iii].
QCAT confirmed that at the time the particular lease was entered into:
- the premises area was more than 1,000m2, and
- the tenant was a subsidiary of a company listed on the Australian Stock Exchange.
This meant that at the time the lease was entered into, the lease was not a retail shop lease. Because the lease was not a retail shop lease, the dispute between the parties about the market rent determination was not a retail tenancy dispute under the Act. QCAT therefore did not have jurisdiction to hear the dispute.
QCAT confirmed that:
“The parties cannot agree to the RSLA applying to their lease in circumstances where the Legislature has provided for the RSLA not to apply.”[iv]
QCAT struck out the notice of dispute, and the parties were left to consider the appropriate jurisdiction to deal with their dispute on market rent.
You know the old saying about assumptions...
It is not uncommon for parties to a lease to mistakenly deal with each other as if the Act applies.
Landlords and tenants can contractually agree in a lease that they will adopt certain processes or concepts similar to those in the Act, but that in itself does not result in:
1. the lease being a retail shop lease under the Act; or
2. the parties being able to resolve a dispute about the lease at QCAT.
In this case, it appears the parties had assumed the Act applied, and had followed the market rent review process in the Act. QCAT also nominated a specialist retail valuer to determine the market rent. It was not until a number of months into the dispute process that the questions of whether or not the lease was a retail shop lease and whether or not QCAT had jurisdiction were raised.
At the beginning of a new lease deal, landlords and tenants should carefully consider if a proposed lease will be a retail shop lease under the Act. If a lease has already been entered into, assessing if the lease is a retail shop lease can involve looking at previous versions of the Act to determine the criteria that applied at the time the lease was entered into. This assessment is critical to properly understand the rights and obligations of each party, and to determine which jurisdiction is appropriate to resolve disputes.
This decision is a good reminder: Just because a landlord and tenant have been dealing with each other as if the Act applies, that does not make it so! An incorrect assumption can result in wasted time and money.