On 25 November 2014, the Attorney-General introduced the Retail Shop Leases Amendment Bill 2014 (the Bill) into Queensland Parliament. The Bill has the potential to significantly reform the rights and obligations of landlords and tenants in the Queensland retail leasing sector. Under the Retail Shop Leases Act 1994 (Qld) (the Act), a statutory review of the legislation is required every seven years. The main purpose of the Bill is to give effect to the most recent review which indicated significant consultation between key retail sector and professional stakeholders.
The Bill seeks to strike a balance between safeguarding retail tenant interests while reducing the regulatory and compliance burden on the Queensland retail sector. The Attorney-General cited the function of the proposed amendments in ensuring “government regulation does not unnecessarily interfere with commercial dealings and relationships”.
This article outlines the key legislative changes and summaries the major implications for landlords and tenants under the Bill.
The key initiatives of the Bill are to:
- Provide further guidance regarding disclosure obligations under the Act
- Exclude specified leases from the operation of the Act
- Implement provisions that further safeguard tenants’ interests
- Provide new benefits for landlords
Disclosure Obligations under the Act
- The Bill purports to clarify lessor’s disclosure obligations to existing lessees exercising an option to renew a retail shop lease. The lessor must give the lessee a disclosure statement within seven days after receiving the lessee’s notice exercising the option to renew. The lessee may, whether or not the renewed lease period has commenced, give the lessor a written notice stating the renewal is withdrawn within fourteen days of receiving the disclosure statement. This is a significant amendment clearly intended to afford further protection to lessees.
- A prospective sublessor or franchisor subject to a retail shop lease may, at their own cost, request a disclosure statement from the head lessor which must be provided within 28 days of the head lessor receiving the request.
- The Bill further clarifies that a Lessor Disclosure Statement will be a defective statement if it:
- is incomplete in a material particular; or
- contains information that is false or misleading in a material particular.
However, a disclosure statement is not a defective statement merely because:
- it omits information that is irrelevant to the lease
- its layout does not comply with that of the approved form
- The Lessee may terminate a retail shop lease within six months if the lessor does not provide a disclosure statement or if the statement is defective. This provision is already enshrined in the Act. However, the Bill outlines a new objection procedure available to a lessor who wishes to oppose termination of the lease.
Leases Excluded from the Ambit of the Act
The Act does not currently apply to a retail shop with a floor area of more than 1000 square metres held by a listed corporation or a listed corporation’s subsidiary. The Bill proposes to extend this exclusion by removing the requirement that the lessee is a listed corporation/subsidiary.
The Bill also excludes leases of the following premises from the operation of the Act:
- premises located on a level of a building if none of the premises located on the level are used for carrying on retail businesses. For example, a level of commercial offices situated above a retail shopping centre; and
- if the centre consists of 2 or more separate buildings — premises located in a building if none of the premises in the building are used for carrying on retail businesses. For example, a stand-alone medical centre within a retail shopping centre parking area.
The Bill confirms that ATMs and vending machines are also excluded from the Act’s operation.
Benefits for Lessees
- A provision of a retail shop lease requiring the lessee to refurbish the leased shop is void unless the lease gives general details of the nature, extent and timing of the refurbishment required.
- The lessor is liable to pay to the lessee reasonable compensation for loss or damage suffered because the leased shop was not available on a specified trading date because of a default of the lessor or anyone acting under the lessor’s authority
- The lessor’s annual estimate and audited statements of outgoings must also include a breakdown of centre management fees to be paid by the lessee. The lessee may withhold payments in relation to apportionable outgoings until the lessor gives the outgoings estimate or audited annual statement to the lessee.
- If the lessee is required to pay the lessor promotion and advertising fees, at least one month before the start of each accounting period, the lessor must make available to the lessee a marketing plan detailing the lessor’s proposed promotion/advertising expenditure. For example, the lessor may publish their marketing plan on a website accessible to the lessee.
- When an assignment of a retail shop lease is entered into, the assignor and any guarantor of the assignor are released from any liability under the lease arising from any default by the assignee. The existing provision only releases the assignor from liability.
Benefits for Landlords
- The lessor is not liable to pay compensation under section 43(1) (business disruptions) for loss or damage suffered because the lessor, or a person acting under the lessor’s authority, takes action—
- as a reasonable response to an emergency; or
- in compliance with any statutory duty
- The lessor is not liable to pay compensation under section 43(1) to the extent the lessee is otherwise entitled to payment of relocation costs or reasonable compensation provided for under section 46G and section 46K of the Act respectively.
- If the lessee instructs the lessor to prepare a final lease but subsequently fails to sign it, the lessor will be able to recover the costs incurred in preparation of the final lease
- Under the existing Act the requirement that rent may not be reviewed more than once in each year can be waived by a major lessee (lessee of more than 5 retail shops in Australia) if, before entering into the lease, the lessee gave the lessor a written notice stating the lessee received appropriate financial and legal advice about the lease. The Bill provides the lessee may waive the rent review provisions simply by giving the lessor a notice to that effect prior to execution of the lease.
- The Bill removes the seven year statutory review requirement
- The Bill clarifies apportionable outgoings for a retail shop lease includes promotion and maintenance amounts to the extent the amounts are treated as part of the lessor’s outgoings under the lease.
The Bill has been referred to The Legal Affairs and Community Safety Committee for review. The Committee is expected to hand down its report on 2 February 2015 after further public consultation.
The Bill implements significant amendments to existing legislation in an effort to address what the Attorney-general describes as “the imbalance in negotiation power and access to information” between landlords and tenants in the Queensland retail leasing sector. However, it remains to be seen whether the Bill will be passed by the State Parliament in its current form.