In recent times, we have seen an increasing number of cases where the permitted use under a lease is inconsistent with the use approved under a development approval. The situation can create significant risk for landlords.
Often, a development approval will permit the use of retail premises for the purposes of “Showroom”. However, the permitted use under a lease will often fall within the definition of “Shop”, which is usually a different defined use in the planning scheme and one which is assessable development for which there is no approval.
As an example, under the current version of the Brisbane City Plan 2014 (City Plan), “Showroom” is defined to mean:
“…the use of premises for the sale of goods that are of -
- a related product line
- a size, shape or weight that requires
- a large area for handling, display or storage
- direct vehicle access to the building that contains the goods by members of the public, to enable the loading and unloading of the goods.”
Examples include bulky good sales, motor vehicle sales showroom and bulk stationery supplies. The uses Food and drink outlet, Shop, and Outdoor sales, which are separately defined in the City Plan, are expressly excluded from the definition.
“Shop” is defined to mean:
“…the use of premises for –
- displaying, selling or hiring goods; or
- providing personal services or betting to the public.”
Examples include hairdresser, liquor store, discount department store, discount variety store, betting agencies, supermarket and corner store. The uses Adult store, Food and drink outlet, Showroom and Market, which are separately defined in the City Plan, are expressly excluded from the definition.
This means that retail shop uses other than bulky goods shops (commonly furniture stores and electrical appliance stores) will not be covered by a development approval authorising Showroom uses on the premises. Uses such as liquor warehouses, medical centres, chemists and small charity stores do not fall within the definition of “Showroom”.
There may be significant risks for landlords who enter into leases for uses that are assessable development for which no approval exists. The risks include:
- being prosecuted for a development offence. Under the Planning Act 2016 (Qld), it is an offence to carry out assessable development, unless all necessary development permits are in effect for the development. The offence provisions cover both owners (regardless of whether they have carried out the use) and occupiers of premises. The maximum penalty is $587,475 for an individual or $2,937,375 for a company
- insurance policies over the premises being invalid on the basis the landlord has not complied with the applicable laws and regulations applying to the premises.
It is important to always consider whether the permitted use under a lease is one for which a development approval is required. Even though a landlord may give no warranty as to whether a permitted use is a lawful use, a landlord may still be adversely affected if the tenant is required to pay turnover rent and the tenant is required to cease an unlawful use as a result of enforcement action.
Recently, the New South Wales State Government replaced the use definition “bulky goods premises” with a new definition, “specialised retail premises”, to reflect changing business models in the large format retail industry. Under the new definition, it is no longer a requirement that the goods be of such a size or weight to require both a large area for handling, display or storage and that there be direct vehicular access to loading facilities for members of the public. Only one of these requirements needs to be met. So, watch this space to see whether Queensland local governments make a similar change to their planning schemes.
If you are unsure about whether a permitted use under a lease has the necessary development approval, we recommend you seek planning advice before entering into the lease.