On the 13 October 2015 the Retail Shop Leases Amendment Bill 2015 (QLD) (“the Bill”) was introduced into Parliament for consideration. It replaced the Retail Shop Leases Amendment Bill 2014 (QLD), which was never finalised due to the change in Government. The Bill has been referred to the Education, Tourism and Small Business Committee, and the Committee’s report is due to be tabled on 5 January 2016, following a public consultation process.
The Bill purports to make the following changes to the current act:
- What is a retail shop lease;
- When is a lease entered into;
- The giving of disclosure statements;
- Releasing Guarantors on Assignment;
- Categories of outgoings; and
- Recovery of legal and other costs.
- WHAT IS RETAIL SHOP LEASE:
The definition of a retail shop lease has been amended so that any premises which is 1,000m2 or larger is no longer considered to be a retail shop lease regardless of whether the tenant is a listed corporation or a subsidiary.
In addition, the Act will not apply to the premises located in a retail shopping centre that are not used wholly or predominately for the carrying on of a retail business if (at the time the lease is entered into):
- The retail area of the level (if the premises are located in a multi-level building) is 25% or less of the total lettable area of the level; or
- The retail area of the building is 25% or less of the total lettable area of the building (in a single level building).
It is thought that this will help to assist shopping centers where there is a commercial office floor within the building.
If the Bill is passed then ATMs, vending machines and advertisement displays within a common area of a retail shopping centre will be excluded from the Act.
- WHEN IS A LEASE ENTERED INTO:
The Bill has also created further clarity as to when a lease has been “entered into”. It now specifies that a lease has been “entered into” at the earliest of either:
- the date on which the lease is signed by all parties;
- the date the tenant enters into possession of the premises under the lease; or
- the date the tenant first pays rent in accordance with the lease.
- DISCLOSURE STATEMENT:
In relation to disclosure statements given by the lessor to the tenant, it is not intended that the Act will specify that a disclosure statement will not be defective merely because it omits information that is irrelevant to the lease or its layout does not comply with the approved form.
In addition, the Bill provides that a landlord is to provide a disclosure statement within 7 days after receiving a notice to exercise an option to renew their lease for a further term. A tenant may (for whatever reason) provide written notice to the landlord withdrawing their exercise of the option within 14 days of receiving the disclosure statement.
Also the Bill allows a tenant to waive time frames (following receipt of disclosure statements) for entry into new leases or renewals by providing written notice to the landlord, together with a legal advice report stating that the tenant has received legal advice from their lawyer regarding the effect and meaning of the waiver.
Currently, the Act allows tenants to terminate their lease within the first 6 months of the terms where a disclosure statement is defective. The Bill introduces a mechanism allowing a landlord to object to the termination through an objection process which is intended to be outlined in the Act.
The annual outgoings estimate and final audited outgoings statement must, in accordance with the Bill, include a breakdown of the estimate fees for administration costs of running the centre and fees to be paid to centre management.
If this is not provided, then the tenant can withhold payments of outgoings. The audited annual statement must also show the comparison between the annual estimate and the amount actually spent. It must also show the total amounts paid by the tenant and the actual amount spent.
On a side note, the Bill also does not allow for the landlord to recover from the tenant any excess paid on their insurance as an outgoing.
- RELEASE OF GUARANTORS ON ASSIGNMENT
The Act has always stated that provided the tenant has satisfied their disclosure obligations in the Act, they will be released upon assignment. However, this was not the case for guarantors. The Bill now ensures that a similar provision is provided for guarantors of the tenant.
The Bill provides for the landlord to recoup from the prospective tenant its reasonable legal costs in relation to preparing a lease where the lease does not proceed. This only applies:
- if both parties had agreed on the terms of the lease;
- the tenant has given written instructions for a final lease to be prepared; and
- if the final lease is not signed by the tenant.
The Bill will shortly be open to consultation and submissions from the public.