The Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act), which is the legislation which governs retail shop leases in Western Australia, has been amended.
The amendments will apply to all retail shop leases entered into from 1 January 2013. In some circumstances, the amendments will apply retrospectively to existing retail shop leases.
Some of the key amendments that landlords should be on the lookout for include:
Application of the Act to retail shop leases
- The Act will no longer apply to levels of a building not containing retail shops.
- The Act will apply to unlisted public companies.
- In certain cases, the Act may also extend to premises which exceed 1,000m 2 in size.
- A new form of disclosure statement is prescribed by the regulations.
- Where a landlord breaches the disclosure requirements, the time allowed for the tenant to terminate the lease has increased from 60 days to 6 months.
- Valuers are entitled to obtain information about other retail leases in the same building or retail shopping centre to use when valuing the market rent for a particular tenancy.
- The approval of the State Administrative Tribunal (SAT) will not be required, in respect of a lease with a term of 5 years or less, for a relocation clause if it is in the form prescribed by the regulations.
- The approval of the SAT will not be required, in respect of a lease with a term that is greater than 5 years, for a relocation clause that contains specified minimum requirements
- The landlord will no longer be able to pass on to the tenant its legal costs associated with preparation of the lease, renewal or extension of the lease, and the costs of obtaining mortgagee consent. The landlord may, however, still claim the reasonable costs in connection with the tenant’s request to assign the lease.
Notice of option terms
- The landlord must notify the tenant of any upcoming option terms. If the landlord fails to notify the tenant in writing of an option to renew at least 6 months before the option is no longer exercisable, the lease is deemed to continue for another 6 months, and the tenant may exercise its right to renew the option within that period.
- A lease provision requiring the tenant to undertake refurbishment will be void unless the provisions specify the nature, extent and timing of the refurbishment.
What to do next?
We encourage all landlords to spend the first part of 2013 preparing and implementing changes to their current retail lease practice to ensure that they are compliant with the amended Act. Landlords should:
- update their lease precedents to deal with the legislation amendments; and
- review existing retail leases to determine the impact that the legislation amendments will have on dealings with current tenants.