Retail shop lease reform is here

07 Dec 2016

The long-awaited changes to the Retail Shop Leases Act 1994 (Qld) came into effect on 25 November 2016 after a six month preparation period following the passing of the Retail Shop Leases Amendment Act 2016 (Qld).

These changes apply to existing leases (subject to limited exceptions) as well as new leases entered into after 25 November 2016.

Going forward both landlords and tenants will need to ensure they understand how the changes impact the terms of their current leases and make arrangements for future compliance.

Summary of the major changes

Application of the Act

  • The scope of the Act has changed. The Act does not apply to leases:
    • with a floor area of greater than 1000m2 (whether or not the tenant is a listed corporation);
    • for non-retail uses in multi-level buildings where only 25% or less of the total lettable area of the relevant level of the building is used for retail purposes;
    • for non-retail uses in a single-level building where only 25% or less of the total lettable area of the building is used for retail purposes
  • The Act has been clarified by expressly providing that the Act does not apply to leases for ATMs and vending machines.

Disclosure

  • Landlords must now provide disclosure statements to a tenant within 7 days of the exercise of an option to renew. The tenant may withdraw from the option within 14 days of receipt of the disclosure statement.
  • Tenants and assignees may now waive the benefit of disclosure periods

Outgoings and rent review

  • Outgoings may only be recovered from a tenant if the lease specifies the outgoings payable by the tenant, how the outgoings will be determined and apportioned and how the outgoings may be recovered by the landlord.
  • Outgoings estimate must be given to tenants one month prior to start of the accounting period. Tenants may withhold payment of outgoings until the estimate or audited statement is given.
  • Outgoings estimates and annual audited statements of outgoings must contain a detailed breakdown of the administration costs and fees to be paid to any centre management.
  • Market rent reviews are to be conducted by specialist retail valuers on an effective rent basis.
  • Major lessees can now agree to ratchet clauses and multiple rent review mechanisms

Refurbishment

  • Refurbishment clauses will be void unless sufficient details of the nature, extent and timing of the refurbishment required is set out.

Lease preparation and mortgagee consent costs

  • In certain circumstances, if a tenant does not proceed with the lease, the landlord can recover the fees for preparation of the lease.
  • Landlords are no longer permitted to recover mortgagee consent costs from tenants.

Things to take away

The new provisions impact all retail leasing arrangements in Queensland and therefore it is essential that lease precedents and procedures are updated immediately.

Please contact wongp [at] kempstrang [dot] com [dot] au (Paul Wong) (Partner), mayesm [at] kempstrang [dot] com [dot] au (Michael Mayes) (Senior Associate) or Sarah Baines (Lawyer) if you would like further information on the new provisions of the Retail Shop Leases Act. 

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