In Queensland, business leases are either retail or non-retail.
Retail leases apply to premises that serve customers directly, such as shops, and are governed by the Retail Shop Leases Act 1994 (Qld) (the Act).
Non-retail leases, also known as commercial leases, apply to premises such as warehouses and factories and are governed by the Property Law Act 1974 (Qld).
What is a Retail Shop Lease?
A ‘retail shop’ is a premises in a retail shopping centre or a premises that is used wholly or predominantly for retail business.
A lease for a retail shop is governed by the Act except in certain situations, such as when the lease is for:
- A retail shop with a floor area of more than 1000 square metres;
- A retail shop leased from the South Bank Corporation and the lease is a perpetual lease or a lease of at least 100 years;
- Premises in a theme or amusement park;
- A temporary retail stall at an agricultural trade show or a carnival, festival or cultural event;
- A site at a flea market, such as an arts and craft market;
- An automatic teller machine or vending machine; or
- Storage or parking.
There is no minimum term for a retail lease.
Key considerations for retail shop leases
There are various key considerations for retail shop leases, including:
Disclosure statements
A landlord must provide a tenant with a disclosure statement at least seven days before the tenant enters the lease.
The form, structure and content of the statement is prescribed by the Act. A tenant (unless they are a ‘major lessee’) must give the prospective lessor copies of reports to confirm that they have received financial and legal advice before entering into the lease.
Money and ratchet clauses
A landlord cannot seek ‘key money’ from a tenant in return for the grant, assignment or renewal of a lease. Also, any security deposit collected from a tenant must be refundable. A landlord also cannot include in a lease a ‘ratchet clause’, which prevents a reduction in rent.
Limits on payments
A retail shop lease must not require a tenant to make payments other than those required for rent, the landlord’s outgoings (including maintenance and repairs), damages for breach, indemnity for loss suffered, interest on arrears and reasonable legal expenses.
Lease renewal
If the lease is for less than one year, the landlord must advise the tenant at least three months before the lease expires whether renewal is possible and on what terms. If the lease is for more than one year, the notification period is six months.
Marketing
If a landlord requires the tenant to make payments towards marketing, including promotions and advertising, they must provide the tenant with a marketing plan detailing the proposed spending at least one month before the start of the accounting period.
Payment of compensation
The Act provides for circumstances in which compensation will be payable by the landlord to the tenant. These include when the landlord has:
- Caused a disturbance to the tenant’s business which restricts their access to the leased shop;
- Taken action which restricts access by customers or the flow of potential customers;
- Caused significant disruption to the tenant’s trading, or otherwise do not take all reasonable steps to prevent such a disruption;
- Failed to rectify breakdown in plant or equipment that is under their care;
- Neglected to clean, maintain or repaint the shopping centre or other premises as necessary; and/or
- Made a false or misleading statement that the tenant relied upon in entering into the lease.
The tenant must give notice to the landlord of any loss or damage for which they want to claim compensation.
Unconscionable conduct
The Act prohibits the landlord (lessor) to a retail lease from engaging in unconscionable conduct (i.e. conduct deemed so unreasonable that it defies good conscience). Indications that a landlord has engaged in unconscionable conduct can include:
- Requiring the tenant to comply with unnecessary conditions;
- Exercising undue influence, pressure or unfair tactics against the tenant;
- Failing to disclose intended conduct which might affect the tenant;
- An unwillingness to negotiate; or
- Failing to act in good faith.
Action
To avoid finding oneself in a disadvantageous legal position concerning retail shop leases, several proactive steps should be taken. Firstly, both landlords and tenants should ensure full compliance with the Retail Shop Leases Act 1994 (Qld). This entails understanding their rights and responsibilities under the Act, including obligations related to disclosure statements, lease renewal terms, as well as restrictions on lease conditions and payments.
Moreover, engaging in thorough due diligence before entering into any lease agreement is crucial. Tenants should carefully review all documentation provided by the landlord, including the disclosure statement and seek independent legal and financial advice to fully comprehend the implications of the lease terms.
Landlords, on the other hand, must ensure transparency throughout the leasing process, avoiding unconscionable conduct or any action that could potentially disadvantage the tenant. This includes providing accurate information and adhering strictly to the requirements outlined in the Act regarding lease renewals, marketing expenditures and compensation claims.
In cases of dispute or uncertainty, both parties should seek resolution through negotiation or mediation. The Act provides mechanisms for dispute resolution and parties are encouraged to utilise these to maintain a fair and compliant leasing environment.
By taking these proactive measures, landlords and tenants can mitigate risks associated with retail shop leases and foster a mutually beneficial landlord-tenant relationship. If you are still uncertain about your obligations under the Act, make a booking with Fox Piper to discuss your situation.
Seeking Advice
Navigating the complexities of retail shop leases requires careful consideration of legal rights and obligations. At Fox Piper, our team of experienced legal professionals stands ready to provide tailored advice and guidance with disputes related to retail leases. Whether you are lessor chasing payment or wanting to terminate a lease, or you are a lessee needing protection, Fox Piper can help.
Conclusion
In conclusion, understanding the nuances of retail shop leases under the Retail Shop Leases Act 1994 (Qld) is essential for both landlords and tenants alike. Compliance with the Act’s provisions not only safeguards legal rights but also promotes a fair and transparent leasing environment. Should complexities arise, seeking timely legal advice from knowledgeable professionals can mitigate risks and ensure a smooth leasing process. By staying informed and proactive, stakeholders can navigate lease agreements confidently and effectively.
