Australia: Proposed changes to retail shop leases in Queensland

Large premises

Leases are excluded if the premises are 1,000m² or more and the tenant is a listed corporation or a subsidiary of a listed corporation.

Leases will be excluded if the premises are 1,000m² or more and regardless of whether the tenant is a listed corporation or a subsidiary of a listed corporation

Commercial leases in a retail shopping centre

The Act applies to a lease in a 'retail shopping centre' (as defined), unless the particular lease is excluded from the Act.  Commercial offices located within retail shopping centres are often caught by the Act. 

Non prescribed retail businesses on a level of a shopping centre building where none of the other premises on that level are used for a retail business will now be excluded from the Act.

Common area tenancies

Certain common area tenancies are excluded from the Act, but the list of excluded tenancies does not specifically mention ATMs or vending machines.

ATMs, vending machines and advertisement displays will now be specifically excluded from the Act.

Defective lessor disclosure statements

Currently, a 'defective' lessor disclosure statement (as defined) may give the tenant certain termination and/or compensation rights.  The Bill proposes to clarify that a lessor disclosure statement will not be defective merely because:

it omits information that is irrelevant to the lease; or

its layout does not comply with that of the approved form.

Under the Act, a lessor disclosure statement may be considered defective if it is incomplete.  Under the Bill, the statement would need to be incomplete in a material particular to be considered defective.

Additional lessor disclosure statement on option exercise and tenant termination right

The Bill proposes that a landlord be required to give a lessor disclosure statement to an existing tenant within 7 days after the landlord receives the tenant's notice of exercise of option. Within 14 days of receiving the disclosure statement, the tenant may give the landlord a written notice withdrawing the renewal.  This withdrawal may be issued by a tenant regardless of whether the option lease period has commenced. The tenant is not required to give any reason for the withdrawal.

Waiver of timeframe to give lessor disclosure statement before lease is entered into

Currently, a lessor disclosure statement and a draft of the lease must be given to the tenant 7 days before the lease is 'entered into' (as defined).  The Bill proposes that a tenant may waive the 7 day period if the landlord gives the lessor disclosure statement and the tenant gives the landlord a waiver notice and a legal advice report stating that the tenant's lawyer has given the tenant advice about the effect of the waiver.  These documents need to be exchanged before the tenant enters into the lease.  The Bill proposes that major lessees (with 5 or more shops) would not need to give the legal advice report.

Tenant termination rights for defective lessor disclosure statements or statements given too late

Currently, a tenant has certain rights to terminate the lease within the first 6 months, if a lessor disclosure statement is not given in time or if it is 'defective' (as defined). Under the Bill, a landlord can now object to a tenant's termination notice and there is a process for the parties to follow if the landlord does this.

Franchisor disclosure to franchisee

The Bill proposes that if a franchisor grants to a franchisee a licence or other contractual right to occupy the premises,  the franchisor may request that the landlord prepare and issue a lessor disclosure statement to the franchisor.  The franchisor will provide the disclosure statement to the franchisee. The franchisor must pay the landlord's reasonable costs of preparing the lessor disclosure statement.

Compensation

Notice of tenant's loss or damage

The Bill proposes that if a tenant is claiming compensation from a landlord for loss or damage suffered by the tenant because of a false or misleading statement or misrepresentation, or because the premises were not available for trading on the date specified in the lessor disclosure statement, the tenant must give the landlord written notice of the tenant's loss or damage as soon as is practicable after the loss or damage is suffered.  Failure to do so will not mean the tenant loses its right to compensation, but the delay in providing notice to the landlord must be taken into account when determining the amount of compensation payable.

Loss or damage resulting from emergencies or landlords complying with statutory duty

The Bill proposes to clarify that landlords will not be required to compensate tenants for the damage or loss suffered because the landlord takes action in response to an emergency, or in compliance with a statutory duty.

Limiting compensation if disturbance within a year of entering into the lease

Currently a provision of a lease limiting the amount of compensation payable under the Act is void.  The Bill proposes to introduce an exception to this, by allowing a lease to cap compensation for a disturbance that occurs within 1 year of the date the lease is entered into, if the landlord gives the tenant a written notice containing certain information about the nature of the disturbance.

Rent reviews for major lessees

The Bill proposes that some of the current restrictions in the Act about the basis of rent reviews will not apply to major lessees (with 5 or more retail shops in Australia), if major lessees give a waiver notice before the lease is entered into.  Major lessees will not also have to confirm that they received appropriate legal and financial advice about the lease.

Relocation

The Act contains relocation provisions, but indicates that they only apply if the lease includes certain specific wording about relocation.  This has created some confusion in circumstances where the lease itself does not use the wording in the Act. The Bill proposes to clarify that the lease only needs to allow for relocation of the tenant's business for the relocation provisions in the Act to apply.

Release of existing guarantors upon assignment of lease

The Act releases tenants upon assignment, provided the parties have satisfied the disclosure obligations in the Act.  The Act did not contain a similar release for the tenant's guarantor.  The Bill proposes that the tenant's guarantor will be released upon assignment.

Refurbishment

The Bill proposes that a tenant can only be required to refurbish the premises during the lease term if the lease sets out sufficient details about the refurbishment required.  A vague statement about refurbishment without  details may not be enforceable.

Outgoings

The Bill proposes that the landlord's annual outgoings estimate and audited outgoings statement must include a breakdown of the estimated fees paid towards administration costs of running the centre and other fees paid to centre management.

The Bill proposes that a tenant may be able to withhold outgoings payments if the landlord's outgoings estimate or audited outgoings statement is not provided as required under the Act.

Promotion and marketing

The Bill proposes that if a tenant is required to contribute towards promotion and advertising, the landlord must at least 1 month before the start of each accounting period, make available to the tenant a marketing plan giving details of the landlord's proposed spending.  Any unspent balance at the end of the period must be carried forward to the next period and used for promotion and advertising.  The Bill proposes that the landlord's expenditure on promotion be audited annually.  The landlord must make the audit available to the tenant.

Recovery of landlord's costs if final lease prepared and the tenant does not proceed

The Act does not allow the landlord to recover its legal costs in relation to the preparation of the lease documents.  The Bill proposes that if the landlord and prospective tenant agreed to the terms of the proposed lease, the prospective tenant gave a written notice to prepare a final lease and the final lease is prepared, but the tenant does not sign the final lease, the landlord can recover its reasonable legal costs in relation to preparing the final lease.