On 4 April 2011 amendments to the Retail Shop Leases Act came into force.
The amendments render ratchet clauses in retail shop leases void and apply to all retail shop leases entered into after 4 April 2011.
The amendment inserts a new section, section 36A in the Retail Shop Leases Act. Within that section a ratchet clause is defined as:
"ratchet rent" provision means any provision of a retail shop lease to the extent that it—
- prevents, or enables the lessor or another person to prevent, the rent decreasing under a rent review; or
- limits or specifies, or allows the limitation or specification of, the amount by which the rent may decrease under a rent review; or
- prevents, or allows the avoidance of, the rent review by the lessor or another person for a purpose mentioned in paragraph (a) or (b).
The introduction of section 36A ensures that rent reviews are not avoided under ratchet clauses and that decreases in rent are not prevented.
Impact on Landlords
Landlords of retail shops must strictly adhere with this new section to ensure important provisions relating to rent are not rendered void under a retail shop lease.
Special attention must be given to rent and rent review clauses within retail shop leases to ensure they do not prevent the rent from decreasing or purport to limit or specify the amount by which the rent may decrease.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.