Australia: Retail lease reforms in Queensland

The Retail Shop Leases Amendment Bill 2015 (Qld) (Bill) was passed by the Queensland Government on 10 May 2016.  The amendments to the Retail Shop Leases Act 1994 (Qld) (Act) will take effect on a date to be fixed by proclamation.

The Bill is the result of a review by major stakeholders which sought to:

  • improve the Act's efficiency and effectiveness;
  • reduce red tape and compliance costs;
  • address imbalances in access to information and negotiating power without unduly interfering with commercial arrangements; and
  • align Queensland's legislation with key eastern seaboard States to enhance operation efficiency and legal certainty for stakeholders operating across jurisdictions.

What are the significant changes to the Act?

  • The Act no longer applies to:
  1. a retail shop with a floor area of more than 1000m˛ (whether or not the lessee is a listed corporation or subsidiary);
  2. ATMs, vending machines, advertising displays, storage and parking areas in common areas of a retail shopping centre;
  3. premises not used wholly or predominantly for carrying on a retail business, even if in a shopping centre;
  4. premises located:
    1. on a level of a multilevel building where the retail area of that level is 25% or less of the total lettable area of that level; or
    2. in a single level building, where the retail area of the building is 25% or less of the total lettable area of the building.
  • The Act amends the calculation of when a retail shop lease is entered into.
  • For government leases (leases to a State, Commonwealth or Local Government), the requirement to provide disclosure statements, legal or financial advice reports or receive notice of when an option needs to be exercised has been removed.
  • A lessee may now waive the lessor's obligation to provide a draft lease and disclosure statement at least seven days before a lease is entered into.
  • A lessee franchisor may request an up-to-date disclosure statement from the lessor to provide to a proposed franchisee but the franchisor will be responsible for the lessor's reasonable costs of doing so.
  • Lessor's disclosure obligations on options:
  1. The lessor is now required to provide an up-to-date disclosure statement to the lessee within seven days of receiving the lessee's notice exercising the option however the lessee can waive this obligation.  The lessee may now withdraw its notice exercising the option within 14 days of receiving the updated disclosure statement from the lessor.  This applies whether or not the renewed lease period has commenced.
  2. If the lessor does not comply with its disclosure obligations on the option lease renewal or provides a defective disclosure statement, the lessee will be entitled to:
    1. terminate the renewed lease within six months after the commencement of the renewed term; and
    2. compensation for loss or damage suffered because of the lessor's non-compliance.
  • A prospective assignee may now waive the lessor's obligation to give an updated disclosure statement at least seven days before an assignment. 
  • Where market rent is to be determined by a specialist retail valuer, new provisions have be inserted to help the parties to properly make submissions to the valuer.  The Bill also introduces the concept of the calculation of rent on an "Effective Rent Basis".
  • There are greater restrictions on the outgoings a lessor can charge.  For example, the outgoings estimate must include a breakdown of the estimated fees to be paid by the lessee towards the administration costs of running the centre and any other fees to be paid to a centre management entity.
  • The lessor must now provide a marketing plan to the lessee at least one month before the start of each accounting period if the lessee is required to pay a marketing levy and provide an annual audited statement of its expenditure for promotion within three months after the end of an accounting period. 
  • Compensation:
  1. Compensation will now also apply to a lessee holding over following the expiry of the lease;
  2. A lessor will not be liable to pay compensation if the lessor:
  1. takes action in a reasonable response to an emergency;
  2. takes action in compliance with the Act or a requirement imposed by an Authority; and
  3. prevents the lessee from extending its opening hours as permitted by the Trading (Allowable Hours) Act 1990 (Qld).
  1. There is also clarification that compensation paid under the relocation provisions is deducted from any compensation payable under the general compensation provisions.
  2. It will also be possible for the lessor to limit the amount of compensation payable in respect of a foreshadowed disturbance, provided the disturbance occurs within one year from the date the lease is entered into.  The foreshadowed disturbance must also be specified with full details. 
  • The lessor may now recover costs from a proposed lessee where the terms are fully agreed but the lessee fails to sign the lease, but cannot recover the mortgagee consent fees of costs associated with the lessor's compliance with the Act.
  • Subject to compliance with disclosure obligations, on assignment of the lease, the guarantor is also released on an assignment, in addition to the assignor.
  • A provision in a retail lease requiring the lessee to refurbish or re-fit the leased shop is void unless it gives general details of the nature, extent and timing of the refurbishment required.
  • Lessees cannot be required to contribute to the lessor's additional outgoings costs of opening outside the core trading hours if it is not one of the premises open at that time. 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.
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