Australia: Resolving retail leasing disputes in Victoria: change ahead with establishment of Small Business Commission

Services: Real Estate & Construction
Industry Focus: Real Estate & Construction

What you need to know

  • The Small Business Commission Act 2017 (Vic), which was assented to on 10 May 2017, will establish the Victorian Small Business Commission and enhance the functions, powers and duties of the existing Small Business Commissioner, which plays a critical role in the resolution of disputes between retail landlords and tenants.
  • When the new regime comes into effect, there will also be a broader scope of dispute resolution services provided by the Small Business Commission.
  • Both landlords and tenants of retail premises in Victoria should be aware of these changes.

As every landlord and tenant will know, disputes about a lease can arise for a wide variety of reasons.

When a dispute relates to a retail lease in Victoria, the Retail Leases Act 2003 (Vic) (RLA) requires the dispute to be brought to the Victorian Small Business Commissioner (Commissioner) before it can be accepted by the Victorian Civil and Administrative Tribunal. This requirement is subject to a few exceptions, such as circumstances where a dispute relates solely to the payment of rent. While the Commissioner can mediate between parties in relation to disputes concerning leases of most premises, the majority are those involving retail shops – the Commissioner reportedly receives more than 1000 applications for such disputes each year.

With the Small Business Commission Act 2017 (Vic) (Act) having been assented to on 10 May 2017, and set to commence on a day to be proclaimed, there are changes ahead for the resolution of certain disputes involving small businesses in Victoria.

What is changing?

The Act will establish the newly named Small Business Commission, and will have expanded power beyond that of the existing Commissioner to include the following:

  • as required by the Minister, and in consultation with the Secretary to the Department of Economic Development, Jobs, Transport and Resources, to review proposed legislation in terms of its potential to adversely affect small businesses
  • to work collaboratively with similar small business commissioners in other States or Territories, or similar Commonwealth agencies, to enhance conditions for small businesses.

The functions of the Small Business Commission will not include the development of legislation and regulatory policy relating to small business and related matters. However, the Small Business Commission may advise or comment on the development of such legislation and regulatory policy.

Broader scope of dispute resolution services

The Act also expands the definition of 'dispute' to include a contractual or commercial dispute between a small business and one or more of the following:

  • a school, registered training organisation, TAFE institute or university
  • a special body as defined in the Public Administration Act 2004 (Vic), excluding certain specified entities such as the office of the Ombudsman, the office of the Freedom of Information Commissioner and VCAT
  • a professional association
  • a peak business, industry or trade body.

Accordingly, the Small Business Commission's function of providing alternative dispute resolution will also extend to such disputes.

Why the change?

One of the main purposes in establishing the Small Business Commission as stated in the Act is "to enhance a competitive and fair operating environment for small business in Victoria". However, it was argued during the bill's passage through parliament, that the legislation will not really do anything for small business and is a lost opportunity. While the Act may provide for the Small Business Commission to deal with a greater range of disputes involving more organisations and the ability to work collaboratively with small business commissions in other jurisdictions, many would say that not much else has changed. For example, sections 32 to 45 of the Act which set out the amendments to the RLA are essentially just concerned with changing 'Commissioner' to 'Commission'.

Retail pressures

Much has been said of the fact that retailers in Australia are operating in an increasingly difficult environment. As we see regular reports of fashion and similar retailers coming under pressure, some landlords are increasing the number of food outlets as a proportion of their tenancy mix in retail premises. The question then becomes: what impact will this have on small business owners operating out of such centres?

In Victoria, item 24.2 of the Landlord's Disclosure Statement – Retail Premises located in retail shopping centres, asks the question "Does the landlord assure the tenant that the current tenant mix will not be altered by the introduction of a competitor?". Generally, this question would be considered narrowly and a tenant might not be concerned by a negative response where an exclusive use had not been negotiated. However, this question might now be viewed differently in a broader context.

As pressure on retail sales increases and tensions grow between landlords and tenants, the Small Business Commission may be met with a corresponding increase in the number of disputes coming before it.

Key takeaways

Both landlords and tenants of premises in Victoria should be aware of the expanded scope of dispute resolution services available from the Small Business Commission if a contractual or commercial dispute arises with the additional entities referred to above.

More generally, landlords and tenants of retail premises should be aware of the issues currently facing the industry, the importance of disclosure statements and the services available where dispute arises.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories

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