In a recent Queensland Supreme Court case, the key issue for the
Court to decide was whether the 'ratchet' rent review
clauses in the lease were permitted by the Retail Shop Leases Act
1994 ("the Act"). Ratchet rent review clauses do not
allow CPI or market rent reviews to decrease the rent.
The Act provides that a rent review clause in a lease is void if
it provides for the rent to change in accordance with whichever of
two or more methods of calculating rent will result in the highest
The tenant argued that the ratchet rent review clause was void
because it stopped the rent from decreasing. The Court, after
following a rather torturous route, agreed with the tenant. In
arriving at its decision the Court disagreed with a 1998 decision
of the Retail Shop Leases Tribunal which found that a similar
ratchet rent review clause was void under the Act. The Court
considered that a clause which required the rent to remain the same
if a CPI or market review would have meant a reduction was not a
'method of calculation'.
The Court sought guidance from the explanatory memorandum for
the Retail Shop Leases Bill and the Minister's second reading
speech when the Bill was introduced into Parliament in 1994. Both
these sources made it clear that it was the Parliament's
intention to prohibit ratchet rent reviews. Having regard to the
Parliament's intention, the Court gave effect to it by deciding
that ratchet rent review clauses are void.
In light of the Court's finding, the tenant became entitled
to choose which method of rent review would apply. It will be of no
surprise to you that the tenant chose no increase.
After 14 years, this decision finally gives us Supreme Court
authority for the proposition that ratchet rent review clauses are
void under the Act.
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guide to the subject matter. Specialist advice should be sought
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