Casual Mall Licensing Code

Introduction

The Australian Competition and Consumer Commission has granted final authorisation for a period of 5 years commencing on 1 January 2008 for the Casual Mall Licensing Code of Practice ("Code"). Authorisation provides immunity from court actions for conduct that might otherwise raise concerns under the Trade Practices Act.

The Code is modelled on existing legislation in South Australia where it has been operating successfully since 2002. It is a voluntary code and ultimately individual shopping centre owners retain the discretion over whether to adopt it. The Shopping Centre Council of Australia strongly recommends all members to adopt the Code. As non-compliance may lead to compulsory legislation, we agree that the industry should comply.

The Code does not apply to leases or tenants which are not covered by the relevant State retail tenancy legislation.

The Code imposes three main obligations on landlords relating to casual mall licensing: disclosure; introduction of competitors and adjustment of outgoings.

What is a casual mall licence

A casual mall licence is a short term licence (for 180 days or less) to a retailer (other than a registered charity) to use part of a mall in the common area of a centre for the purposes of sale of goods or services to the public.

Casual mall licence policy

The Code provides that a landlord may not grant a casual mall licence unless the landlord has prepared, and distributed to tenants of the centre, a casual mall licence policy ("Policy"). The Policy must include:

• a floor plan ("Plan") which clearly shows mall areas within the centre that may be subject to casual mall licences and those parts of the mall which are regarded as a centre court. The size of those areas must also be shown. [Note the centre court must not exceed 20% of the total common area of the shopping centre. By definition, common area does not include parking areas, customer service areas, escalators, seating areas, food courts, stage areas, entertainment areas, lifestyle precincts etc]

• the number of sales periods for each accounting period. [Sale periods are periods not exceeding four weeks where the landlord promotes a sales event in the centre eg Back to School, Valentines Day, Easter, Mothers Day, Fathers Day, Christmas]

• a statement as to whether the landlord reserves the right to grant casual mall licences in respect of special events otherwise than in accordance with the Code. [A special event is defined to mean a community, cultural, arts, entertainment, recreational, sporting, promotional or other similar event that is held in the centre over a limited time].

Disclosure

The landlord must not grant a casual mall licence unless the landlord has given to each person who is a tenant of the centre the following information:

• a copy of the Policy

• a copy of the Code

• contact details of a nominated person who will deal with complaints relating to casual mall licences.

For all new leases the information must be provided at the same time as the disclosure statement is served on the tenant.

For all existing tenants the information must be provided not less than 14 days before granting the first casual mall licence in the centre. If the Code is to be adopted on 1 January 2008, then all tenants must be provided with the above information by no later than early to mid December 2007.

Amendment to policy

If a landlord varies its Policy the landlord must:

• give written notice to all tenants of the amendments and inform tenants of the place and times where a copy of the amended Policy may be inspected

• in the case of a tenant who may be affected by the amendment, provide to that tenant a copy of the amended Policy

• otherwise provide a copy of the amended Policy to a tenant who requests it.

An amendment to a Policy does not take affect until 30 days after all tenants have been notified.

Compliance with code, policy and plan

A landlord must not grant a casual mall licence except in accordance with the Code and the Policy in force at the time the licence is granted. A landlord must not grant a casual mall licence in respect of an area that is not included in the landlord's Plan.

Sightlines

A landlord must ensure that a casual mall licence does not substantially interfere with the sightlines to an existing tenant's shopfront. This does not apply where the landlord has obtained the written consent of the affected tenant to the grant of the licence.

Competitors

Three definitions are crucial to understanding the provisions of the Code dealing with competitors:

• "competitor" In the case of the sale of goods - a person is a competitor of another if more than 50% (on an area occupied by display basis) of its goods are of the same general kind as more than 20% of the goods displayed by the other person. In the case of the supply of services - a competitor is a person who competes with the other person to a substantial extent

• "external competitor" is a person granted a casual mall licence who is not a tenant of the centre but who is a competitor of an existing tenant

• "internal competitor" is a person granted a casual mall licence who is a tenant of the centre and who is a competitor of an existing tenant.

A landlord must not grant a casual mall licence that results in the unreasonable introduction of an external competitor in front of or immediately adjacent to an existing shop. The introduction of a competitor will be considered unreasonable if it has a significant adverse effect on the trading of the adjacent tenant's shop. Other considerations may also be relevant.

The same restriction applies to an internal competitor except where:

• the internal competitor's permanent shop is situated in the same retail precinct or vicinity as the licence area

• the licence area is the area closest to the internal competitor's permanent shop that is currently available at the time the casual mall licence is granted

• the casual mall licence is granted within a sales period (provided there have been no more than 5 previous sales periods in the preceding 12 months)

• the casual mall licence is within the centre court.

There is an overriding exemption to the restriction on competitors if the existing tenant agrees in writing to the introduction of a casual mall licence adjacent to its shop.

Special events

Provisions relating to policies, sightline restrictions and competitors will not apply to a casual mall licence granted in respect of a special event provided the landlord:

• reserved the right in its Policy to grant casual mall licences otherwise in accordance with the Code

• the tenants of the centre are given not less than 24 hours written notice of the details and duration of the special event in question.

Adjustment of outgoings

A formula has been introduced into the Code which now requires an adjustment of recoverable outgoings for the centre at the end of any accounting period. Whilst the formula is complicated, its effect is to provide that the non-specific outgoings recoverable from the centre tenants must be reduced to take account of casual mall licences. Casual mall licences are deemed to contribute to a proportion of such outgoings (whether they do so or not).

The new formula will no doubt prove troublesome for centre managers. Appropriate records capable of audit will need to be kept for each casual mall licence. Details relating to the number of days the casual mall licensee was permitted to trade and the lettable area of the licence area will need to be kept with accuracy.

Code administration committee

The Code will be administered by the Code Administration Committee ("CAC"). The role of the CAC is to promote and publicise the Code, monitor the Code's operation and to produce an annual report on the operation and effectiveness of the Code. In year 4 the CAC will make a recommendation as to whether the Code will be extended for a further period.

The CAC will have six representatives: 2 nominated by the Australian Retailers Association; 1 nominated by agreement between the National Retail Association and the Retail Traders Association of Western Australia; 2 nominated by the Shopping Centre Council of Australia and 1 nominated by the Property Council of Australia.

What should landlords do right now

The introduction of this Code will require landlords to do certain things. A landlord who intends to engage in casual mall licensing and comply with the Code must:

• develop a Policy on casual mall licensing

• designate in a Plan the areas within the centre where casual mall licensing may operate and the centre court

• by early to mid December, provide a copy of its Policy, the Code and details of a complaints administrator to existing tenants of the centre

• ensure that the same information is also provided to any new tenant at the same time as the disclosure statement is served on the tenant.

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.