Retail Shop Leases: Important Changes

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Retail Shop Leases: Important changes on the horizon that you need to know.

On 10 May 2016, significant changes to the Retail Shop Leases Act were passed by the Queensland Parliament. Although these changes are not likely to come into effect for 6 months, Landlords need to prepare now to ensure lease documents are amended appropriately in plenty of time so that their interests are protected.

These changes that will affect all retail leases in Queensland have been five years in the making, but it is likely that few landlords or tenants are aware of the upcoming changes.

The major changes that I see affecting both landlords and tenants once the changes commence are as follows:

  • Outgoings: How, what, where and when: The tenant will not be required to pay outgoings unless the lease specifically states the outgoings payable. What’s new you ask? Well, now the lease must not only state what outgoings, but must also state how the outgoings will be determined and apportioned to the tenant and how the outgoings may be recovered by the landlord. In addition, a landlord must give outgoings estimates and audited annual statements at specific times, and if it does not do this, the tenant does not have to pay until such time as the landlord does.
  • What is a Retail Lease? If it looks like a shop…..: Currently, any premises in a retail shopping centre is considered a “retail lease”. Once the changes apply, if a non-retail premises (eg. office, medical centre) is located in a floor of a shopping centre that has less than 25% of the floor area as retail use, the premises will not be considered to be under a retail lease. In addition, any premises over 1000 square meters, regardless of the tenant entity, will not be a retail lease premises.
  • Disclosure at exercise of option. Will I stay or will I go now?: Currently, a landlord is required to give a Lessor Disclosure Statement before a tenant enters into a lease, and to an assignee of the lease. Under the changes, a landlord will also be required to give a tenant a current disclosure statement within 7 days of the tenant exercising  an option to renew. If the tenant does not like the contents, the tenant may withdraw its exercise of option within 14 days of receiving the disclosure statement. The tenant may waive this right, but the landlord may not waive the requirement.
  • Consent: Freely given? Who pays?: A landlord may no longer recover the mortgagee consent costs to a lease from the tenant. For a tenant’s interests in a lease to be protected, the lease should be registered and the mortgagee’s consent obtained prior to registration. Some mortgagees charge above $500 to provide this consent. This has been recoverable from the tenant. However, once the changes come into effect the landlord will not be able to pass on this cost. As registration is not compulsory in Queensland, it will be interesting to see if Landlord’s will refuse to obtain this mortgagee’s consent. Tenants should keep this in mind when negotiating the terms of the lease.
  • “House Rules” goes retail: Any requirement in a lease that states a tenant must refurbish a premises must also be accompanied by information as to the nature, extent and timing of the refit is spelled out. In other words, rules as to the refurbishment must be included.
  • Release me, set me free: Currently, if the provisions of the Retail Shop Leases Act are complied with on assignment, a landlord must release a tenant from continuing obligations under the Lease. However, nothing requires the landlord to release the guarantor and often they won’t be released. Under the proposed changes, if the requirements are met, the guarantor will also be released.

These are some of the more important changes to be implemented, but these are by no means all the changes. Transitional arrangements will apply.

If you are a landlord, please see us to make sure your lease documents will protect your interests once the changes are implemented.

If you are a tenant, please see us to make sure that your interests are protected and that you are not being required to pay for more than you have to once the changes come in.

Make an appointment today with Malcolm McColm at MMLaw by telephoning (07) 5443 1800.

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Disclaimer

The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.

The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.

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