RBG Lawyers / News / December 14,2016

Retail Shop Leases Amendment Act 2016

The Retail Shop Leases Amendment Act 2016 came into force on 25 November 2016. This article sets out some of the more important amendments to the Retail Shop Leases Act 1994 but is not meant to be exhaustive.

The Queensland Government’s Business and Industry Portal has released the approved forms to comply with the recent amendments to the Retail Shop Leases Act 1994.

Date the lease entered into

The period for making disclosure is dependent on when the lessee ‘enters into a retail shop lease’. Section 11 now provides:

‘A retail shop lease is entered into on the earliest of the following dates:

  • the first date by which the lease is signed by all of the parties to the lease;
  • the date the lessee enters into possession of the retail shop under the lease;
  • the date the lessee first pays rent under the lease, other than as a deposit to secure the premises for the lease.’

Care must be taken by lessors to ensure disclosure is given within the required period. For example, if a lease is signed after possession has been given, the time for a lessor to provide a disclosure statement is 7 days before possession was given.

Disclosure obligation on exercise of option

The new s 21E(2) requires a lessor to give a current disclosure statement ‘within 7 days after the day on which the lessor receives the lessee’s notice exercising the option to renew (the renewal notice).’

 The disclosure statement must be updated so that it is current at the time it is given.

If the disclosure statement is not given within that 7 day period or if that statement is defective, the lessee may terminate the lease by written notice to the lessor within 6 months after the lessee enters into the lease (s 21F(1)). Hence the failure of a lessor to strictly comply with this disclosure obligation can have significant adverse consequences for a lessor.  A statement will be defective if it is incomplete in a material particular or contains information that is false or misleading in material particular (s 21F(2)).

A cooling off period now applies where an option is exercised. Section 22E(4) provides that within 14 days after receiving the current disclosure statement, the lessee can withdraw the renewal notice.

Lessee’s liability to pay expenses of lease preparation

Section 48(3) now provides that if a prospective lessee does not sign the lease, the lessor can recover its reasonable legal or other expenses of preparing the lease provided that:

  1. the lessor and lessee have agreed to the terms of a proposed retail shop lease; and
  2. the lessee gives the lessor a written notice to prepare a final lease and the final lease is prepared; and
  3. the lessee does not sign the final lease; and
  4. the lessor gives the lessee a copy of the lessor’s invoice for expenses for the preparation of the final lease.

Lessors should consider updating pro forma offers to lease to include a clause that reflects the new s 48(3).

Lessee cannot be required to pay for mortgagee’s consent

The new s 48(b) provides that the lessee is not liable to pay the cost of obtaining the consent of the lessor’s mortgagee.

Outgoings

Section 37(1) now provides that a lessee is not liable to pay outgoings unless the lease specifies:

    1. the outgoings payable by the lessee; and
    2. how the outgoings will be determined and apportioned to the lessee; and
    3. how the outgoings may be recovered by the lessor from the lessee.

These pre-conditions to recovery of outgoings are included in most standard retail shop leases. If it is not, a lessee will not be required to pay any outgoings.

Outgoings cannot include payment of an excess in relation to a claim on lessor’s insurance (s 7(3)(da)).

Annual outgoings estimate to include breakdown

If a lessee is required to pay for administration costs and management fees as part of the outgoings, the new s 38A(3) requires the annual estimate of outgoings to include a breakdown of those costs.

The new prescribed form does not include provision for the breakdown but does draw the author’s attention to the requirement to include a breakdown.

Promotion and advertising

The new s 40A provides that if a lessee is required to pay amounts for promotion and advertising, the lessor must make available to the lessee 1 month before the start of the accounting period a marketing plan that gives details of the lessor’s proposed spending on promotion and advertising during that accounting period.

Compensation

Sections 43(2) and (3) have been amended so that when a lessee is seeking compensation it must give written notice of the loss or damage to the lessor as soon as practicable. A failure of a lessee to give this notice does not affect the right to claim compensation but may affect the amount of compensation payable.

An agreement between lessor and lessee is void to the extent it purports to limit the amount of compensation payable to a lessee (s 44A(1)). The only exception is a claim for compensation for an anticipated disturbance that occurs within 1 year from the date the lease is entered into if the lessor has given to the lessee a notice complying with s 44A(3) before the lease is entered into (s 44A(2)). An ‘anticipated disturbance’ is defined in the new s 44A(5) to mean an action or omission in relation to which a lessor is liable to pay the lessee compensation under s 43(1)(a) to (e).

For lessors it is important to consider if any disturbances (eg refurbishment works) are expected to occur within 12 months whenever a lease is being negotiated so that the lessor can seek to reach agreement with a prospective lessee to limit compensation payable. It is essential that a notice under s 44A(2) strictly complies with s 44A(3) and be given before the lease with the relevant lessee is entered into.

For lessees it is important to be aware of the limitations of compensation where the lessor gives this notice.

A lessor is no longer required to pay compensation if the subject loss or damage was caused due to the lessor’s reasonable actions in responding to an emergency or the lessor’s actions complying with a statutory duty (s 43AB).

The compensation provisions now also apply to a lessee that is holding over (s 42(2)(a)).

This article is of general import only and does not constitute legal advice. You should not rely on this contents of this note without first seeking our advice.

For any queries or for further information, please contact Alice Morrow on (07) 3009 9317.