10 November 2016

10 Things Every Landlord and Tenant Needs To Know About The Retail Shop Lease Act Amendments

The long awaited amendments to the Retail Shop Leases Act (“the Act”) are here.  The commencement date for the Retail Shop Leases Amendment Act 2016 has recently been announced with the amendments coming into effect on 25 November 2016.

The amendments come as a result of an extensive statutory review of the legislation which began in 2011 and involved stakeholder consultation and feedback on the efficiency and effectiveness of the Act.  Some of the key aims of the amendments are to reduce red tape, improve tenant protections and bring the Queensland legislation into line with corresponding legislation in other states.

  1. Is it Still a Retail Shop Lease?

The amendments narrow the types of leases that will fall under the umbrella of the Act.  In particular:

  • Leases for premises that are more than 1000m² (whether or not the tenant is a listed company) are no longer considered retail shop leases under the Act. This is good news, as generally these types of tenancies host large tenants who do not require the protections of the Act and gives landlords more flexibility in negotiating leases.
  • Non-retail premises in multi-storey buildings on a floor where less than 25% of the premises are retail premises will not be considered a retail shop.
  • Leases or licences for ATMs and vending machines are now specifically excluded from the operation of the Act.
  1. Disclosure on Exercise of Options

From the commencement of the amendments, landlords will be required to provide tenants with a new lessor disclosure statement on the exercise of options.  From notice of an exercise of option, landlords have seven days to issue a disclosure statement.  Tenants will then have 14 days from receiving the new disclosure statement to withdraw their notice exercising option.

  1. Waiver of Disclosure Periods

One of the more welcomed amendments to the Act is that tenants can now waive seven day disclosure periods when entering into new leases, on exercise of options or on assignment.

Tenants will be able to provide a written notice to landlords waiving these periods.

  1. Mortgagee Consent Fees

Following the amendments, landlords will no longer be able to recover mortgagee consent fees from tenants, bringing the Queensland legislation into line with other states.  Existing provisions in leases allowing recovery of mortgagee consent fees will be void from the commencement of the Act.

  1. Costs in Preparation and Negotiation of Lease

Landlords will now be able to recover their reasonable expenses involved in negotiating and preparing a lease if the tenant calls for a final lease to be provided and subsequently pulls out.

  1. Release on Assignment

Presently, on the assignment of a retail shop lease, if the required disclosures are given the assignor (current tenant) must be released from their obligations pursuant to the lease from the assignment date.

With the amendments, the requirement for release will also extend to any existing guarantors of the lease.  However, there is no restriction on the landlord requiring the assignee to provide new guarantees.

  1. Relocation

There has been a drafting amendment for clarity on the application of the implied provisions for relocation of tenants.  At the moment, the implied relocation provisions only apply in certain circumstances.  Following 25 November 2016, the implied provisions on relocation will be included in any lease that provides for relocation of a tenant during the term.

  1. Refurbishment

The amendments also make it a requirement that clauses in leases requiring refurbishment specifically outline the:

  • general nature of the refurbishment required;
  • extent to which the premises must be refurbished; and
  • timing of the refurbishment or re-fit.

If a refurbishment clause does not comply with these requirements it will be void.  This amendment brings the Queensland legislation into line with other state equivalent legislation.

  1. Marketing and Promotion Contributions

In an effort to provide further transparency to tenants on the management and use of funds for marketing and promotion, following the amendments landlords will need to make available a marketing plan detailing the planned use of marketing or promotional fund contributions tenants may be required to make pursuant to their leases.

  1. Rent Review Restrictions

Major tenants will now have the option to opt out of the rent review restrictions (including those on ratchet rent) by providing a written notice waiving the protection of the provisions to landlords.

The amendments are comprehensive and are expected to apply (without much transition) from the commencement date.  Both landlords and tenants of retail shop premises will be affected by the changes and it is important that you familiarise yourself with the changes now.

For more information about this issue and all retail shop lease enquiries, please contact our partner, Melissa Nielsen, on 07 4036 9700.

London, UK - June 16, 2016: Neals Yard with unidentifed people. It is a small alley in Covent Garden with colorful houses. It contains several health food cafes and values driven retailers

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