Changes to Retail Shop Leases Act Commence on 25 November 2016

21 November 2016

Landlords, tenants and managing agents need to be aware of important changes to the Retail Shop Leases Act 1994 (Qld) (Act) which take effect from 25 November 2016.  This alert highlights some of the key changes to the Act. 

Enhanced Tenant Protection

  • Additional disclosure obligations will be implemented as follows:
    • Landlords need to give a Lessor Disclosure Statement (LDS) to existing tenants within 7 days after receipt of a tenant's notice exercising its option.  A tenant may, within 14 days of receiving the LDS, give the landlord a written notice withdrawing from the renewal.  Failure to give the LDS within the time period will give the tenant a right of termination of the lease.
    • Where the tenant is a franchisor and intends to grant a franchisee a licence of the premises or where a tenant intends to sublease the premises, the tenant can request the landlord to issue a LDS within 28 days. 
    • Landlords must give prospective assignees a LDS at least 7 days before the assignment of a lease is entered into, unless this right is waived. 
    • Landlords’ annual estimate and audited statement of outgoings must provide a breakdown of centre management fees and other fees. If a landlord does not provide the estimate and audited statement, tenants can withhold outgoings payments. 
    • Landlords must also make available their marketing plan detailing proposed advertising/promotion expenditure each year.
       
  • On an assignment, both the Assignor and the guarantor will now be released provided the parties comply with their disclosure obligations. 
  • Tenants can no longer be required to pay for the landlord’s mortgagee’s consent to a lease.  This may be a saving of $200 to $900. 
  • Tenants are only liable to refurbish the premises during the term where the lease gives sufficient details of the nature, extent and timing of the required refurbishment.

Amendments benefiting Landlords

  • Landlords can recover the cost of lease preparation from a tenant where a tenant gives a written notice to a Landlord for the final lease to be prepared but the tenant does not sign that lease.
  • The landlord will not be liable for compensation for business disruption, where the landlord’s action is a reasonable response to an emergency or acts in compliance with a statutory duty.  The Act also gives flexibility for leases to limit a tenant’s compensation claim for some anticipated business disturbances notified by the landlord and expected to occur within 1 year from when the lease is entered into. 
  • The Act already gives tenants certain rights to terminate the lease where a defective LDS is given or where disclosure is not provided within the right timeframe. These rights remain in Act, however, the landlord can now object to a tenant’s termination notice in certain circumstances.

More Leases Excluded from Operation of Act 

The types of leases excluded from the operation of the Act will be expanded to: 

  • Premises with areas of 1,000m2 or more and regardless of whether the tenant is a listed corporation or a subsidiary of a listed corporation.
  • Certain commercial leases in a retail shopping centre where less than 25% or less of the building (or level of a building) is retail area.
  • ATMs, vending machines and advertisement displays in common areas.

Transitional Provisions 

Transitional arrangements mean that some of the changes will apply to existing leases and other changes will only affect leases signed after the changes commence.  

Next Steps 

Landlords and managing agents need to ensure compliance with the changes. Please contact us if you would like to discuss how the changes impact you.

If you have any queries in relation to this legislation or any other property related matter, please contact a member of our property team:

John Lowes, Partner: (07) 3307 4567

Richard Waring, Partner: (07) 3307 7545

Gyöngyi Kruchió, Lawyer: (07) 3307 4514

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