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Retail Shop Leases Unpacked

By 8 November 2018Business, Commercial

The Retail Shop Leases Act (Qld) 1994 (“the Act”) was first introduced to attempt to bridge the power imbalance between owners of properties (Lessors) and the businesses who lease the properties (Lessees).

It is stated in the Act that the object is to promote efficiency and equity in the conduct of certain retail businesses in Queensland.  The Act states that this is achieved by setting mandatory minimum standards for retail shop leases and establishing a low cost dispute resolution process for retail tenancy disputes.

A Retail Shop, is a shop where a retail business is carried on.  Schedule 1 of the Retail Shop Leases Regulation (Qld) 2016 (“the Regulations”) contains a comprehensive list of the businesses that are retail businesses.

The Act contains a number of exclusions in relation to Retail Shops and they are:

  1. a retail shop with a floor area of more than 1,000m2;
  2. a retail shop within the South Bank corporation area if the lease is entered into or granted by the South Bank Corporation and is either—
    1. a perpetual lease; or
    2. another lease for a term, including renewal options, of at least 100 years;
  3. premises used wholly or predominantly for the carrying on of a business by a lessee for a lessor as the lessor’s employee or agent;
  4. premises in a theme or amusement park;
  5. premises at a flea market, including an arts and crafts market;
  6. a temporary retail stall at—
    1. an agricultural or trade show; or
    2. a carnival, festival or cultural event;
  7. premises that, if the premises were not leased, would be premises within a common area of a retail shopping centre, but only if the premises are used for 1 or more of the following—
    1. an information, entertainment, community or leisure facility;
    2. telecommunication equipment;
    3. an automatic teller machine;
    4. a vending machine;
    5. an advertisement display;
    6. storage;
    7. parking.

Also, a Retail Shop Lease does not include a lease of premises located in a retail shopping centre if—

  1. the premises are not used wholly or predominantly for carrying on a retail business; and
  2. at the time the lease is entered into, either—
    1. if the premises are located on a level of a multi-level building—the retail area of the level is 25% or less of the total lettable area of the level; or
    2. if the premises are located in a single level building—the retail area of the building is 25% or less of the total lettable area of the building.

There are disclosure requirements under the Act providing that the prospective Lessee must receive a copy or draft of the lease and a Lessor Disclosure Statement at least 7 days prior to entering into the lease.  There are consequences under the Act if this is not provided.

The Lessee is required to provide the Lessor prior to entering into the Lease, the Lessee Disclosure, a Legal Advice Report and a Financial Advice report. There are consequences under the Act if this is not provided.

The minimum lease requirements stated in the Act provide for the following matters:

  1. That a Lessee must make the following payments:
    1. Rent;
    2. If specified in the lease, outgoings, damages or interest;
    3. The Lessors legal costs associated with a variation of the lease or if consent is required under the lease.
  2. Provisions for turnover rent;
  3. Provisions for rent reviews;
  4. Other payments under leases, such as sinking funds, promotions and marketing;
  5. Compensation in particular instances;
  6. Lessees and Lessors rights to deal with leased premises;
  7. Unconscionable conduct;
  8. Relocating the Lessee’s business;
  9. Demolishing premises;
  10. General provisions, such as right to independent legal advice, costs (see below) and refurbishment and refitting etc;
  11. Trading Hours.

The Lessor is not allowed under the Act to charge you for their legal fees for preparing the lease, but they can charge you for the following:

  1. Registration of the Lease;
  2. Preparing a survey plan associated with registration of the lease; and
  3. If the parties agree to lease terms, a final lease is prepared and the lessee gives written notice to prepare a final lease, a final lease is prepared, the lessee does not sign the final lease and the lessor gives the lessee a copy of the tax invoice for the preparation of the final lease.

The Act sets out procedures that are required if there is a dispute in relation to Retail Shop Leases.  The parties are to attempt to resolve the matter between themselves, if that is not able to resolve the dispute the parties are to attempt mediation.  If the dispute is not resolved at mediation then one of the parties can apply to QCAT for determination of the dispute.

This is just a snapshot of the Act and how Lessees are assisted by the provisions of the Act.  If you are looking at renting a shop, make an appointment today to discuss your lease with one of our experienced Commercial Team on 13 58 28.