The year starts with significant changes impacting all leases falling under the Retail Shop Leases Act, 1) new
lessor disclosure requirements and, 2) ratchet clauses to be outlawed again.
Lessor Disclosure Requirements
QLD, NSW & VIC have got together to standardise disclosure requirements from 01 Jan 2011.
This should assist those who deal across State borders like national tenancy chains and large portfolio owners.
Tenants across the board should also benefit from the increased disclosure by landlords regarding certain
provisions in the retail shop lease so that they are better informed of their rights and obligations. Theoretically
at least, this should assist lessees to make better business decisions.
For most lessor owners, it is another compliance requirement with potentially painful consequences if you get
wrong.
Requirements include :
# the date the lessee is entitled to occupy the shop, if different to the date or estimated date the lease starts
# the date by which the lessee must exercise the option
# a warning to the tenant that it should investigate whether the proposed use of the premises is lawful under
relevant planning laws
# whether the tenure for the shopping centre is granted under a Head Lease or Crown Lease
# any rent free period; any rent adjustment and the method of calculation; any turnover rent and the method of
calculation
# If turnover rent is not payable, whether the lessee is required to give information to the lessor on turnover;
# in addition to rent free periods, whether there is any outgoings free period
# breaking down the annual estimated turnover of the shopping centre into certain categories
# if the lessee is required to make payments for the lessor’s outgoings, the date payments are to commence
# requiring the landlord to give (or not give) assurances to the tenant as to the current tenancy mix of the
shopping centre
# whether or not a survey of the leased shop’s area will be undertaken
# expanding the list of existing items in the premises which will be provided by the landlord (excluding any
landlord works, tenant’s fitout and refurbishment works)
# an estimate of any contribution to be made by the lessee to the cost of the lessor’s works
# the landlord’s requirements (if any) as to the quality and standard of shop front and fitout
# any alteration works that the lessor is aware of, that are to be carried out by or for the lessor to the shop,
leased building or shopping centre
# whether the tenant is permitted to access the shopping centre and the premises outside the core trading
hours
# disclosure of any current legal proceedings in relation to the lawful use of the shop etc.
# confirmation of whether the landlord has adopted the Shopping Centre Council of Australia’s Casual Mall
Licensing Code of Practice
Ratchet Clauses (to be) Banned, … Again
Since its inception in 1994, it was always the intent of the Act, or rather the Parliament, to prohibit rent review
provisions that prevented decreases in rent – “ratchet clauses”. Everyone, well almost everyone, in the
property industry accepted that principle. It was more or less confirmed in 2002 by the District Court in Oz
Sushi Pty Ltd v Lloyd Bennett & Associates Pty Ltd.
A somewhat unusual set of circumstances (including a lot of money and professional liability) saw the premise
challenged at the Supreme Court of Appeal in Connor Hunter v Keencrest Pty Ltd [2009]. (see our previous
article “SHOCK RULING BLOW FOR TENANTS”) Notwithstanding the judicial correctness of the ruling in a split 2-
1 decision, the Court itself acknowledged that it was contrary to the intent of the Act.
It has taken over a year and a half for the Government to fix the legal technicalities in the wording of the Act.
Interestingly they were buried at the back of the Criminal Code and Other Legislation Amendment Bill
(24Nov2010).
The amendments seem not apply to leases entered into before the Bill is enacted (scheduled for 15Feb2011).
This may be tested in future as the Bill does not specifically refer to leases granted under an option where that
lease was entered into before the Bill is enacted.
## FOOTNOTE ## The amendment did not receive assent until 04 April 2011. The enacted amendments only
apply to a lease entered into after that date.
Disclaimer : This publication is intended only to provide a summary of the subject matter covered. It does not
purport to be comprehensive or to render professional advice and neither purports nor is intended, to be advice
on any particular matter. No reader should act on the basis of any matter contained in this publication without
first obtaining specific professional advice. This article is copyright. For permission to reproduce this article
please contact Mal Missingham ph: (07) 3888 3999