Changes to Retail Shop Laws – How Will They Affect You?
There have been important changes to retail shop lease laws in Queensland which both lessors (landlords) and lessees (tenants) need to be aware of and act upon.
On 10 May 2016 the Queensland Parliament passed the Retail Shop Leases Amendment Bill 2015 (Qld) which amends the Retail Shop Leases Amendment Act 1994 (Qld) (Act). Although the commencement date of the law changes are yet to be determined, they will likely take effect in late 2016.
Although there are a large number of amendments to the retail shop leasing laws, we have highlighted some key changes below.
Important Disclosure Changes
Some of the most important changes to the Act for lessors and lessees to be aware of are regarding disclosure rights and obligations.
(a) Lessor Disclosure and Waiver
The lessor is required to provide a prospective lessee with a draft lease and a disclosure statement at least 7 days before a prospective lessee enters into a retail shop lease. Importantly this requirement can now be waived by a prospective lessee if they receive a disclosure statement from the lessor and provide a waiver notice and a legal advice report to the lessor prior to entering the lease.
(b) Disclosure, Waiver and Option Renewal
- Importantly lessors must provide lessees with a new disclosure statement within 7 days after the lessee gives notice exercising an option to renew.
- Lessees may terminate the lease within 6 months of exercising the option to renew if the disclosure statement provided is incomplete in a material way or contains false or misleading material. Therefore it is very important that lessors provide accurate information in their disclosure statements and that lessees are aware of their rights in this regard.
- The lessor’s defences against the lessee terminating the lease because they provided an incomplete or false and misleading disclosure statement have now been removed. Regardless of the lessor’s intentions and the effect of non-disclosure/misleading disclosure, the lessee can still terminate the lease.
- The lessee may waive their right to receive a new disclosure statement by providing a waiver notice at the same time as providing notice exercising an option to renew.
- Within 14 days of receiving the new disclosure statement the lessee may withdraw their exercise of the option period via written notice, regardless of whether the option period has commenced.
(c) What about subleases and franchises?
The lessee has similar disclosure obligations to sub-lessees and franchisees in that they must provide disclosure documents, including an updated disclosure statement from the lessor within 7 days of a prospective sub-lessee or franchisee entering into a sub-lease or franchise agreement.
The sub-lessor/franchisor (also the lessee/tenant) may now request an updated disclosure statement from the lessor if they intend on granting a sublease or franchise licence. The lessor must reply within 28 days with an updated disclosure statement; however the lessee must pay the lessor’s reasonable costs to prepare the statement.
Is my shop still a retail shop?
Changes to the retail shop lease definition means that the premises you let may no longer be a “retail shop” and the provisions of the Act may no longer apply. The following shops are specifically excluded by the new retail shop lease definition:
- Premises located in a retail shopping centre if the premises are not wholly or predominantly for carrying on a retail business and at the time the lease was entered into the retail area of the level is 25% or less of the total lettable area;
- Retail shops with a floor area of more than 1000m2 regardless of whether the premises is leased by a listed corporation or a listed corporation’s subsidiary; and
- Premises that would normally form part of a common area in a retail shopping centre used for 1 or more of the following purposes:
- An information, entertainment, communication or leisure facility;
- telecommunication equipment;
- an automatic teller machine;
- a vending machine;
- an advertisement display;
- storage; and
Marketing Plans! What is that?
- Where the lessee pays amounts to the lessor for promotion and advertising the lessor must make a marketing plan available to the lessee that gives details of the lessor’s proposed spending on promotion and advertising during that period.
- An example provided in the Act is for the lessor to make the marketing plan available online for the lessee to access.
- The marketing plan must be made available by the lessor to the lessee at least 1 month before the start of each accounting period.
- The lessor must also make available an audited annual statement within 3 months after the end of the period to which the statement relates detailing the lessor’s expenditure on promotion.
- The audited annual statement must be prepared by a registered auditor.
Although there are a variety of important amendments, failure to provide disclosure correctly at the beginning of a lease and/or option period could be particularly disastrous for a lessor, or conversely useful to a lessee under the new Act.
The exact date that these requirements will become mandatory from is not yet known, please review our blog and newsletter on a regular basis and we will announce the date once it is known so that you can ensure that you comply with the new requirements. In the meantime you need to make yourself aware of the changes to the disclosure rights and obligations under the Act for both lessors and lessees.
The solicitors at Streten Masons Lawyers have extensive experience in advising clients in relation to a variety of different leasing matters from the establishment of the lease to a dispute. If you require any assistance please contact Justin at Justin@smslaw.com.au or call our us at (07) 3667 8966 to discuss your options.