Retail tenancy legislation – a number of key state by state differences as at May 2019
Each state and territory has its own retail tenancy legislation which are all different and all of which are unavoidable and override lease provisions if they apply. Whilst the specifics of the legislation differ the intention and rationale behind the legislation is the same and there are numerous general common features.
Set out below are a few of the differences and requirements which are useful to note for landlords and tenants operating across different states and territories.
Each retail tenancy legislation has a different definition of “retail shop” and differ as to what “premises” fall within the scope of each act and it is important to be aware of what “premises” and “retail shops” fall within the relevant legislation. For example:
- The retail tenancy legislation does not apply to premises with a “lettable area” of greater than 1000 sqm in 6 of the states and territories, however in Victoria and South Australia this carve out does not apply. In the Australian Capital Territory, the carve out only applies if the lettable area is larger than 1000 sqm and the premises are leased to a listed public company or a subsidiary of a listed public company.
- In the Australian Capital Territory “small commercial premises” being commercial premises with a lettable area of no more than 300 sqm are governed by the retail tenancy legislation.
- In the Australian Capital Territory the retail tenancy legislation applies to premises (excluding residential premises) let to unincorporated charitable bodies or to incorporated associations.
- A number of the states and territories legislation (or most of the provisions) do not apply to “short term” leases which are generally leases of less than 6 months, however some states and territories do not make this distinction such as Victoria, Western Australia and Tasmania.
- The Western Australia legislation applies to all “retail shop leases” whether for a term or by way of periodic tenancy or a tenancy at will and whether or not in writing.
- A 2017 Victorian case (IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd  VSCA 178) has confirmed that leases generally not considered to be retail leases (eg a lease of a cold storage facility supplying cold storage services to business) can fall within the scope of the retail tenancy legislation in Victoria.
In a number of states and territories there is a prescribed minimum 5 year term (this includes option terms (except in Tasmania)) for leases which fall under the relevant legislation.
- The minimum 5 year term does not apply in New South Wales (for leases entered into from 1 July 2017) or in Queensland.
- The provisions around the minimum 5 year term are more complex under the Western Australia legislation and cannot be contracted out of.
- In Victoria, South Australia, Tasmania, the Australian Capital Territory, and in New South Wales (for pre-1 July 2017 leases) the tenant can contract out of the minimum 5 year term as per the relevant acts requirements.
Each state's and territory's legislation requires a disclosure statement to be provided to tenants prior to entry into a lease (with different requirements applying for option leases). In the Australian Capital Territory, Northern Territory and Queensland the tenant can waive the strict timeframes for receiving a disclosure statement. In all other states and territories this obligation cannot be waived. If a disclosure statement is not provided or is defective then tenants have rights to terminate the lease. The period of time by when the tenant can terminate is not the same across the states and territories but is generally 3 or 6 months after entering into the lease.
Each legislation allows recovery of outgoings however there are some differences as to what outgoings can be recovered from tenants. For example in Queensland, South Australia and Victoria the legislation prohibits the inclusion of land tax as an outgoing. In New South Wales and Western Australia the landlord can only recover land tax on a single holding basis.
All states and territories legislation prohibit ratchet clauses (a clause which states that the rent will not decrease on a rent review date) and the greater of two methods for rent reviews (eg the greater of CPI and 3%). In Queensland however a ratchet clause and a greater of two methods clause can be included in a lease for “major lessee’s” if the tenant gives the prescribed notice as required under the Queensland legislation.
The general position across the states and territories is that the landlord’s legal lease preparation costs and mortgagee consent fees cannot be passed on to the tenants. We note however that:
- in South Australia the landlord can pass on half of the legal lease preparation costs and mortgagee consent fees;
- in the Northern Territory a tenant can be required to pay a “reasonable sum” of the legal lease preparation costs and mortgagee consent fees; and
- in Tasmania, the landlord may charge the tenant the cost of any alterations the tenant requires to the lease and the parties are able to negotiate payment of mortgagee consent fees.
Other areas of note which are captured by the legislation but differ in specifics are:
- relocation and demolition provisions; and
- when consent to assignment by the tenant can be withheld and when the landlord’s consent to an assignment is deemed to have been provided.
We act for a number of landlord and tenant clients in the retail, industrial and commercial areas in relation to leasing matters, acquisitions and disposals (and a whole array of property matters). Please contact us if we can assist in relation to your leasing matters, retail business or any other property matters.
Disclaimer: This article is intended to provide general information and commentary and should not be relied on as legal advice.