As the Retail Shop Leases Act (“the Act”) includes a number of specific requirements and includes more protection for Tenants than a standard commercial lease, it is important to know whether it will apply to your lease.
The Act applies to all “retail shop leases” – which are simply defined as leases of “retail shops”.
Although this may seem like a simple concept, the definitions and exemptions under the Act mean that a number of leases you may think are retail shop leases are in fact not, and a lease you may not think is not a retail shop lease is actually one.
What are Retail Shop Leases?
A “retail shop” is defined as a premises that:
- is situated in a retail shopping centre; or
- is used wholly or predominantly for the carrying on of a retail business.
Located in Retail Shopping Centre:
A “retail shopping centre” under the Act is not necessarily limited to what you imagine a shopping centre to be and can include a number of unexpected scenarios.
Under the Act, a “retail shopping centre” is defined as a cluster of premises:
- where 5 or more of them are used wholly or predominantly to carry on a retail business;
- all owned by the same person or in the one community titles scheme;
- all located in the one building or two or more buildings if they are adjoining or separated by common areas or roads.
This can include more than the traditional shopping centre and it may be for example, that an accounting firm’s lease of a premises in the middle of 7 adjoining premises owned by the same person is a retail shop lease if at least 5 of those premises are used wholly or predominantly to carry on a retail business.
On the flip side, just because a premises is located in a retail shopping centre doesn’t necessarily mean that it will be a retail shop lease.
The Act now no longer applies to leases in a retail shopping centre if:
- the premises are not used wholly or predominantly for carrying on a retail business; and
- at the time the lease is entered into, the retail area of the level of the shopping centre that the premises is located on is 25% or less of the total lettable area of the level (or 25% or less of the total lettable area of the building if it is single story).
For example, a premises leased by an accounting firm on the 4th level of a retail shopping centre is not a retail shop lease if (at the time the lease was entered into) 75% of the total lettable area of the 4th level is not retail. If however the same accounting firm leased a premises on the 3rd floor where the total retail area on that level is 60% of the total lettable area, the lease would be a retail shop lease.
Used to Carry on Retail Business:
The Regulation to the Act (which can be downloaded at https://www.legislation.qld.gov.au/view/whole/html/inforce/current/sl-2016-0223) contains an extensive list (approximately 250) of retail businesses.
If the premises are used wholly or predominantly to carry out one of these businesses, its lease will be a retail shop lease (subject to the below exemptions) – irrespective of whether or not the premises is located in a retail shopping centre.
Note that Act specifically provides that the wholesale of goods (even if they are of a type listed in the Regulation) is not a retail business.
What are not Retail Shop Leases?
Obviously a lease of premises that isn’t in a retail shopping centre or isn’t used wholly or predominantly to undertake a retail business is not a retail shop lease.
The Act however also exempts a number of types of leases – including:
- a lease with a floor area of more than 1,000m2;
- a lease with South Bank Corporation for a perpetual term or at least a term (including any option periods) of 100 years;
- where the Tenant carries on the business for the Landlord as the Landlord’s employee or agent;
- a premises in a theme or amusement park, flea market and temporary retail stalls at agricultural and trade shows or carnivals, festivals or cultural events; and
- premises in common areas used for information, entertainment, community or leisure facilities, telecommunication equipment, automatic teller machine, vending machine, advertising display, storage or parking.
The Act also doesn’t apply to a service station business where the Competition and Consumer (Industry Codes-Oilcode) Regulation applies to the carrying on of the business under a fuel re-selling agreement within the meaning of that Regulation.
It should also be noted that the Act only has limited application to leases that have a term (including any option) of less than 6 months.
Determining whether a lease is a “retail shop lease” within the relevant legislation may therefore not be as straight forward as it would initially seem. The property team at Murdoch Lawyers are experienced with leasing issues and are happy to assist you with any questions or issues you may be facing in that regard.