Commercial Tenancy (Retail Shops) Agreements Amendment Regulations (No. 2) 2012 (WA)
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WESTERN 5831 AUSTRALIAN
GOVERNMENT
| ISSN 1448-949X | PRINT POST APPROVED PP665002/00041 |
PERTH, FRIDAY, 30 NOVEMBER 2012 No. 220 SPECIAL PUBLISHED BY AUTHORITY JOHN A. STRIJK, GOVERNMENT PRINTER AT 12.30 PM
© STATE OF WESTERN AUSTRALIA
Commercial Tenancy (Retail Shops) Agreements Act 1985
Commercial Tenancy (Retail Shops) Agreements
Amendment Regulations (No. 2) 2012
Made by the Governor in Executive Council.
1. Citation
These regulations are the Commercial Tenancy (Retail Shops)
Agreements Amendment Regulations (No. 2) 2012.
2. Commencement
These regulations come into operation as follows —
(a) regulations 1 and 2 — on the day on which these regulations are published in the Gazette; (b) the rest of the regulations — when the Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011 section 3 comes into operation.
3. Regulations amended
These regulations amend the Commercial Tenancy (Retail
Shops) Agreements Regulations 1985.
4. Part 1 heading inserted
Before regulation 1 insert:
Part 1 — Preliminary
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5. Regulation 3 replaced
Delete regulation 3 and insert:
3. Terms used
In these regulations —
Form means a form in Schedule 2;
option expiry day, in relation to a retail shop lease, that provides, whether directly or by operation of section 13 of the Act, an option or a further option of renewal of
the lease exercisable by the tenant, means the date after
which the option is no longer exercisable.
6. Part 2 heading inserted
After regulation 3 insert:
Part 2 — General matters
7. Regulations 3AA and 3AB inserted
Before regulation 3A insert:
3AA. Defining or calculating area for the definition of
lettable area of a retail shop under section 3(1)
(1) The lettable area of a retail shop means so much of the
surface floor area of the premises as are designed and
available for use in carrying on the business that is, or
will be, carried on at the shop.
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(2)
Each of the following areas is not part of the lettable area of a retail shop, unless a particular tenant has a right to the exclusive use of the area —
(a) areas covered by awnings or similar coverings; (b) balconies;
(c) areas under planter boxes;
(d) terraces;(e) verandahs;
(f) public spaces; (g)
thoroughfares or access ways for the use of service vehicles or the delivery of goods;
(h)
all other areas of a retail shop that are not reasonably capable of being used in carrying on the business that is, or will be, carried on at the shop.
(3) Each of the following areas is not part of the lettable
area of a retail shop, if the area is provided as a
common facility in the building where the shop is
situated, unless a particular tenant has a right to the
exclusive use of the area —(a) access ways;
(b) cupboards;
(c) escalators, stairwells and landings;
(d) fire hose reel cupboards;
(e) lift shafts and lobbies;(f) plant/motor rooms; (g) recessed doorways; (h) storage rooms;
(i) tea rooms and other service areas;
(j) telecommunications cupboards;
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(k) toilets;
(l) car park spaces; (m) entrance halls.
3AB.
Leases exempt from the operation of the Act — definition of retail shop lease under section 3(1)
The following leases are exempt from the operation of
the Act —
(a) a lease held by a body corporate whose securities are listed on the New Zealand Stock Exchange Limited; (b) a lease held by a subsidiary (as defined in the Corporations Act 2001 (Commonwealth) section 9) of such a body corporate; (c) a lease of premises for the purpose of the lessee operating only a vending machine or automatic teller machine on those premises.
8. Regulation 3A amended
In regulation 3A:
(a) in paragraph (c) delete “therapy;” and insert: therapy and treatments;
(b) in paragraph (d) delete “repair;” and insert: repair (which may include key cutting and engraving);
(c) in paragraph (e) delete “tapes.” and insert: tapes, DVDs, electronic games or other similar
amusements.
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9. Regulation 4A inserted
Before regulation 4 insert:
4A. Exemption from section 13C (section 4(4) and (5)) A landlord is exempt from section 13C of the Act in
respect of a retail shop lease if —
(a) but for that exemption, the landlord would be required under section 13C of the Act to notify a tenant in writing of an option expiry day provided under the lease; and (b) the landlord is unable to give that notice within the period of time provided under that section because the notice would need to have been given to the tenant before the commencement of the current term of the lease; and (c) the landlord has, on or before the commencement of the current term of the lease, notified the tenant in writing of the option expiry day.
10. Regulation 6A inserted
After regulation 5A insert:
6A.
Defining or calculating area for the definition of total lettable area for premises that are not retail shops, under section 12(3)
The lettable area of any premises that are not retail
shops is to be defined and calculated for the purposes
of paragraph (b) of the definition of total lettable area
in section 12(3) of the Act in the same manner as is
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prescribed under regulation 3AA but for that
purpose —
(a) a reference in regulation 3AA to “a retail shop” or to “shop” is to be read as a reference to “premises”; and (b) a reference in regulation 3AA to “in carrying on the business that is, or will be, carried on at the shop” is to be read as a reference to “by the tenant”.
11. Regulation 7 inserted
After regulation 6 insert:
7. Various provisions prescribed for retail shop leases
The provision set out in Schedule 1 column 2 —
(a) opposite item 1 is prescribed under section 13 of the Act; and
(b) opposite item 2 is prescribed under section 14A of the Act.
12. Regulation 9 amended
In regulation 9(1) delete “Form 6.” and insert:
Form 4.
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13. Regulation 10 amended
In regulation 10 delete the Table and insert:
Table
Item Section of Act Description of matter
1. 11(3C)(b) Application for an order that a landlord
comply with a request made under
section 11(3B) of the Act.2. 12(1)(b) Application for approval for proportion
of operating expenses of a landlord
payable by a tenant under a retail shop
lease to be greater than the relevant
proportion.3. 12(1e) Application for approval for
contribution towards the operating
expenses of a landlord payable by a
tenant under a retail shop lease to
exceed the amount calculated under
section 12(1e)(b) of the Act.4. 12A(3)(e)(ii) Submission of a scheme of repayment
for approval under section 12A(4) of the
Act.5. 12B(3)(e)(ii) Submission of a scheme of repayment
for approval under section 12B(4) of the
Act.6. 13(3)(a) Application for approval for variation of
the period during which an option to
renew a lease is exercisable.
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Item Section of Act Description of matter
7. 13(7) Application to approve of the inclusion
in a retail shop lease of a provision
under which a landlord may determine
the lease at a time that is before the day
set out in section 13(6)(aa) or (ab) of the
Act, as is relevant.8. 13(7b) Application for an order that an option
of renewal does not arise under
section 13(1) of the Act.9. 13A(3) Application to determine that there are
bona fide commercial reasons for an
inconsistency referred to in
section 13A(1)(a) of the Act.10.
14A(3)
Application for the approval of the inclusion in a retail shop lease of a provision about the relocation of a tenant’s business to be in a form other
than a form prescribed for the purposes
of section 14A of the Act.11. 15F(6) Application for an interim order
pending final determination of an
unconscionable conduct application
under section 15F(1) of the Act.12.
16D(6)
Application for an interim order pending final determination of a misleading or deceptive conduct application under section 16D(1) of the
Act.
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Item Section of Act Description of matter
13. 16(1) Referral of a question between the
parties to a lease which a party believes
to be a question arising under the lease,
but only if urgent relief in the form of
an order for a party to the lease to do, or
refrain from doing, something is sought
in conjunction with the referral.14. 27(3)(b) Application for a matter before the
Tribunal to be transferred to a court.14. Part 3 inserted
After regulation 10 insert:
Part 3 — Transitional regulations arising from
the enactment of the Commercial Tenancy
(Retail Shops) Agreements Amendment Act 2011
11. Terms used
In this Part —
2011 amending Act means the Commercial Tenancy
(Retail Shops) Agreements Amendment Act 2011;commencement day means the day on which the 2011
amending Act section 3 comes into operation.12. Application of section 13C
(1)
Section 13C of the Act does not apply in respect of a retail shop lease if commencement day is during the period of 6 months before the option expiry day for that retail shop lease.
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(2) If a landlord is required under section 13C of the Act to
notify a tenant in writing of an option expiry day and
commencement day is during the period described in
column 1 of the Table then that section applies in
respect of the retail shop lease as if subsection (1) of
that section was modified to provide that the period of
time during which the landlord is required to notify the
tenant was the period set out in column 2.Table
Commencement day Notice required to be falls during this period
given by landlord during this period
Period that is more than Period that is after 6 months but not more commencement day but than 9 months before the before the day that is option expiry day for a 2 months before the retail shop lease option expiry day for the
retail shop leasePeriod that is more than Period that is after 9 months but not more commencement day but than 12 months before the before the day that is option expiry day for a 3 months before the retail shop lease option expiry day for the
retail shop lease13. Pre-1 July 1999 leases
(1) In this regulation — existing retail shop lease has the meaning given in
Schedule 1 clause 3 of the Act;pre-1 July 1999 lease means a retail shop lease that was an existing lease, as defined in the Commercial Tenancy(Retail Shops) Agreements Amendment Act
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1998 section 14(1), in relation to a provision of that
Act.
(2) The amendments effected by the 2011 amending Act,
other than —
(a)
the amendments to section 11(2) of the Act set out in section 8(1) of that amending Act; and
(b)
the amendments to section 12 of the Act set out in section 10 of the amending Act,
apply to, and in relation to, a pre-1 July 1999 lease in
the same way as they apply to, and in relation to, anexisting retail shop lease.
(3) Section 8(1) of the 2011 amending Act is to be taken to
amend section 11(2) of the Act, as that provision
applied to and in relation to a pre-1 July 1999 lease
immediately before commencement day, as if it read as
follows:(1) In section 11(2) delete “lease.” and insert: lease, and is not to take into account the value of —
(a)
the goodwill of the business carried on in the retail shop; or
(b)
any stock, fixtures or fittings in the retail shop that are not the property of the landlord; or
(c)
any structural improvement, or alteration, of the retail shop carried out, or paid for, by the current tenant.
(4) Other than as specified in this regulation, the
amendments effected by —
(a) the 2011 amending Act; and
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(b) Commercial Tenancy (Retail Shops) (No. 2) 2012 the ,
do not affect the operation of the Commercial Tenancy
(Retail Shops) Agreements Amendment Act 1998
section 14.
15. Schedule 1 inserted
Before the Schedule insert:
Schedule 1 — Provisions for retail shop leases
[r. 7]
Item and Provision for retail shop lease description 1. Entitlement by The landlord is entitled to determine the lease landlord to by reason of either of the following persons determine the becoming, according to the Interpretation lease Act 1984 section 13D, a bankrupt or a person Section 13(6)(da) whose affairs are under insolvency laws — of the Act (a) the tenant;
(b) a guarantor of the tenant, if — (i) the tenant is a body corporate; and
(ii) the guarantor is a director or a majority shareholder of the body corporate.
2. Relocation 1.1. Terms used in this clause
Section 14A(1)(a) In this clause, unless the contrary of the Act intention appears — landlord means the person who is the
landlord, as defined in the Commercial
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Item and Provision for retail shop lease description Tenancy (Retail Shops) Agreements lease;
new retail shop means a redeveloped
retail shop or alternative retail shop that
is the subject of an offer under
subclause 1.5.1 or a substitute lease;redevelopment, of the retail shop,
includes any substantial repair,
renovation, reconstruction or demolition
of the retail shop, or the building or the
retail shopping centre within which the
retail shop is located;retail shop means the premises the
subject of this lease;retail shopping centre, in relation to a retail shop, means the retail shopping centre as defined in the Commercial
Tenancy (Retail Shops) Agreements retail shop is located;
substitute lease means a lease of a new
retail shop that a landlord offers or
provides under subclause 1.5;tenant means the person who is the
tenant, as defined in the Commercial
Tenancy (Retail Shops) Agreements
Act 1985 section 3(1), in relation to this
lease;
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Item and Provision for retail shop lease description termination date, in relation to the termination of this lease under this clause, means the date set out in a termination notice for the lease referred
to in subclause 1.3.3(b).
1.2. Landlord may terminate lease to
redevelopThe landlord may terminate this lease in accordance with this clause if the retail shop, or the building or the retail
shopping centre within which the retail shop is located, is to be the subject of a redevelopment and —
(a) the landlord reasonably requires
vacant possession of the retail
shop to enable the redevelopment
to be carried out; or(b) access to the retail shop while the
the landlord cannot ensure safe out.
1.3. Notice of termination for
redevelopment1.3.1 The landlord must give the tenant
written notice of termination of this
lease (a termination notice) under this
clause.
1.3.2 A termination notice must be given at least 6 months before the termination date.
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Item and Provision for retail shop lease description 1.3.3 A termination notice must contain the
following —
(a) the details of the proposed redevelopment; (b) the date on which this lease terminates (the termination date); (c) notice of the tenant’s right to under subclause 1.7.
1.3.4 The termination date does not need to
coincide with the end of a rental
period.
1.4. Termination of lease under this clause 1.4.1 On the termination date this lease
terminates.
1.4.2 On termination of this lease under this clause, the tenant is not under any obligation under this lease to make good the retail shop, despite any other
clause in this lease to the contrary.
1.5. Offer by the landlord to lease
redeveloped retail shop or alternative
retail shop1.5.1 At the time a termination notice is
given to a tenant, the landlord must make an offer (the offer) to lease to the tenant —
(a) the redeveloped retail shop; or (b) an alternative retail shop.
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Item and Provision for retail shop lease description 1.5.2 For the purposes of subclause 1.5.1(b), if the retail shop is situated in a retail shopping centre, the alternative retail shop is also to be situated in that retail
shopping centre.
1.5.3 If the landlord does not offer the tenant a substitute lease then the landlord is liable to pay relocation
costs and compensation in accordance
with subclauses 1.6 and 1.7.
1.5.4 The offer must be in writing.
1.5.5 Unless otherwise agreed between the
parties, the new retail shop that the landlord offers to lease to the tenant under subclause 1.5.1 must —
(a)
be located in a position that has an estimated trading potential similar to that of the retail shop; and
(b)
have a floor configuration similar to that of the retail shop; and
(c)
have a lettable area similar to the lettable area of retail shop; and
(d)
meet all requirements of current health, safety, building, fire and other relevant legislation for the use to which the retail shop is to be put by the tenant.
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Item and Provision for retail shop lease description 1.5.6 The offer for the lease of the new
retail shop must contain the
following —
(a) details of the new retail shop; (b) the date by which the tenant must accept the landlord’s offer (which must be at least 60 days after the date of the offer);
(c) that the tenant’s acceptance of the offer must be in writing; (d) the rent per annum for the new retail shop, which is to be no more than the rent under this lease for the retail shop; (e) the terms and conditions of the lease, which are to be the same, or better, terms and conditions as this lease except that the term of
the substitute lease is to be no
shorter than the remainder of the
term of this lease;(f) the date, or estimated date, on which the lease is to commence; (g) the date, or estimated date, on which the tenant can access the retail shop to fit it out; (h) seek independent legal and
a statement that the tenant should and the new retail shop.
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Item and Provision for retail shop lease description 1.5.7 Without limiting subclause 1.5.6(e), the proportion of operating expenses to be paid by the tenant under the
substitute lease must not be greater
than the proportion of operating
expenses to be paid by the tenantunder this lease.
1.5.8 If the tenant accepts the offer on or
before the date specified under
subclause 1.5.6(b) —
(a) the landlord must provide the tenant with a substitute lease for the new retail shop not later than 21 days after the tenant accepts the offer; and (b) substitute lease and return it to
the landlord not later than 60 daysthe tenant is to execute the lease by the landlord.
1.5.9 The substitute lease must be on the
same terms and conditions as this
lease, except that —
(a) the commencement date for the substitute lease will be —
(i) such date as is agreed between the parties; or (ii) between the parties, 30 days
after the new retail shop isif a date is not agreed to fit it out;
and
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Item and Provision for retail shop lease description
(b)
if the term of the substitute lease extends beyond the term of this lease, the dates on which the rent is reviewed or adjusted during that term or additional term will occur in the same manner as are provided for under this lease; and
(c)
the lease is to make provision to the following effect —
(i) if the landlord cannot
provide the tenant with
access to the new retail shop
under the substitute lease
due to the redevelopment or
any other unforseen
circumstance, then the tenant
may terminate the substitute
lease at any time by giving
the landlord written notice of
the termination;(ii) the landlord has no claim
against a tenant for the
termination of the lease in
the circumstances set out in
subparagraph (i);(iii) the termination of the
substitute lease in those
circumstances is to be
treated as a termination of
this lease under this clause
for the purposes of
subclause 1.7.
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Item and Provision for retail shop lease description 1.5.10 The landlord is responsible for arranging the preparation of the substitute lease and the landlord is to
bear the following costs —
(a) the preparation, and execution, of
the cost of, and associated with, of surrender of this lease;
(b) legal costs in relation to the
termination of this lease, advicethe cost of the tenant’s reasonable lease and the execution of the substitute lease.
1.6 Landlord to pay tenant’s reasonable
removal and relocation costs1.6.1 If this lease is terminated under this
clause, the landlord is to pay the
tenant’s reasonable costs of removal
from the retail shop and, if relevant,
the relocation of the tenant’s business
to another place (whether provided
under a substitute lease or not)including, but not limited to —
(a) costs incurred by the tenant in services; and
(b) replacing, re-installing or
modifying finishes, fittings,
equipment or services to thecosts incurred by the tenant in retail shop immediately before
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Item and Provision for retail shop lease description the relocation, but only to the extent that they are reasonably required in the other place; and
(c) packaging and removal costs
incurred by the tenant.1.6.2 The landlord is to pay to the tenant the
reasonable costs of the removal and
relocation in accordance with this
subclause as soon as is reasonably
practicable after the removal from the
retail shop by the tenant but in any
event not later than 30 days after a
claim for costs under this clause has
been given to the landlord by the
tenant.
1.7. Tenant’s right to compensation 1.7.1 If this lease is terminated under this
clause, or under a provision of an
alternative lease referred to in
subclause 1.5.9(c), the landlord is
liable to pay the tenant reasonable
compensation for loss and damage
(including loss of goodwill) suffered
by the tenant due to the termination of
this lease, taking into account all
relevant factors.
1.7.2 Despite subclause 1.7.1, the landlord is only liable to pay the written down value of the costs of fitting out the
retail shop as at the termination date,
calculated in accordance with the
current method used by the Australian
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Item and Provision for retail shop lease description Taxation Office for the depreciation of assets.
1.7.3 The tenant must give the landlord
written notice of the loss or damage as soon as reasonably practicable after it is suffered but a failure to do so does not affect any right of the tenant to
compensation.
1.7.4 Subclause 1.7.1 applies whether or
not —
(a) the landlord offers the tenant a substitute lease; or (b) the tenant accepts an offer of a substitute lease; or (c) a substitute lease is entered into by the parties; or (d) the terms of a substitute lease entered into are not complied with; or (e) accordance with a provision of
a substitute lease is terminated in subclause 1.5.9(c).
1.7.5 The landlord is to pay to the tenant
compensation in accordance with this
subclause as soon as is reasonably
practicable after the termination date,
but in any event not later than 30 days
after a claim for compensation under
this clause has been given to the
landlord by the tenant.
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Item and Provision for retail shop lease description
1.8. Abatement of rent 1.8.1 The landlord must allow the tenant an
abatement of rent, and other
occupancy costs, for any period of
time during which the tenant cannot
reasonably carry on the tenant’s
business in the new retail shop after
the termination date of this lease —
(a) because the tenant needs to fit out the new retail shop and to
relocate the tenant’s fixtures,
fittings, furnishings, plant and
equipment and stock-in-trade
from the retail shop to the new
retail shop; or(b) because the landlord had not the new retail shop; or
(c)
because of any other actions of the landlord.
1.8.2 Subclause 1.8.1(a) does not apply to
any period of time where there is
unreasonable delay in fitting out the
new retail shop and installing the
fixtures, fittings, furnishings, plant and
equipment, and stock-in-trade in the
new retail shop, unless the delay is
outside of the control of the tenant.
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Item and Provision for retail shop lease description
1.9. Dispute resolution Any question between the landlord and the tenant arising under this lease may be referred to the State Administrative Tribunal, or made the subject of a request to the Small Business
Commissioner, where relevant, in
accordance with the Commercial
Tenancy (Retail Shops) Agreement
Act 1985.
16. Schedule amended
(1) In the Schedule delete:
Schedule
Forms
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and insert:
Schedule 2 — Forms
(2) In the Schedule delete Form 1 and insert: FORM 1
Commercial Tenancy (Retail Shops) Agreements Act 1985
Section 6(4)
[r. 4]
DISCLOSURE STATEMENT
Part 1 Premises Part 2 Lease term and option/s to renew lease Part 3 Works, fitout and refurbishment Part 4 Rent Part 5 Outgoings/Operating expenses
Part 6 Other costs
Part 7 Alteration works (including renovations,
extensions, redevelopment, demolition)Part 8 Trading hours
Part 9 Retail shopping centre details Part 10 Group of premises
Part 11 Other disclosures
Part 12 Landlord acknowledgments and signing
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Part 13 Tenant acknowledgments and signing
Part 14 Attachments
Landlord
Tenant
Premises
KEY DISCLOSURE ITEMS
1 Annual base rent under the $ p.a. lease Including GST/Excluding GST See item 10.1 2 Is rent based on turnover
Yes payable by the tenant in
No year 1
See item 123 Total estimated $ outgoings/operating Including GST/Excluding GST expenses, promotion and
marketing costs and
contributions to sinking
fund for the tenant in year 1
See Item 14.2 and Part 64 Term of the lease Years months See item 5.2 5 Commencement date is / /20
See item 5.1 Actual/estimated [Insert the commencement date,
or details of how the
commencement date is to be
determined, e.g. on receipt of
council approval]
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6 Handover date is / /20
See item 7.1 Actual/estimated [Insert the handover date, or
details of how the handover
date is to be determined, e.g. on
receipt of council approval]
7 Does the tenant have an Yes - see item 6.1 option to renew for a No further period (to be
exercised in the manner
specified, on or before the
last date stated in the option
clause)
See item 68 Does the lease provide the Yes tenant with exclusivity in No relation to the permitted use
of premises
See item 2.2
Disclosure item Response PART 1 — PREMISES 1 Premises details
1.1
Street address of premises [Insert street address of
premises and, as applicable,
shop number, name of the
building/centre in which the
premises is located, street
address of the building/centre]1.2
Plan of premises (if available) [Insert description of premises
by reference to a prepared
plan. Attach the plan to this
disclosure statement at
item 38.1]
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Disclosure item Response
1.3 Lettable area of the premises New premises - approximately
(in m2) m2 Existing premises — certified
at
m2
Will a survey be conducted?
Yes No
1.4 Existing structures, fixtures, [Select as appropriate] plant and equipment in the
air conditioning premises provided by the
plastered walls landlord at the cost of the
cool room/freezer landlord (excluding any
shop front works, fitout and
floor coverings refurbishment described in
sink Part 3)
grease trap sprinklers hot water service suspended ceilings lighting telephone mechanical exhaust water supply painted walls waste electrical distribution load (3 phase)
electrical distribution load (single phase) separate utility meter — gas separate utility meter — water
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Disclosure item Response
separate utility meter — electricity
other [Please specify]
1.5 Services and facilities [Select as appropriate] provided by the landlord for
tenancy cleaning the benefit of the premises
common area cleaning common area lighting security services bin rooms child minding facilities staff toilets other [please specify] [Note: The tenant should
ensure that the nature of the
services and facilities are
suitable to the tenant’s
requirements]1.6 Other special requirements of
air control the tenant in relation to the
delivery access premises
drainage floor loading wall loading other [please specify] 2 Permitted use 2.1 Description of permitted use [Note: the tenant should
investigate if the proposed use
of the premises is permitted
under planning laws]2.2 Is the permitted use described
Yes in item 2.1 exclusive to the
No tenant? 2.3 Is there any restriction on the
Yes [insert details] provision of any goods and
No services by the tenant?
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Disclosure item Response
2.4 Do the premises meet all Yes requirements of current No health, safety, building and fire legislation for the Not known permitted use? 3 Number of car parking spaces
3.1 Approximate total spaces spaces 3.2 Available spaces for spaces customers of the
building/centre3.3 Reserved spaces for use of the spaces tenant only 4 Head lease
4.1 Is the premises under a head Yes lease or Crown lease? No [Note: a tenant who is a
sublessee should seek
independent legal advice on thesecurity of the tenant’s tenure]
4.2 If this is a Crown lease, is the Yes Minister’s consent to the No lease required? Not applicable 4.3 Has the landlord provided a Yes – attached at copy of the head lease or item 38.2 Crown lease to the tenant? No Not applicable
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Disclosure item Response
4.4 Current term under the head Not applicable lease or Crown lease and Details of head lease as
option/s to renew
follows: Current term: Years: / /20 to / /20
Options to renew:
Years: / /20 to / /20[List any options for further
terms held by the landlord
under the head lease]
4.5 Is the head landlord’s consent Yes to the lease required? No 4.6 Do any rights or obligations Yes of the landlord under the head No lease affect the premises? [Insert details]
PART 2 — TERM OF LEASE AND OPTION/S TO RENEW
LEASE5 Term of lease
5.1
Date lease commences (see / /20
also date of handover at Actual / Estimate item 7) [Insert the commencement date,
or details of how the
commencement date is to be
determined, e.g. on receipt of
council approval]5.2
Length of term Years months
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Disclosure item Response
5.3 Date lease expires (based on / /20 the date indicated at item 5.1
as the date the lease
commences)6 Option/s to renew lease
6.1 Option/s details Not applicable Options as follows:
Length Period Exercise of of date option option years / /20 / /20
to to / /20 / /20 Actual/ Actual/ Estimate Estimate
years / /20 / /20
to to / /20 / /20 Actual/ Actual/ Estimate Estimate
[List all options to renew lease.]
[Note: an option to renew a
lease must be exercised in the
manner specified in the lease
and given to the landlord on or
before the last day stated in theoption clause of the lease]
How option is to be exercised
[Describe the method by which
the tenant must exercise the
option to renew the lease, e.g. in
writing, orally]
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Disclosure item Response PART 3 — WORKS, FITOUT AND REFURBISHMENT
7 Date of handover
7.1
Date of handover on which / /20
premises will be available for Actual / Estimate occupation or fitout (if [Insert the handover date, or different to the date the lease details of how the handover commences indicated at date is to be determined, e.g. on item 5.1) receipt of council approval] 8 Landlord’s works 8.1
Description of works to be carried out by the landlord before the date lease
commences (exclude any
works that form part of the
tenant’s fitout at item 9)8.2
Is the tenant required to See lease clause contribute towards the cost of
any of the landlord’s finishes, [Insert details of tenant’s fixtures, fittings, equipment, contribution.] or services? [Note: the Act provides that any
clause in a lease in respect of
premises in a retail shopping
centre requiring a tenant to pay
costs in respect of the
amortisation of capital costs in
relation to the shopping centre
is void (s. 12(2))]8.3
Estimate of expected [List items of work and costs] contribution by the tenant [Note: see also outgoings/ towards the costs of the operating expenses (item 13) in landlord’s works relation to any maintenance
and repairs outgoings and
sinking fund (item 16)]
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Disclosure item Response 9 Tenant’s fitout works
9.1 Fitout works to be carried out
by the tenant (excluding the
landlord’s works at item 8)9.2
Is the landlord providing any Yes — [insert details of
contribution towards the cost
of the tenant’s fitout?landlord’s contribution, including any
amortisationarrangements]
No
9.3 Does the landlord have Yes requirements as to the quality
and standard of shop front [Insert details or provide fitout and fitout? guide]
No
9.4 Are there any requirements Yes for the tenant to refurbish or
refit the premises during the [Insert details of nature, extent term or at the end of the term and timing of the refurbishment of the lease? or refitting requirements]
No
PART 4 — RENT
10 Annual base rent
10.1
Starting annual base rent (i.e. $ when the lease commences) Including/Excluding GST 10.2
Rent free period [Describe any rent free period] 10.3
Date of rent commencement / /20
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Disclosure item Response
10.4 How rent payments are to be [Insert description of how rent made?
is paid, e.g. by equal monthly instalments in advance on the first day of each month, other than the first and last payments
which are calculated on a
pro-rata basis]10.5 Is there provision for
Yes abatement of rent on damage
No or destruction of the premises? See lease clause: [Insert
details]11 Rent adjustment (rent review) 11.1 Rent adjustment date/s and [Insert a list of all rent adjustment method adjustment dates and
adjustment methods, e.g. fixed
increase by ###%, fixed
increase by $###, market rent,
indexed to CPI]12 Rent based on turnover 12.1 Is rent based on turnover
Yes — [Insert method of
payable by the tenant? calculation for turnover
rent]
No [Note: If any part of the
tenant’s rent is calculated by
reference to the turnover of the
tenant’s business, the Act
provides that the tenant must
elect in writing on the form
titled:
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Disclosure item Response Notice of Election that Rent be
Determined by Reference to
Turnover (Form 2 of the
Commercial Tenancy (Retail
Shops) Agreements Regulations
1985) to make those payments
(s. 7).
The tenant should understand
the full implications of this
method of rent calculation,
which includes a requirement
that the tenant disclose its
trading figures to the landlord.
The tenant is encouraged to
seek independent legal and
accounting advice]PART 5 — OUTGOINGS/OPERATING EXPENSES
[Note: The Act provides that a tenant cannot be required to contribute to the landlord’s operating expenses related to extended trading hours unless the tenant chooses to open during those hours (s. 12(1)(c))]
13 Contribution by tenant towards the landlord’s outgoings/operating expenses
13.1
Is the tenant required to pay Yes or contribute towards the No landlord’s
outgoings/operating
expenses?13.2 Describe any period during
which the tenant is not
required to pay any
outgoings/operating expenses13.3
Date on which payment of / /20 outgoings/operating expenses
is to commence
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Disclosure item Response 13.4 Frequency of operating [Insert details of when
expenses payments payments are due]
13.5 Formulae for apportioning outgoings/operating expenses
[Insert formulae of how the
outgoings payable by the tenant
are to be apportioned]See lease clauses: [Insert
details]
[Note: The tenant’s proportion
of operating expenses are to be
no more than the “relevant
proportion” determined in
accordance with section 12 of
the Act]
13.6 Proportion of total operating [Note: The proportion of the expenses apportioned to the total cost of operating expenses tenant (if applicable) as at the for the building/centre payable date of lease commencement by the tenant may vary
periodically]14 Outgoings/operating expenses estimates (annual) for the 12 month period __________ to ___________
For a list of operating expenses payable by the tenant see the annual
estimate of expenditure attached and the following lease clauses:[Insert details]
[Attach a copy of the annual estimate of expenditure at item 38.3]
14.1 Total outgoings/operating $ expenses for the building/centre
14.2 Estimated tenant contribution
to outgoings/operating
expenses$
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Disclosure item Response PART 6 — OTHER COSTS 15 Advertising and promotional costs
15.1
Is the tenant required to Yes contribute towards No advertising and promotional
costs (including marketing
fund contributions) for the
building/centre?
15.2 Tenant’s contribution to advertising and promotional
Not applicable
Yes — contribution per
costs per annum annum is $ Actual/Estimate
Yes — contribution per annum is % of the rent (excluding GST) payable from time to time Yes — [Insert details of tenant’s contribution per annum and how this is determined]
15.3 Landlord’s contribution to
advertising and promotional
costs per annum
15.4 Does the tenant have any [Insert details as to how tenant input into how the marketing can have input] and promotional fund is used? 16 Sinking fund for repairs and maintenance
16.1
Is the tenant required to Yes contribute towards a sinking No fund for repairs or
maintenance for the
building/centre?
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Disclosure item Response 16.2 Tenant’s contribution to sinking fund for repairs or
Not applicable Yes — contribution per
maintenance per annum annum is $ Actual/Estimate
Yes — contribution per annum is % of the rent (excluding GST) payable from time to time Yes — [Insert details of tenant’s contribution per annum and how this is determined]
17 Other monetary obligations and charges
17.1
Outline any costs, arising costs following default under the lease, including legal costs (as
upfront costs or other costs permittedby the Act)
not part of the outgoings/ interest on outstanding
operating expenses and not moneys
referred to elsewhere in this grease trap cleaning disclosure statement pre-payment of rent or
operating expenses
after hours security after hours
airconditioning wet waste removal other [please specify]
17.2 Compulsory contributory Yes
Date on which contributions to
commence:membership of Tenants’
No Association
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Disclosure item Response PART 7 — ALTERATION WORKS (INCLUDING
RENOVATIONS, EXTENSIONS, REDEVELOPMENT,
DEMOLITION)18 Alteration works
18.1
Are there any alteration Yes — [Insert details of
works, planned or known to the proposed works]
the landlord at this point in No time, to the premises or
building/centre including
surrounding roads during the
term or any further term/s?19 Orders of statutory or local authorities 19.1
Are there any outstanding [Select one of the following and orders of a statutory authority provide details]
or a local government Yes — [Insert details] affecting the premises?
No [Note: the tenant should make
enquiries with the local
government and statutory
authorities relating to all
regulations and proposed or
approved alterations to the
centre/building or the
neighbourhood, including
changes of zoning, roads, other
centres etc.]
20 Clause/s in lease dealing with relocation, demolition and destruction
20.1
Clause/s in lease providing Clause/s of the lease / for relocation of the tenants Not applicable
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Disclosure item Response
20.2 Clause/s in lease which Clause/s of the lease / provide/s for the total or partial demolition or Not applicable destruction of the premises or
building/centrePART 8 — TRADING HOURS
[Note: The Act provides that any provision in a lease which requires a
tenant to open at specified hours or times is void (s. 12C).]21 Core trading hours relevant to the tenant
Monday a.m. to p.m. Tuesday a.m. to p.m. Wednesday a.m. to p.m. Thursday a.m. to p.m. Friday a.m. to p.m. Saturday a.m. to p.m. Sunday a.m. to p.m. Public holidays a.m. to p.m. 22 Tenant access to premises outside core trading hours
22.1
Is the tenant permitted to Yes — [Provide details
access the premises and including cost of access]
building/centre outside the No core trading hours? PART 9 — RETAIL SHOPPING CENTRE DETAILS
[This Part must be completed only if the premises are in a retail
shopping centre as defined in the Act (s. 3(1))]23 Retail shopping centre details
23.1
Total number of shops shops
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Disclosure item Response 23.2 Number of shops [Insert details for shops owned
leased/occupied by the landlord] Leased
• Number occupied — • Number unoccupied — Number unleased
23.3 Total lettable area of the m2
centre (in m2) Actual/Estimate 24 Major/anchor tenants
24.1 Major/anchor tenants and [List all major and anchor
lease expiry dates tenants (e.g. department stores,
discount department stores,
supermarkets), and the dates on
which leases held by those
tenants expire]25 Floor plan and tenancy mix
25.1
Floor plan showing tenancy Attached as per item 39.1 mix, common areas, common area trading, kiosks and major tenants
25.2
Does the landlord assure the Yes tenant that the current tenant No mix will not be altered by the
introduction of a competitor26 Customer traffic flow information 26.1
Does the landlord collect Yes — attached as per
customer traffic flow item 39.2
information? No
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Disclosure item Response 27 Use of common areas
27.1
Are common areas able to be Yes — [insert details of
used for trading? basis upon which trading
permitted]
No
28 Casual mall licensing for common areas
28.1
Do you adhere to the Yes — casual mall
Shopping Centre Council of licensing policy attached Australia’s Casual Mall as per item 39.3
Licensing Code of Practice? No PART 10 — GROUP OF PREMISES
[This Part must be completed only if the premises are in a group of
premises that are not classed as a retail shopping centre as defined by
the Act (s. 3(1))]29 Details of group of premises
29.1
Total number of premises premises 29.2
Number of premises in the [Insert details for premises group leased/occupied owned by the landlord] Leased
• Number occupied — • Number unoccupied — Number unleased
29.3 Total lettable area of the m2
group of premises (in m2) Actual/Estimate
PART 11 — OTHER DISCLOSURES
30 Other disclosures
30.1
Are there any current legal Yes — [provide details] proceeding in relation to the No lawful use of the premises or
building/centre?
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Disclosure item Response 31 Representations by landlord
31.1
Any other representations by [Landlord to insert details of the landlord or the landlord’s any other oral or written agent representations made by the
landlord or the landlord’s
agent]32 Representations by the tenant 32.1
Any other representations by [Landlord to insert details of the tenant or the tenant’s any other oral or written agent
representations made by the tenant or the tenant’s agent]
33 Other agreements
33.1 Any other agreements between the tenant and the
[Insert details of any other
agreements between the tenant
landlord and the landlord]
PART 12 — LANDLORD ACKNOWLEDGMENTS AND
SIGNATURE34 Acknowledgments by landlord
By signing this disclosure statement, the landlord confirms
and acknowledges that:
this disclosure statement contains all representations in
relation to the proposed lease by the landlord and the
landlord’s agents as at the date of this disclosure
statement; and this disclosure statement reflects all agreements that have
been made by the parties; and the landlord has not knowingly withheld information
which is likely to have an impact on the tenant’s proposed
business.
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Disclosure item Response Warnings to landlord when completing this disclosure
statement:
The tenant may have remedies including termination of lease if the information in this statement is misleading, false or materially incomplete. 35 Landlord’s signature
35.1
Name of landlord [Insert name of the landlord] 35.2 Signed by the landlord or the
landlord’s agent for and on
behalf of the landlord
35.3 Name of landlord’s authorised representative or
[Insert name of the person
signing with the authority of the
landlord’s agent landlord]
35.4 Date / /20 PART 13 — TENANT ACKNOWLEDGMENTS AND
SIGNATURE36 Acknowledgments by the tenant
By signing this disclosure statement, the tenant confirms and
acknowledges that the tenant received this disclosure
statement.Warnings to tenant:
Before signing any offer to lease, lease or associated
document the tenant should ensure that it fully
understands this disclosure statement, the form of lease
and the operating expenses budget and that the tenant has
negotiated any change that it wishes to make; Signing any of the above documents is legally binding on
the tenant.
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Disclosure item Response Before entering into a lease, tenants should consider these
key questions:
Does the planning authority allow your proposed use for
the premises under planning law? Is the security of your occupancy affected by:
mortgages, charges or encumbrances granted by the
landlord? rights and obligations under a head lease? Do the premises comply with all requirements of building
and safety legislation? Are the premises affected by
outstanding notices by any authority? Could your trading be affected by disturbances or changes
to the building/centre? Does the landlord require you to refurbish the premises
regularly or at the end of the lease? Can the landlord end the lease early even if you comply
with the lease? Are all the existing structures, fixtures and plant and
equipment in good working order? Are you required to make good the premises at the end of
the lease? Is the tenancy mix of the shopping centre (if applicable)
likely to change during the course of the lease? — see
item 25.2? Who is responsible for building defects?
Who is responsible for maintenance, insurance, repairing or replacing finishes, fixtures and fittings, equipment and services?
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Disclosure item Response 37 Tenant’s signature
It is important that a tenant seek independent legal and
financial advice before entering into a lease.37.1
Name of Tenant [Insert name of the tenant] 37.2 Signed by the tenant or for and on behalf of the tenant 37.3
Name of the tenant’s [Insert name of the person authorised representative signing with the authority of the
tenant]37.4
Date / /20 PART 14 — ATTACHMENTS
38 List of attachments
38.1
Plan of premises (see Yes item 1.2) Not applicable 38.2
Head lease or Crown lease Yes (see item 4.2) Not applicable
38.3 Annual estimate of Yes
expenditure Not applicable (outgoings/operating
expenses) (see item 14)
38.4 Additional attachments [List any additional
attachments]39 List of attachments — retail shopping centre
[This item must be completed only if the premises are in a retail
shopping centre as defined by in the Act (s. 3(1))]
39.1 Floor plan (see item 25.1) Yes
Not applicable
39.2 Customer traffic flow statistics (see item 26.1)
Yes
Not applicable
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Disclosure item Response
39.3 Casual mall licensing policy Yes (see item 28.1) Not applicable
39.4 Additional attachments [List any additional relating to the retail shopping attachments relating to the centre retail shopping centre] This disclosure statement is not complete unless it is accompanied by —
a copy of the form of lease; and the current year’s annual estimates of expenditure for
each item of operating expenses; and a copy of the tenant guide (see Form 4 of the Commercial
Tenancy (Retail Shops) Agreements Regulations 1985.
(3) In the Schedule after Form 3 insert: FORM 4
Commercial Tenancy (Retail Shops) Agreements Act 1985
Section 6A
[r. 9]
TENANT GUIDE
FOR NEW RETAIL SHOP LEASES FROM 1 JANUARY 2013
This guide is intended to assist you, as a tenant, to understand some of your legal rights and obligations in relation to a retail shop lease under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (the
Act). This guide does not replace financial, legal or business advice.
The Act and the regulations are available from the State Law
Publisher at
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WHAT IS A RETAIL SHOP LEASE?
Entering into a lease for a retail shop means that you (the tenant or lessee) are entering into a legally binding contract with the landlord (or lessor). The lease agreement sets out your rights and obligations in relation to the use of the retail shop.
A lease cannot override the requirements of the Act.
The Act regulates some of the provisions which may be contained in your lease agreement, including the following:
• rent reviews
• options to renew a lease • terminating a lease • operating expenses (or outgoings) • trading hours.
Which leases are covered by the Act?
The Act generally applies to leases for premises with a lettable area of
1 000 m2 or less:
• that are used for carrying on a business and that are in a retail shopping centre • that are not in a retail shopping centre, but that are used (or predominantly used) for the sale of goods by retail • that are used for conducting a ‘specified business’ — specified businesses include, drycleaning, hairdressing, beauty therapy, shoe repair and video or DVD stores (a list of all specified businesses is available from the Department of Commerce at
There are some retail shops with a lettable area greater than 1 000 m2 that are also covered by the Act — a list of these premises can be obtained from the Department of Commerce at
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The Act generally does not apply to leases to publicly listed companies.
(See section 3(1) of the Act, definition of retail shop lease.)
When is the lease “entered into”?
A lease is usually entered into when both parties have signed it. signed by the parties if:
• the tenant takes possession of the shop premises; or • the tenant starts paying rent.
(See section 3(4) of the Act.)
What you should do:
•
if necessary, seek advice as to whether your lease is covered by the Act
•
establish the area of the retail shop under the lease and have this verified if necessary.
INFORMATION YOU SHOULD HAVE BEFORE ENTERING
INTO A LEASE
Before entering into a lease you should do the following:
• carefully read this tenant guide • carefully read the disclosure statement provided by the landlord or the landlord’s agent • carefully read any written lease document (including any assignments, extensions or deeds of variation) • obtain independent financial, legal and business advice.
Rent, the term of the lease, options, outgoings and related costs are open to negotiation with the landlord. Make sure that you understand these, and all other aspects of the lease, before signing it. To avoid disputes at a later stage, you should make sure that all agreements that you have made are in writing and that the lease documents are
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consistent with any representations made by the landlord or the
landlord’s agents.
What you should do before signing or entering into a lease:
•
seek independent legal and business advice before entering into a lease
•
make sure you understand the lease and your rights, liabilities and obligations before signing it
•
seek advice from financial experts to ensure you understand the costs of running the business.
Tenant Guide to be located in lease
A new retail shop lease must include this tenant guide at the front of the lease.
If the landlord does not give you a tenant guide, you may have the right to do either or both of the following:
•
terminate (end) the lease at any time up to 60 days after the lease was entered into (after this time you may apply to the State Administrative Tribunal for an order to terminate the lease)
•
apply to the State Administrative Tribunal for an order for compensation for any monetary loss suffered by you.
(See section 6A of the Act.)
Disclosure statement to be given to you by landlord
At least 7 days before a lease is entered into the landlord must give you a disclosure statement. The disclosure statement sets out important facts about the retail shop and the lease. A copy of this tenant guide, the form of lease and annual estimates of expenditure in relation to operating expenses should be attached to the disclosure statement.
If the landlord does not give you a disclosure statement or gives you a disclosure statement that is incomplete or contains incorrect
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information you may have the right to do either or both of the
following:
• terminate (end) the lease at any time up to 6 months after the lease was entered into • apply to the State Administrative Tribunal for an order for compensation for any monetary loss you have suffered.
The disclosure statement should be in a prescribed form (this form is Form 1 of Schedule 2 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at It is important to read the statement carefully and make sure it includes all verbal and written agreements, promises or commitments made during negotiations with the landlord or the landlord’s agent (for example, any representations about customer traffic).
The disclosure statement should also contain details about the following:
• the landlord’s property, such as the total lettable area, tenancy mix and services provided • the shop premises, such as location, area and services provided • key terms and conditions of the lease such as rent, term of the lease, options to extend the term and rent review • permitted use of the premises • your contribution to the landlord’s expenses (operating expenses) • any additional charges payable by you, such as shop fitout or contributions to marketing and sinking funds.
By signing the disclosure statement you are acknowledging that you understand the basis for the retail shop lease with the landlord. If you do not understand or agree with anything in the disclosure statement you should advise the landlord immediately.
It is vital that you are satisfied that the disclosure statement sets out all relevant information regarding the retail shop and (where applicable)
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the shopping centre building and property. If necessary, you should
check details by making relevant enquiries and by seeking appropriateindependent legal or expert advice.
(See section 6 of the Act.)
What you should do:
•
make sure that you understand the disclosure statement before signing it and ensure it includes any agreements you reached during negotiations and any promises made to you by the landlord or their agent.
Disclosure by the tenant
The landlord may ask for details of your retailing experience and financial capacity to establish and trade profitably and professionally. Any information provided to the landlord by you must also be correct and contain no misleading information.
PERMITTED USE OF THE RETAIL SHOP
The permitted use clause in a lease is very important as it sets out the type of business that you can run from the premises. You should ensure that the description of permitted use is broad enough to cover the type of business that you want to operate and, if anticipated, to allow you to expand the business.
The kind of things to consider about permitted use include:
• for a hairdresser, does the permitted use include providing beauty treatments? • for a takeaway shop, can the type of food be changed? • your future plans for the business.
You should also check that any local government approvals are in place for the type of business that you plan to operate. Avoid potential disputes by getting the approvals you need in writing.
A permitted use clause in a lease does not mean that you have the exclusive right to carry on a particular type of business in a shopping
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centre. Exclusivity is a separate issue that needs to be agreed
separately with the landlord and included in the lease agreement.
What you should do:
•
make sure the lease and the landlord’s disclosure statement describe the shop’s permitted use and that this description is broad enough so you can expand or sell the business
•
check that local government approvals are in place for the business you plan to conduct — get the approvals in writing
•
confirm whether or not you have an exclusive right to carry on your particular type of business.
TERM OF THE RETAIL SHOP LEASE
The term of a lease is the length of time for which you can rent the shop. The lease must set out the lease term and may also include one or more options to renew or extend the term.
The length of the term of the lease is critical because it should be long enough to enable you to recover your investment, make a profit and sell the business, if you wish.
Minimum of 5 years
In most cases, the Act gives a tenant who is entering into a new lease a right to a minimum 5 year lease term. The 5 year term can be a combination of the initial term and options to extend the lease (for example, an initial term of 2 years and an option to renew of 3 years). The initial term does not need to be 5 years.
If the lease does not provide for options to extend the lease to a 5 year term, you have a legal right to do so (often called a “statutory option”). You can exercise this option by giving the landlord written notice in the standard form at least 30 days prior to the expiry of the term of the lease (the standard form is Form 3 of Schedule 2 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at Although the Act allows you to extend
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the lease to a 5 year term, you do not need to extend the lease for the
whole of this period if you choose not to.The right to a 5 year term will only apply to retail shop leases with a term of more than 6 months (this includes any lease where the tenant has been continuously in possession of the premises for more than
6 months).
(See section 13 of the Act.)
The term can be longer or shorter than 5 years
Even though the Act gives tenants a right to a minimum 5 year term, you can negotiate a term that is longer than 5 years (for example, a 10 year term, or a 5 year initial term with 2 options to renew for a further 5 years each).
In some circumstances, you may agree to a term shorter than 5 years, but this must be your decision and needs to be approved by the State Administrative Tribunal.
(See section 13(7b) of the Act.)
Exercising an option to renew
It is important that you exercise an option to renew a lease in the way set out in the lease (you may need to let the landlord know in writing and within certain timeframes). If you do not exercise an option to
renew properly the landlord may not be obliged to renew the lease.
The Act requires the landlord to give you written notice of the expiry
date for any options to renew (the date on which the option to renew is
no longer valid). You must receive this notice between 6 and
12 months before the expiry date. If the landlord fails to give younotice the option expiry date may be extended.
(See section 13C of the Act.)
At the end of the lease term
At the end of the term of the lease and the use of any options to renew the lease, the landlord does not have to renew the lease and you will have no further rights to occupy the premises. In some instances the landlord may allow you to continue to occupy the premises on a month to month basis.
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Within 12 months before the end of the lease term you can make a written request to the landlord asking whether the landlord intends to renew the lease. The landlord must reply to such a request in writing within 30 days.
(See section 13B of the Act.)
What you should do:
•
seek advice as to the appropriate lease term for your business
•
don’t assume that you will get a new lease at the end of the lease term — you need to make sure that the term of your lease is appropriate for your business structure
•
seek advice as to the landlord’s intentions at the end of the lease term as early as possible so that you can plan accordingly.
Does the lease include redevelopment or relocation clauses?
Many leases include a clause allowing a landlord to terminate a lease before the end of the agreed lease term if the premises are to be redeveloped. In some instances the landlord may offer to relocate a tenant to alternative premises.
For the initial 5 years of a lease term, a redevelopment or relocation clause may only be included in a lease if:
• it is in the prescribed form (see item 2 of Schedule 1 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at or • it has been approved by the State Administrative Tribunal (if the parties have agreed to a provision that is different to the prescribed form).
If 5 years of the term have already expired, then the clause must be in accordance with the provisions of the Act — which sets out requirements in relation to notice, offer of alternative premises,
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payment of the tenant’s reasonable costs and payment of
compensation.
(See section 14A of the Act.)
What you should do:
•
carefully look at any redevelopment or relocation clause in the lease and consider:
- what commitment is the landlord giving about
relocation of the shop – will the new location and
rental be comparable to the current premises?- what compensation is the landlord offering you if
your trade is affected?- what effect will it have on your business? •
seek independent financial, legal and business advice on the clause.
RENT
Rent is usually the largest ongoing payment required under a lease. The Act does not regulate what the rent should be. However, the Act includes some rules relating to rent based on turnover and review of rental.
Types of rent
The initial rent for a shop is a matter for negotiation between the landlord and the tenant. Rental for retail shops can vary considerably depending on the location, the size of the shop, the term of the lease and the type of business.
Some common methods of determining rent are:
•
net rent — an agreed base rent plus a contribution to the landlord’s operating expenses or outgoings
•
gross rent — an all inclusive payment for all the shop’s occupancy costs
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•
semi-gross rent — an amount charged for rental inclusive of some outgoings (for example, the tenant may pay the semi-gross rent plus its proportion of rates and taxes)
•
turnover rent or percentage rent — a component of rent that is determined as a percentage of the tenant’s turnover during a specified period.
What you should do:
•
seek expert advice as to the basis for determining rent that best suits your business operations
•
pay your rent on time — if you don’t pay your rent, the landlord may be able to end your lease.
Rent based on turnover
Some leases base rent (or a part of the rent) on a percentage of the turnover of the tenant’s business.
If you have agreed to a rent based on turnover, then:
• the lease must set out an agreed formula • your agreement must be formalised in writing on the prescribed form before the lease is entered into (the prescribed form is Form 2 of Schedule 2 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at
The Act also recognises the confidentiality of turnover figures to a retail business and limits the use of this information.
(See section 7 of the Act.)
The landlord cannot require you to provide turnover figures
unless your rent is to be based on turnover.
(See section 8 of the Act.)
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RENT REVIEW
Most leases will state that the rent will be reviewed at regular intervals.
At each review time the lease must set out a single basis on which the rent is to be reviewed, this can include:
• the market rent • an increase by reference to the Consumer Price Index (CPI) • a set percentage increase • an agreed formula or combination, for example, CPI + 2%.
The types of review may vary over the life of the lease (the lease may state that reviews are to alternate between CPI and market review). However, the lease cannot give the landlord the right to choose the greatest return from a range of rent types at any one review (for example, the lease cannot state that the increase is to be CPI or 5% whichever is higher).
The lease may specify only one method of review at a time.
Market rent
The Act provides that market rent is the rent obtainable for the retail shop in a free and open market if it were vacant and to be let on similar terms.
The market rent is not to take into account:
• the goodwill of the business •
any stock, fixtures or fittings that are not the property of the landlord
•
any structural improvements paid for or carried out by the current tenant.
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Market rent review
If your lease specifies a market rent review, the Act provides that both parties can initiate the market rent review process and if the parties cannot agree on the rental:
• appoint a licensed valuer (agreed to by both parties) to determine the new rental; or • request that the Small Business Commissioner appoint a valuer to determine the rental; or • each appoint a valuer to determine the rental.
A landlord is required under the Act to provide a valuer with certain information in relation to retail shops in a shopping centre or in the same building in order to assist the valuer to decide the market rent. A valuer must keep this information confidential.
A disagreement regarding the new rent may be referred to the Small Business Commissioner for mediation or to the State Administrative Tribunal for determination. Until the new rent is agreed, the current rent continues to apply. Once the higher or lower rent is agreed,
adjustments will be backdated to the review date.
No “ratchet” clauses
Any provision in a lease about a market review that seeks to prevent the rent from rising or falling above or below a certain level is void. The lease must allow the rent to rise or fall to a level supported by
market evidence, for example, a clause cannot stop the rent from
decreasing on a market review.
(See section 11 of the Act.)
What you should do:
•
make sure that you understand how your rent is to be calculated and what other payments may be required
•
consider whether your business can sustain the current rent, rent increases and operating expenses over the term of the lease.
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CONTRIBUTION TO THE LANDLORD’S OPERATING
EXPENSES OR OUTGOINGSYou may be required to contribute to a proportion of the landlord’s expenses. The landlord’s expenses are described in the Act as operating expenses. Leases can also refer to them as “outgoings or variable outgoings”.
Operating expenses are the costs of operating, repairing or maintaining the landlord’s premises including any building common areas. Typically these costs include the rates and taxes, cleaning, air conditioning, security, insurances and other valid expenses of running the property.
Details about the operating expenses and their payment are to be set out in the lease and the disclosure statement.
No capital expenses or management fees
The landlord cannot recover the following from you as an operating expense:
management fees capital expenditures in relation to a retail shopping centre (for
example, asset replacement)
Operating expenses are not to exceed the “relevant proportion”
Your contributions to operating expenses are negotiable. The Act provides that a tenant cannot be required to contribute more than the “relevant proportion” in relation to an operating expense. Nothing prevents you from negotiating with the landlord to pay less than the relevant proportion.
The relevant proportion is calculated by comparing the lettable area of your shop to the total lettable area of the shopping centre or the group of premises to which the expense relates.
lettable area of shop
relevant proportion total lettable area
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Referable expenses
In certain circumstances an operating expense may be incurred in relation to only some of the businesses in a centre or group of premises, for example, specialised cleaning used by only a few tenants. This is called a “referable expense” and can be allocated using the total lettable area of only the shops to which the referable expense relates.
What you should do:
• make sure that you understand the operating expenses before signing the lease • budget to meet the operating expenses payments.
Landlord to provide estimates and statements for operating expenses
In order to recover operating expenses from you, the landlord must provide you with:
• an annual estimate of expenditure for each operating expense •
an audited operating expenses statement for each accounting period detailing all expenditure by the landlord (this statement must be given within 3 months after the end of the accounting period).
(See section 12 of the Act.)
SINKING FUNDS
If your shop is in a shopping centre and you have agreed to contribute to a fund for major repair and maintenance works, your contributions are protected under the Act. These funds are subject to accounting
and audit provisions and should not be spent by the landlord on
anything other than the purpose for which they are collected. These
costs may be in addition to operating expenses charged under the
lease.
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Capital works must be paid for by the landlord and would include such works as the construction of extensions to the shopping centre and the replacement of major plant and equipment.
(See section 12A of the Act.)
OTHER FUNDS AND RESERVES
The landlord is also required to properly account for the
administration, expenditure and auditing of any other funds or
reserves that you have agreed to contribute to for specific purposes
such as for marketing or promotion. These costs may be in addition tooperating expenses charged under the lease.
(See section 12B of the Act.)
FITOUT AND REFURBISHMENT
Tenants are usually responsible for the costs of installing fixtures and fittings in the shop (the fitout). There may be a standard of construction required for fitouts. You may also be responsible for some or all of the landlord’s costs of preparing the shop for the fitout.
Fitout requirements must be detailed in the disclosure statement.
A provision in a lease requiring a tenant to contribute to the cost of any of the landlord’s finishes, fixtures, fittings, equipment or services will be void unless the disclosure statement notifies the tenant about the effect of the provision.
(See section 12(3A) of the Act.)
The Act provides that a clause about refurbishment or refitting will be void unless it provides the tenant with enough detail about the required refurbishment or refitting as is necessary to indicate the nature, timing and extent of work required.
(See section 14C of the Act.)
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What you should do:
•
ensure that you understand your obligations with regards to the fitout of the premises
•
if possible, obtain or prepare a condition report prior to entering into the lease so that you have evidence of its condition
•
ensure you have a sufficient fitout budget as some fitout costs (for example cost of moving plumbing) are often overlooked
•
discuss variations of standard fitout with the landlord — as this could cost you extra.
LEGAL FEES
The Act prohibits the landlord from claiming legal or other expenses from you relating to:
•
the negotiation, preparation or execution of the lease (or any renewal or extension of the lease)
• obtaining the consent of a mortgagee to the lease
•
However, if you assign your lease or sub-let the premises, the landlord
may claim from you any reasonable legal or other expenses incurred
in connection with the assignment or sub-letting.the landlord’s compliance with the Act. (See section 14B of the Act.)
TRADING HOURS
The trading hours for your shop may be affected by a number of matters.
Retail trading hours legislation in Western Australia sets out those hours that retailers may open (this can vary depending on the type of business you operate).
If your retail shop is located inside a shopping centre then for practical reasons the opening and closing times for the centre (core hours) may
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be different to the trading hours permitted by law. This should be set
out in the disclosure statement by the landlord.
When do you have to open your shop?
A clause in a lease which requires you to open your premises at specified hours or for specified times is void under the Act. For example, you cannot be required to open your shop for the core hours
for a centre. You can choose which hours to open your shop.
If you believe that your lease has not been renewed because you did
not open at certain times you can apply to the State AdministrativeTribunal for compensation.
(See section 12C of the Act.)
What you should do:
•
if your premises are in a shopping centre you should check that the core hours are suitable for your business
•
find out whether you can open your shop at any times outside of the core hours and find out about what costs are involved
•
remember that the lease can’t require you to open your shop for specified hours or during specified times.
Standard trading hours and operating expenses
The Act also sets out “standard trading hours” which are used only for the purposes of allocating operating expenses.
For the purposes of allocation of operating expenses “standard trading hours” are:
•
8.00 a.m. to 6.00 p.m. Monday, Tuesday, Wednesday and Friday
• 8.00 a.m. to 9.00 p.m. Thursday • 8.00 a.m. to 5.00 p.m. Saturday.
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The Act provides that if you do not open outside standard trading hours, then you cannot be charged operating expenses related to the extended hours (for example, additional security costs).
If, however, you do open outside the standard trading hours, you may be required to pay operating expenses related to the extended hours. These expenses should be calculated based on the lettable area of those shops which were open during the extended hours.
If you are closed for a period during the standard trading hours (for example, if you do not open your shop until 10 a.m.), you may still be charged operating expenses for the time that you are closed, that is, between 8.00 a.m. and 10.00 a.m..
(See section 12(1)(c) of the Act.)
Retail trading hours law may allow you to open at times outside of the standard trading hours (for example, Sunday trading) - however:
• you can’t be forced to open your business •
you are not required to make a contribution to operating expenses relating to non-standard hours if you choose not to open during those times.
VOID CLAUSES
The lease agreement and any other verbal or written agreements cannot include clauses that are contrary to any provision in the Act.
In addition, the Act specifically precludes the lease or any other agreement from containing clauses that:
• require a tenant to pay key money, which is any money or other benefit in addition to rent paid to the landlord or others for the right to lease retail shop premises (See section 9 of the Act.)
• prevent the tenant disclosing the rent it has agreed to third parties, such as other retail tenants or their valuers (See
section 11(2a) of the Act.)
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• require the tenant to contribute to any fund that applies moneys to capital expenditure in a shopping centre, such as new building works (See section 12(2) of the Act.)
• require a tenant to open for specified hours or during specified times (See section 12C of the Act.)
• prevent a tenant from joining a tenant’s association or similar body (See section 12D of the Act.)
• require a tenant to provide turnover figures to the landlord, unless the tenant has agreed to pay rent based on turnover (See section 8 of the Act.).
A clause in a lease that is contrary to the provisions of the
Act is void and has no effect.
DISRUPTIONS — COMPENSATION BY THE LANDLORD
The Act states that, if your shop is in a shopping centre, you are entitled to seek reasonable compensation from the landlord if the landlord:
• inhibits or prevents your, or customer, access to the shop premises • disrupts trading conditions, causing loss of profits to your business • does not properly repair, maintain or clean the shopping centre premises or common areas.
You will only be entitled to compensation from the landlord if you have given the landlord notice in writing to rectify the problem and the landlord has not done so.
If you cannot agree the amount of compensation with the landlord,
you can make an application to the State Administrative Tribunal for a
decision as to the amount payable.
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In most cases, before making an application to the State Administrative Tribunal you must attempt to resolve the matter through the Small Business Commissioner’s dispute resolution processes.
(See section 14 of the Act.)
UNCONSCIONABLE CONDUCT AND MISLEADING AND
DECEPTIVE CONDUCTThe Act provides that neither the landlord nor the tenant can engage in conduct that is:
•
unconscionable (conduct that is so harsh, oppressive or unreasonable that it goes against good conscience)
•
The State Administrative Tribunal can hear a claim for
unconscionable conduct or misleading and deceptive conduct and may
make an order for payment of compensation or another appropriate
order (such as an order to vary a lease or an order that a party stop
doing something).misleading or deceptive. In most cases, before making an application to the State Administrative Tribunal you must attempt to resolve the matter through the Small Business Commissioner’s dispute resolution processes.
(See Part IIA of the Act.)
ASSIGNMENT AND SUB-LEASING
During the term of the lease, your circumstances may change and you may want to sell your business and assign your lease or sub-let all or part of the premises.
Your responsibilities if you assign your lease
If you assign your lease the new tenant “takes over” and assumes all your rights and responsibilities including rent and any other obligations under the lease from the date of assignment.
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Although the Act gives you a right to assign your lease, the landlord may withhold consent on reasonable grounds. Examples of reasonable grounds include:
if the landlord believes that the new tenant would not be able
to meet their financial obligations; or if the proposed use of the premises is contrary to the use
permitted in the lease.
You will need to write to the landlord seeking consent for assignment of the lease. If the landlord doesn’t reply within 28 days, you are entitled to assume the landlord has consented to the assignment.
You may have to pay the landlord’s reasonable expenses for assessing a prospective tenant to take over your lease.
Your responsibilities if you sub-lease your shop
If you sub-let all or part of your premises you effectively become the landlord and the person you sub-let to is your tenant. Sub-leasing means that you will still be responsible under the lease to your landlord (for example, you may be liable for the rent if the sub-lessee does not pay).
You will also have obligations to the person you sub-let to, for example, you will need to provide a tenant guide and disclosure statement to your sub-tenant.
Your lease may include restrictions on sub-leasing. You should check your lease and seek advice as to its requirements on sub-leasing.
You may need to write to the landlord seeking consent to sub-lease. If the landlord doesn’t reply within 28 days, you are entitled to assume the landlord has consented to the sub-lease.
(See section 10 of the Act.)
What you should do:
•
seek independent legal advice as to the requirements of the Act and your obligations on assignment or sub-leasing.
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DEFAULT OR BREACH OF LEASE
Most leases allow the landlord to terminate (or end) the lease on a
breach or default by the tenant (for example, failure to pay rent). You
should ensure that you understand the procedures set out in the lease
in relation to default. For example, in many instances, your obligationto pay future rent will continue even after a lease has been terminated.
DISPUTES BETWEEN THE TENANT AND LANDLORD
State Administrative Tribunal
If you are unable to resolve a dispute with your landlord over any
aspect of your retail shop lease the Act allows the State
Administrative Tribunal to deal with these disputes.Either you or the landlord may initiate this action with the Tribunal by making an application and paying the appropriate fee. The Tribunal generally deals with matters through an initial directions hearing, a mediation process or in a hearing.
(See section 16 of the Act.)
Small Business Commissioner
In most cases, before making an application to the State Administrative Tribunal you must attempt to resolve the matter through the Small Business Commissioner’s dispute resolution processes.
(See Part III of the Act and regulation 10.)
Advice about a dispute can be obtained from lawyers with property experience, the Small Business Development Corporation, industry sources, tenant advocates and retail representative groups.
KEEP RECORDS
You should make sure that you keep records of all agreements, undertakings, correspondence (including emails) and other communications with the landlord. Where possible you should confirm things in writing.
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Make sure that you diarise important dates in relation to your lease.
If you need to make a claim in the Tribunal you will need to provide appropriate evidence to support your claim.
(4) In the Schedule delete Form 6.
By Command of the Governor,
N. HAGLEY, Clerk of the Executive Council.
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