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Recent Changes to Retail Leases in WA

Written by Michelle Makela

Michelle Makela is one of our Legal Practice Directors and the National Practice Manager. She holds a Bachelor of Laws, a Bachelor of Science (Psychology) and a Master’s in Criminology. Michelle has had a varied career, working in commercial litigation, criminal law, family law and estate planning. Michelle joined Go To Court Lawyers in 2011. She now supervises a team of over 80 solicitors across Australia.

Do Recent Legal Changes To Retail Leases in WA Affect Me?

In January 2013 amendments to the Commercial Tenancy (Retail Shops) Agreement Act 1985 came into force. The Act regulates a large portion of commercial tenancies in Western Australia, setting out the rights and responsibilities of tenants and landlords under applicable leases. If your commercial lease falls within the ambit of the Act, it is vital that you know where you stand under the new laws.

Which Commercial Leases are covered by the Act?

The Act (and its accompanying Regulations – the Commercial Tenancy (Retail Shops) Agreement Regulations 1985) applies only to leases of premises with square meterage of 1000m or less. The business must either be located in a retail shopping centre or, if not within a shopping centre, it must be a ‘retail business’ as specified in the act, which is defined as:

  • a business which involves the retail sale of goods, or
  • a specified business, including a hairdresser, dry cleaner, beauty salon, shoe repairer, or DVD/Video outlet.

Certain types of business are specifically excluded from the Act, including those held by listed corporations (and their subsidiaries) and listed bodies corporate (and their subsidiaries).

If the lease was entered into AFTER 1 January 2013 - Disclosure

The Act requires landlords to provide tenants with a number of disclosure documents at least 7 days before the lease is signed. Those documents include:

  • A disclosure statement – in the prescribed form (Form 1);
  • A tenant guide – in the prescribed form (Form 4);
  • A copy of the proposed lease; and
  • A budget for operating expenses.

The landlord must provide the tenant with the disclosure documents within 6 months of the commencement of the lease. The documents must also be complete, with no misleading information. If the disclosure obligations are not met within the timeframe then the tenant may have the right to terminate, provided that they can show that the information improperly disclosed has a significant impact on their position under the lease.

If the lease was entered into AFTER 1 January 2013 - Certainty of Tenancy

The lease must allow the tenant the option to renew for a minimum 5 year term, unless the lease if for less than 6 months (ie The tenant has not been in continuous passion of the premises for more than 6 months). Tenants must notify the landlord that they wish to renew at least 30 days prior to the end of the lease term using the prescribed form (Form 3).

There are certain clauses, however – those prescribed under the Regulations, or those included with the permission of the State Administrative Tribunal – that allow the landlord to terminate the lease before the 5 year statutory term. Such clauses may include where the tenant becomes bankrupt or insolvent during the lease. It is vital that tenants check the lease carefully for such clauses before signing.

If the lease was entered into AFTER 1 January 2013 - Relocation and Refurbishment

Under the new amendments, a relocation clause will be void unless it complies with the Act:

For leases where the 5 year term has not yet elapsed, the relocation clause must be in the form prescribed under the Act (Schedule 1, Item 2, Regulations) or approved by the State Administrative Tribunal.

For leases where the 5 year term has already elapsed, the relocation clause must conform to the requirements of the Act, including prescribed notice periods and compensation requirements.

Any clause requiring the tenant to refurbish the premises will be void where it fails to outline details of the required fit out.

ALL retail relevant leases FROM 1 January 2013 - Options to Renew

Landlords are required to provide written notice to tenants of the last date on which they may exercise an option to renew. The notice must be provided within 6 to 12 months before the date on which the option will expire. If the landlord fails to provide notice within the prescribed time frame, the lease is deemed to continue on until the 6 month notification period is reached. The tenant retains the right to terminate during this extended period.

ALL retail relevant leases FROM 1 January 2013 - Legal Costs

The landlord is no longer able to claim from the tenant their costs in relation to:

  • Preparing, negotiating and executing the lease or lease renewal documentation
  • Seeking mortgagee consent
  • Compliance under the Act.

ALL retail relevant leases FROM 1 January 2013 - Market Rent Review

Where a market rent review is to be undertaken, the Act requires that the landlord comply with any request for information from a valuer. Failure to do so may allow the tenant to apply to the State Administrative Tribunal for an order compelling them to do so.

The valuer is no longer able to include the following in their assessment of the market rent for a premises:

  • Goodwill of the business
  • Business stock
  • Fixtures and fittings paid for by the tenant
  • Improvement work completed out by the tenant.

Where Can I Obtain More Information?

Before entering into a lease for a retail shop premises, both landlords and tenants must be very aware of their obligations under the new amendments. If you have concerns about whether the amendments apply to you, or you wish to obtain a review of your lease documentation to ensure it complies with the Act, you should obtain legal advice.

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