The relationship between a landlord and a tenant in a commercial setting is an obviously crucial one which in Queensland is governed both by legislation as well as contract law.
Commercial leases generally divide into either retail or non-retail leases. Places where goods and services are sold to consumers, such as shops, comprise retail leases while non-retail leases include warehouses, distributors and manufacturers which operate a business but don’t sell directly to consumers. Sometimes these lines can be blurred and so seeking expert legal advice if you’re unsure of the status of your lease is a wise course of action.
Commercial and retail leases have similarities but also some key legal differences. In Queensland, as in other states, retail leases are governed by the Retail Shop Leases Act 1994 (“the Act”). In contrast, non-retail commercial leases are governed by state-specific property and conveyancing Acts which, unlike retail leases, can be contracted out of. The reason for this is that it is generally assumed a retail tenant has unequal bargaining power when compared with a landlord (often a large shopping centre owner), while the law is less inclined to involve itself in the contractual arrangements between commercial land owners and tenants.
In essence, however, all commercial leases will include terms covering:
- payment of rent;
- rent increases; and
- maintenance and repairs of the premises.
The remainder of this article will primarily focus on the basics of retail leases.
In Queensland, the Act covers retail leases unless the business is a service station; operates from a premises with a floor area of more than 1000 sq m and is leased by a listed corporation or a listed corporation’s subsidiaries; is a temporary business such as a trade stall; is a premises within a theme park or amusement park.
In order for a retail lease to be agreed in Queensland, both landlord and tenant must provide disclosure statements. The landlord’s statement must provide summary information about the terms of the proposed lease and be given to the tenant at least seven days before the commercial lease agreement is finalised. Failure to do so allows the tenant the opportunity to terminate the lease.
The landlord must also give the tenant a copy of the proposed lease in writing at least seven days before entering into the lease, and a certified copy of the signed lease within 30 days of the lease being signed. Failure to do so may result in a fine.
Tenants must also provide a disclosure statement to the landlord that includes information about their business history and experience, as well as any details of representations made by the landlord. Prospective tenants should note that providing misleading or false information on this statement can result in the payment of compensation to the landlord if they suffer loss due to the misrepresentations of the statement.
Additionally, tenants who operate fewer than five retail businesses must secure a legal advice and a financial advice report before signing a lease. This will require the tenant consulting a leasing lawyer such as Twohill Lawyers to receive advice on the lease’s terms and conditions. These reports must be provided by the tenant to the landlord before the lease commences.
Rent reviews, options and renewals
A commercial lease needs to specify how the amount of rent paid by the tenant is varied during the term of the lease. For example, rent might be adjusted up by a fixed amount or according to the Consumer Price Index. Rent may also be renegotiated at the end of a lease term and in the case of a retail lease, this may require the services of a Specialist Retail Valuer to determine the market rent of the premises. This process can be costly but the valuer’s rental figure is generally binding on the parties.
An option to renew a commercial lease is usually a specific clause within the lease document which entitles the tenant to renew the lease for a further term. If there is no option or all options under the lease have been exercised, a new lease is required.
If the lease is for less than a year, the landlord must advise the tenant at least three months before the end of the lease whether the landlord intends to allow the tenant to renew and on what terms. If the lease is for over a year, the landlord must advise the tenant within six months of the end of the lease as to whether or not they intend to renew the lease. The landlord is free to set any rental amount they wish in these circumstances. Unlike other states, Queensland does not have any minimum term for a lease to be considered a retail lease.
Where a dispute about a retail lease arises between a landlord and a tenant, the matter will go to the Queensland Civil and Administrative Tribunal (QCAT) who will first ask the parties to attend a mediation on the dispute. If mediation is unsuccessful, QCAT will conduct a hearing on the dispute.
In some circumstances a landlord can be made to pay a tenant reasonable compensation for loss or damage. This can occur if:
- a landlord significantly restricts access to the tenant’s shop;
- or significantly restricts or alters customer access or flow into the shop
- or causes a substantial disruption to the tenant’s business;
- or does not quickly rectify or repair building defects or breakdowns in plants or equipment;
- or neglects cleaning, maintenance or repainting of the building;
- or causes the tenant to leave the shop before the end of the lease so the landlord can refurbish or extend the building;
- or makes an untrue statement or misrepresentation which causes the tenant to enter into the lease;
- or fails to make the shop available for trading on the date specified in the lease.
If you’re a retail tenant who believes any of these circumstances apply to your situation, consult Twohill Lawyers for immediate advice and guidance on how to proceed. We have widespread experience in commercial law matters, including leases, whether you’re a landlord or a tenant. Contact us for a consultation today on (07) 5571 1450.