Retail Shop Leases
The Retail Shop Lease agreement between the landlord and tenant is not the only thing that the parties must consider in their relationship. The Retail shop Leases Act overrides the terms of the lease.
The laws relating to retail shop leasing in Queensland are updated fairly regularly. The most recent update came into effect in November 2016.
Given that most retail shop leases are for a period of at least 3 years or more many landlords and tenants may not yet have found a need to become familiar with some of these changes.
Both landlords and tenants have obligations to give disclosure at various times during the relationship. Failures to do this properly at any stage can have serious consequences.
Some things you may not know about exercising an option to renew a lease
Landlords must provide a disclosure document to a tenant within 7 days of receiving a notice exercising an option to renew. It should be acknowledged that this is a short time frame and can easily be missed during a busy time.
A tenant may withdraw its notice exercising the option at any time within 14 days of receiving the landlord’s disclosure.
We suggest that landlords speak with tenants well before the date for exercise of the option so that the intentions of all parties can be clarified and important information exchanged. Increases in outgoings and other changes to the complex may cause a tenant to alter their intentions.
Some things you may not know about assigning a lease.
Upon assignment of a lease guarantors of the tenant may be released by law. In order for that release to be given it is necessary for the assignor to comply with its obligations under the act including by giving proper disclosure. The process can be confusing. A tenant wanting to assign a lease must give an up to date disclosure to the landlord at least 7 days before requesting consent to assignment. In practice a tenant may not understand this obligation until after seeking legal advice and in our experience this is sometimes after consent has already been requested.
When the assignment is associated with the transfer of a business the assignor must give a disclosure statement and a copy of the lease at least seven days before signing the business sale contract. See section 22B.
Did you know that you can be released from any guarantee if you follow the disclosure process?
We strongly suggest that a lawyer be employed specifically for the purpose of assigning the lease and obtaining the release. A release will be given if the disclosure process is properly followed. We have found that sometimes it is necessary to delay arrangements for the sale of a business in order to ensure that all time limitations set out in the Act are met. A guarantor will sleep easier knowing that the personally responsible for the performance of the assignee / buyer of the business is at an end.
Franchising and Subleasing
Franchisors and Tenants issuing subleases or licences must provide disclosure as though they are the landlord. Updated disclosures need to be provided within 28 days of a request.
Outgoings
Landlords are required to provide outgoings estimates to tenants at least one month before the start of any accounting period.
Tenants are entitle to refuse to pay outgoings until the landlord provides and estimate or audited annual statement.
Promotions
Landlords who require payment of a promotional levy are now required to provide, on a yearly basis, marketing plans detailing the proposed spending on promotion and advertising. These are to be provided at least one month before the start of the accounting period.
Redecoration
Did you know that the requirement to redecorate may be void if it does not specify the nature extent and timing of the redecoration works? A general requirement to redecorate will not be effective.
Certain Landlord Costs cannot be passed to tenant
Landlords cannot pass on the cost of
Unfair Contracts Legislation
The unfair contracts legislation impacts upon all areas of business law including Leases. If a clause in a lease is unfair it may be unenforceable on that basis. Landlords should take care to ensure that their lease is drafted in a way that is unlikely to offend the unfair contracts legislation as unfair clauses are not replaced. Tenants reviewing documentation should note any clauses that are thought to be unfair so that this complaint is put on the record.
