Real Estate CPD 2014
Mandatory CPD for Commercial Agents & Property Managers
Amendments to the Commercial Tenancy (Retail Shops)
Agreements Act 1985 and Associated Regulations
Participant Information Booklet – Distance Learning
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Welcome to Mandatory CPD for 2014
The purpose of the Compulsory Professional Development (CPD) program is to
assist industry members in updating and developing their knowledge and skills in the
areas of industry practice and legislative requirements.
The Commissioner for Consumer Protection (the Commissioner) has determined the
topics for mandatory sessions in 2014.
This session topic is amendments to the Commercial Tenancy (Retail Shops)
Agreements Act 1985 and the associated Regulations for commercial property
managers and real estate and business agents.
The Small Business Development Corporation (SBDC) provides a commercial
tenancy service to assist landlords and tenants with retail lease problems and
inquiries. The SBDC can be contacted by visiting their website:
http://www.sbdc.wa.gov.au, by calling 131249 or by sending an email to
The Department of Commerce offers information on the website related to policy,
content and review aspects of the CT Act; however advice and assistance should be
sought from the SBDC. The following link may provide useful information.
http://www.commerce.wa.gov.au/consumerProtection/Content/Business/Commercial
_tenancy/Retail_shop_leases_in_WA.html,
Do you receive e-Bulletins?
The DOC uses electronic bulletins (e-bulletins) as a means of updating the industry
with important information including changes to and compliance with legislation and
policy.
If you are not registered to receive e-bulletins, please email:
[email protected] to be added to the distribution list.
Archive:
E-Bulletins
www.commerce.wa.gov.au/ConsumerProtection/PDF/Real_Estate_industry/Publicat
ions/e-Bulletins.html
Newsletters
www.commerce.wa.gov.au/ConsumerProtection/PDF/Real_Estate_industry/Publicat
ions/newsletters.html
© 2014 Department of Commerce
West Coast Property Training has produced this Mandatory CPD distance learning workbook and in
conjunction with the Consumer Protection Division of the West Australian Department of Commerce.
This document is intended for educational purposes only and does not constitute legal or business
advice by West Coast Property Training, the Department of Commerce or third parties delivering this
training session. Readers requiring legal or business advice should seek out suitably qualified and
experienced legal or business advisors.
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Contents
Session Format ....................................................................................................... 4
Instructions ............................................................................................................. 4
The Commercial Tenancy (Retail Shops) Amendment Act 2011 ......................... 5
Part One: When does the CT Act apply? ............................................................... 6
Part Two: Changes in the CT Act: New provisions ............................................. 10
Part Three: The Disclosure Statement: ................................................................ 17
Part Four: Disputes between landlord and tenant .............................................. 19
Bibliography .......................................................................................................... 22
Resources .............................................................................................................. 23
Appendix A – Regulation 10 of the CT Regulations ............................................ 24
Appendix B – Recap on Unconscionable Conduct ............................................. 26
Appendix C - Extracts from the Commercial Tenancy (Retail Shops)
Agreements Act 1985 ............................................................................................ 28
Appendix D - Disclosure Statement – Form 1 ..................................................... 46
Appendix E - Allocation of Operating Expenses for Non-Standard Hours ........ 66
Appendix F – Face-to-Face Session Activities with Answers ............................ 70
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Session Format
This session has been designed to build on the subject matter that was covered in a
mandatory session in 2013 for commercial and business agents entitled “Legislative
changes affecting the commercial property industry”.
The Commercial Tenancy (Retail Shops) Agreements Act 1985 (the CT Act)
regulates the relationship between landlords and tenants in retail shop premises in
Western Australia. The primary objectives of the CT Act are to promote equitable
leasing arrangements, improve communication and provide access to low cost
dispute resolution mechanisms for the retail industry.
This session has been designed to ensure a sound understanding of the key
provisions of the CT Act that have changed since the Commercial Tenancy (Retail
Shops) Agreements Amendment Act 2011 (the Amendment Act) commenced on 1
January 2013.
Disclosure and transparency are cornerstones of the CT Act; hence this session
focuses predominantly on the disclosure of pertinent information (in the form of
the disclosure statement) by the landlord to the prospective tenant before the signing
of a retail shop lease.
It is intended to be interactive with participants given the opportunity to test their own
knowledge. Participants are encouraged to work together in groups to consider
scenarios and a case study as well as respond to short answer questions.
Instructions
Review the materials in this information booklet and then complete the
accompanying assessment and feedback sheet. Additional activities from the
face-to-face session are included as an addendum; you may wish to review
these to test your understanding of the subject matter.
Return the completed assessment and feedback sheet to your training
provider. You may wish to keep the information booklet for future reference.
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The Commercial Tenancy (Retail Shops) Amendment Act 2011
The Amendment Act commenced on 1 January 2013 and amends the CT Act to
improve the tenancy rights of small business and enhance the clarity and
effectiveness of the CT Act.
The Amendment Act implements a number of outstanding recommendations of a
review of the CT Act undertaken in 2002/3 and addresses other issues that have
arisen since that time, such as recent work to harmonise disclosure statements
across jurisdictions. This Amendment Act implements a number of important reforms
to commercial tenancy laws in Western Australia.
The amendments incorporate new provisions into the CT Act which:
o prohibit misleading and deceptive conduct;
o require landlords to include additional information in the disclosure statements
provided to tenants;
o require landlords to give tenants notice of the date on which an option to
renew a lease is no longer exercisable;
o allow for use of a prescribed relocation clause in leases (without the need to
obtain the approval of the State Administrative Tribunal) and introduce new
requirements in relation relocation clauses in leases for long term tenants
(those who have been in occupation of premises for more than 5 years);
o prohibit landlords from passing on some of their legal fees to tenants; and
o assist in the preparation of more consistent and equitable rent reviews by
requiring landlords and tenants to supply valuers with relevant leasing
information.
Amendments have also been made to the Commercial Tenancy (Retail Shops)
Agreements Regulations 1985 (the CT Regulations) to support the implementation of
the Amendment Act. These amendments, contained in the Commercial Tenancy
(Retail Shops) Agreements Amendment Regulations (No.2) 2012 include a:
o definition of lettable area;
o prescribed relocation clause;
o revised tenant guide; and
o revised disclosure statement.
The focus of the CT Act is on retail business; however leases for some non-retail use
such as businesses in shopping centres and other specified businesses are also
covered by the CT Act. The Amendment Act applies to new retail shop leases
entered into on or after
1 January 2013 and extensions of existing retail shop leases. Parts of the 2011
Amendment Act also apply to existing retail shop leases.
The Amendment Act does not generally apply to existing leases entered into before 1
January 2013 that were not covered by the CT Act as it applied before 1 January
2013 or leases entered into under an option or agreement made before 1 January
2013 that were not covered by the CT Act as it applied before 1 January 2013.
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Part One: When does the CT Act apply?
The CT Act generally applies to leases for retail shops where the premises have a
lettable area of 1000 m2 or less that:
o are used for carrying on a business and that are in a retail shopping centre (a
group of premises, 5 or more of which are used for the sale of goods by retail
or for a specified business);
o are not in a retail shopping centre, but that are used (or predominantly used)
for the sale of goods by retail (this would include non-retail specific locations
such as a Light Industrial Area); or
o are used for conducting a ‘specified business’.
o If the premises sell goods, the RT Act applies. There are no other
exemptions or mitigating circumstances other than those described here.
The CT Act allows for some retail shops with a lettable area greater than 1000 m2 to
be prescribed as also being covered by the CT Act. As at 1 January 2013 no shops
had been prescribed.
Key Definitions in the legislation
The Amendment Act further clarified some of the key definitions included in section 3
of the CT Act. When leasing premises (either to retail businesses or within shopping
centres) landlords need to consider these definitions and determine whether the CT
Act applies. Some of these key definitions are outlined in the table opposite.
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Key terms and definitions
Key term Definition
A retail shop
means any premises:
situated in a retail shopping centre that are used wholly or
predominantly for the carrying on of a business; or
not situated in a retail shopping centre that are used wholly
or predominantly for the carrying on of a retail business.
A retail business
is -
a business that is wholly or predominantly involves the sale
of goods by retail; or
a specified business. (Refer to the definition below).
A retail
shopping centre
is -
a cluster of premises of which 5 or more are used for the
carrying on of retail business; and
all of which have the same head lessor or comprise lots on
a single strata plan.
A retail shop
lease -
means a lease that provides for the occupation of a retail shop
and
has a lettable area that is less than 1000 m2 (some
exclusions apply as outlined above);
is not held by a listed corporation or a subsidiary of such a
corporation; and
is not of a kind prescribed as exempt by the regulations (e.g.
ATMs and vending machines).
Lettable area means -
the surface floor area of the premises as designed and available for use in carrying on the business that is, or will be, carried on at the shop.
A specified
business is -
one of the following as prescribed by Regulation 3A of the
CT Regulations to be a specified business -
o drycleaning;
o hairdressing;
o beauty therapy and treatments;
o shoe repair (which may include key cutting and
engraving); or
o sale or rental of videos tapes, DVDs, electronic
games and other similar amusements.
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What is not considered lettable area?
Section 12(3) of the CT Act defines the total lettable area of a group of premises, or
part of a group of premises as the lettable areas of the premises that are retail shops
(or areas set aside for retail shops); and if any of the premises are not retail shops,
the lettable area of those premises as defined by the regulations.
The lettable area of a retail shop is defined in Regulation 6A of the CT Regulations
and must be calculated in the same, or substantially the same way, as other retail
shops in the same group of premises. It should be noted that the prescribed method
of calculating the lettable area of a retail shop is consistent with the Property Council
Guidelines that are generally used by the industry. There are some areas that are
excluded and are not considered to be part of the lettable area of a retail shop unless
a particular tenant has a right to the exclusive use of the area. These areas include
but are not limited to:
a) areas covered by awnings or similar coverings;
b) balconies;
c) areas under planter boxes;
d) terraces;
e) verandahs; and
f) public spaces, thoroughfares or vehicle access ways; and
g) any other areas not reasonably capable of being used in carrying on
business.
If an area is provided as a common facility in the building where a shop is situated,
unless a particular tenant has a right to exclusive use of the area, the following are
examples of areas that would not be considered part of the lettable area of the retail
shop.
a) access ways;
b) cupboards;
c) escalators, stairwells and landings;
d) fire hose reel cupboards; and
e) lift shafts and lobbies;
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When does the CT Act not apply?
The CT Act applies only to retail shop leases.
The definition of retail shop lease and regulation 3AB of the CT Regulations provide
for the following exclusions:
premises with a lettable area in excess of 1000m2;
leases to publicly listed companies (including those listed on a foreign stock
exchange that is a member of the World Federation of Exchanges and the
New Zealand Stock Exchange); and
leases for premises used only for the purpose of operating a vending machine
or ATM.
Certain petrol stations were specifically excluded from the previous definition of retail
shop lease by reference to a, now repealed, Commonwealth Act. A specific exclusion
is no longer included in the CT Act in relation to petrol stations. Landlords and their
agents must now consider whether a petrol station falls within the scope of the CT
Act on a case by case basis.
What is a retail shopping centre?
It is important for commercial agents and property managers to bear in mind that in
some instances it is necessary to consider the way other premises in a building are
used as this may determine whether the building is or isn’t classed as a retail
shopping centre. This, then, can impact on whether a business will be classed as a
retail shop. For example, a real estate agency is not defined as a retail business
because it provides a service rather than the sale of goods but, if the agency leases
premises in a shopping centre, it will be classed as a retail shop for the purposes of
the CT Act because it is a business within a retail shopping centre.
If premises are in a multi storey building, only those floors on which retail businesses
are situated are classed as part of the retail shopping centre (The Amendment Act
clarified this).
For example, providers of health care and insurance are often grouped together in
suburban shopping centres. Consider a four story major suburban shopping centre
that has only six premises including Medicare, HBF, Medibank Private, a podiatrist, a
dentist and a pathologist on the fourth floor. In this circumstance, the fourth floor
would not be considered part of the retail shopping centre because none of these
service providers meet the definition of a retail business. If, however, there was even
one retail business on this floor (i.e. a jeweller or a boutique), then all the businesses
on this floor would be considered retail shops.
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Part Two: Changes in the CT Act: New provisions
If the CT Act and the CT Regulations apply to a lease, a number of requirements and
obligations arise. It is essential that landlords, agents and property managers are
aware of and comply with these requirements.
In this part of the session we will be looking at the key provisions of the CT Act that
have changed as a result of the Amendment Act.
The amendments incorporate new provisions into the Act, which are summarised
below.
The Revised Disclosure Statement
As we know, the CT Act requires the landlord to provide the tenant with a disclosure
statement at least 7 days before entering into a retail shop lease. Since 1 January
2013, landlords have been required to provide additional information in the disclosure
statement provided to tenants.
The Amendment Act made changes in relation to the consequences for inadequate
disclosure. Section 6(1) of the CT Act provides that if the landlord or property
manager fails to provide a disclosure statement or provides one that is incomplete or
false or misleading, the tenant has a limited right to terminate the lease and/or seek
an order from the State Administrative Tribunal (the SAT). If a tenant under a retail
shop lease provides the landlord with a notice of termination under section 6(1), the
lease terminates 14 days after the notice was given.
Prior to the amendments, a tenant could terminate a lease within 60 days after it was
entered into for failure to provide a correct disclosure statement. For leases entered
into after 1 January 2013, the termination period is 6 months.
A disclosure statement given for the purposes of section 6(4) of the CT Act must be
in the prescribed form and summarise the key lease details. The disclosure
statement must also contain a statement notifying the tenant that he or she should
seek independent legal advice.
The disclosure statement and tenant guide are contained in the CT Regulations.
These documents have been amended to increase some of the disclosure
requirements for landlords and to improve the clarity and form of these documents.
In Part Three of this session we will be looking in more detail at the new disclosure
requirements that have been introduced by the Amendment Act. (See Part Three
and the prescribed form at the end of this workbook for more details).
A copy of the revised disclosure form is available to be downloaded from the
Commerce website. For training purposes, a copy of the disclosure statement is at
the back of this workbook.
http://www.commerce.wa.gov.au/ConsumerProtection/Content/Business/Commercial
_tenancy/Forms_specified_by_regulations.html
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The Revised Tenant Guide
The Tenant Guide sets out some of the tenant’s legal obligations and rights and in
accordance with section 6A of the CT Act and Regulation 9 (Form 4), it must be
provided to the tenant at the front of the lease to which it relates. A copy of the
Tenant Guide must also be attached to the disclosure statement.
The Tenant Guide has been updated and it is essential that landlords and their
agents use the correct version.
Failure to provide the Tenant Guide gives the tenant the right to terminate the lease
and or/seek an order for compensation. The tenant may terminate the lease within 60
days or by applying to the SAT at any time.
As the Tenant Guide is prescribed, it is essential that a copy be provided to the
tenant.
The right to a five year tenancy
Section 13 of CT Act creates a basic right for retail tenants in most circumstances to
be granted a minimum period of tenancy of five years. This in itself is not new,
however the CT Act has been amended to clarify that this right to a five year term
only applies in relation to leases of 6 months or more. The other requirements of the
CT Act such as disclosure still apply, even if the lease is less than 6 months.
If the term of the lease specified in the lease agreement is less than five years, the
CT Act provides that the lease will be taken to give the tenant an option to renew for
the balance of the five year period.
A landlord is prohibited from terminating a lease before the expiry of the guaranteed
five year term except in certain circumstances:
o due to the default of the tenant; or
o where it would be inconsistent with a head lease under which the
premises are held by the landlord for the retail shop to continue; or
o in accordance with a clause permitting earlier termination that is included
in the lease (either with the approval of the SAT or if such a clause is
permitted by the CT Act or Regulations).
As a result of the Amendment Act, certain termination clauses prescribed in the CT
Regulations can be included in a lease without the approval of the SAT. For
example, for leases entered into after 1 January 2013, a provision allowing for
termination of a lease on the bankruptcy or insolvency of a tenant or guarantor (of a
corporate tenant if the guarantor is a director or majority shareholder) may be
included in a lease without the approval of the SAT. The prescribed clause is set out
in the Regulations (Schedule 1, Item 1).
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Options to renew - notification requirements
As a result of the amendments, landlords are now required to give tenants notice of
the date on which an option to renew in no longer exercisable. There can be
significant consequences for a tenant if he or she fails to exercise an option to renew
a lease on time. For example, a landlord might assume that the tenant does not
intend to continue leasing the premises and may agree to lease the premises to a
new tenant.
The landlord is now required to give the tenant written notice of the expiry date for
any options to renew. The notice does not need to be given in a specific form, but it
must be provided to the tenant in writing.
This change to the CT Act applies to all retail shop leases, including those entered
into before 1 January 2013 and those leases where an option to renew arises under
the CT Act. (i.e. the statutory right to a five year term set out in section 13).
This notice must be received by the tenant between 6 months and 12 months before
the expiry date. If the landlord fails to provide the notice, for leases entered into after
1 January 2013, the option expiry date is taken to be six months after the landlord
notifies the tenant as required.
It is important for landlords, agents and property managers to be remember that if a
lease is extended because of the landlord’s failure to notify the tenant of the option
expiry date, the tenant may terminate the lease by providing notice in writing.
Regulation 4A makes specific provision for those circumstances where the landlord
cannot comply with the notice requirements because the lease is for a short term.
It is important that commercial agents and property managers look at all their leases
to determine which tenants have an option to renew and develop systems for
ensuring that appropriate notices are given.
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How to provide notice under section 13C?
The diagram below may be useful in determining the option expiry date and when
notice should be given.
How to identify the option expiry date:
Step Two: Determining when the section 13C notice should be given
Option expiry date Date on which notice must be given
If the option expiry date is after 1
January 2014….
Notice must be given between 6 and 12
months before the option expiry date.
If the option expiry date is within 6
months of the lease commencement…
The landlord must notify the tenant in
writing of the option expiry date before
the commencement of the lease.
Does the lease specifically provide the tenant with a contractual right to renew
the lease (that has not been exercised)?
Yes
Determine option expiry date based on
provisions of lease agreement
No
Term of lease has been 5 years or more
Section 13 does not apply - no statutory
option
Term of lease less than 5 years,
including any options
Lease entered into before 1 January
2013
If lease is more than 89 days - statutory option
applies - tenant is required to give notice 90 days before the end
of the tenancy.
Lease entered into after 1 January 2013
If tenant in possession for 6 months or more - statutory option applies - tenant is required to
give notice 30 days before the end of the
term.
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Relocation clauses
The CT Act has been amended to include certain provisions in relation to lease
clauses concerning the relocation of a tenant or the termination of a lease on the
redevelopment of a retail shop. They only apply to leases entered into on or after 1
January 2013.
The amendments mean that the parties no longer need to obtain the approval of the
SAT for relocation clauses allowing for early termination if the parties use the
prescribed relocation clause contained in the amended regulations (for the first five
years of the lease term).
If however the parties choose to use another relocation provision they will need to
apply to the SAT to have it approved. Notice of an application of this nature must be
given to the tenant. If a landlord wished to include the same relocation clause in a
number of leases, it is not necessary to make a separate application to the SAT for
each tenant if the same circumstances apply. The landlord need only make one
application to cover the relevant leases.
The prescribed relocation clause is set out in the Regulations (Schedule 1, Item 2). A
copy of the prescribed relocation clause is at the back of your workbook, however it
can also be downloaded from the Commerce website.
http://www.commerce.wa.gov.au/ConsumerProtection/PDF/CommercialTenancies/C
omTenRelocationClause.pdf
If the relocation is within the first 5 years of the lease, the clause must be included
in the lease in the prescribed form or the relocation must be approved by the SAT.
If relocation is required after the first 5 year period, the relocation clause must meet
the requirements of Section 14A or be approved by the SAT.
Legal fees
Since 1 January 2013, in accordance with section 14B of the CT Act, landlords have been prohibited from passing on some of their legal fees to tenants. These legal fees and expenses include those relating to:
the negotiation, preparation or execution of the lease, a renewal of the lease
or an extension of the lease;
obtaining the consent of a mortgagee to the lease; and
the landlord’s compliance with the CT Act.
Remember!
It is important to remember that a landlord can only require a tenant to relocate if the
lease contains a relocation clause that the tenant has agreed to and the terms of the
clause comply with the CT Act.
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This provision does not prevent a landlord from claiming the reasonable legal or other expenses incurred by the landlord in connection with an assignment of the lease or a sub-lease.
Rent reviews
As we know, rent review provisions must specify a single basis on which a review is
to be made (e.g. market rent or consumer price index).
The CT Act provides that “market rent” is the rent obtainable for the retail shop in a
free and open market if it were to be let on similar terms.
A provision cannot be included in the lease preventing the rent from falling below or
rising above a certain level (known as a ‘ratchet clauses’). Rent must be allowed to
rise or fall to a level supported by market evidence. For example, a lease clause
cannot provide that there is to be a market review of rental, but that the rent cannot
be decreased as a result of the review.
The Amendment Act introduces two new provisions which facilitate more accurate
and fairer valuations. Section 11 of the CT Act includes the following requirements.
1) Landlords are required to provide information to a valuer who has been
appointed to determine the market rent. So that valuer has all the necessary
information upon which to base the valuation, lease details in relation to other
premises in a shopping centre or a group of premises must be provided.
2) A market valuation of rent in relation to a retail shop is not to take into
account the value of the:
a. goodwill created by the tenant’s occupation;
b. tenant’s fixtures and fittings on the retail shop premises; or
c. works carried out to the retail shop premises at the expense of the
tenant.
The new provisions provide that for the purpose of assisting to determine the rent
payable as a result of a review, the landlord must provide information to a valuer
within 14 days of being given a written request to do so. The information requested
may include any of the following information about leases for retail shops in the same
building or retail shopping centre:
a) current rental for each lease;
b) rent free periods or any other form of incentive
c) recent or proposed variations of any lease;
d) outgoings for each lease; and/or
e) any other information prescribed for the purposes of this paragraph.
If the landlord fails to provide the requested information to the valuer in the required
timeframe without reasonable excuse, the valuer must within 7 days, advise the
tenant in writing of the landlord’s failure. The tenant may then apply in writing to the
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SAT for an order that the landlord comply with a request made under subsection 3B
to supply the information requested.
A person given information by a landlord for the purpose of a market review of rent
must not disclose that information except in circumstances specified in section 11A
of the CT Act.
Misleading and deceptive conduct
Prior to the recent amendments, the CT Act already included a prohibition on
unconscionable conduct. The CT Act has been amended to also provide that the
parties may not engage in misleading and deceptive conduct. The purpose of the
amendments is to ensure that the SAT has the jurisdiction to deal with all matters
arising in relation to a retail shop lease.
Misleading or deceptive conduct under the CT Act is conduct that is misleading or
deceptive to another party to the lease or that is likely to mislead or deceive another
party to the lease.
Below are some examples of conduct by the landlord that may be considered
misleading or deceptive.
All of the relevant information is NOT disclosed to a tenant in relation to a
lease. For example, a prospective tenant is told that the retail shopping
centre in which they have just signed a lease has 85% occupancy but
does not disclose that the three largest tenants that make up 50% of the
centre are vacating at the expiry of their leases.
A promise is made to a prospective tenant about the amount of foot traffic
that goes through a shopping mall on a given day that cannot be
substantiated and/or proves to be inaccurate or completely false.
Representations are made about the proposed features of a new
shopping centre for example the anchor tenant will be a large department
store and there are no reasonable grounds for this statement.
Misleading or deceptive conduct is not specifically defined in the CT Act however
there is a significant amount of case law on the subject. You will recall it is a
provision within the Australian Consumer Law (ACL) (section 18).
Remember!
The important points to remember with respect to this provision of the CT Act:
- the SAT will give regard to conduct that is likely to mislead or deceive as well
as conduct that actually misleads or deceives.
- Whether conduct is misleading or deceptive is a matter of fact for the SAT to
determine after taking into consideration all of the circumstances of a case.
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Part Three: The Disclosure Statement:
As we have already discussed, under the CT Act, a Disclosure Statement is to be
provided to a tenant in all circumstances where the CT Act applies and it must be
provided 7 days before the parties enter into a retail shop lease.
A Disclosure Statement given for the purposes of section 6(4) of the CT Act shall be
in the form of Form 1 (see the prescribed form at the end of this workbook for more
details).
The Disclosure Statement includes all the material matters that are relevant to the
lease of premises. This includes all the initial negotiations as well as all the matters
that the prescribed Disclosure Statement (Form 1) requires to be addressed. The
Disclosure Statement will include standard information such as the amount of rent,
length of the lease, and when and how rent will be reviewed. Other matters material
and specific to the lease that may be disclosed include proposed road changes, the
proximity of other relevant businesses and pedestrian flow to name just a few.
Any special conditions the tenant and landlord agree on should also be included in
the Disclosure Statement. For example, if there are rent free periods applicable when
the business commences, this should be included in the Disclosure Statement.
There is no requirement to provide a disclosure statement on:
the renewal of a retail shop lease under an option; or
the assignment of a retail shop lease.
A Disclosure Statement is not complete unless it is accompanied by:
a copy of the lease;
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).
If the landlord does not provide a disclosure statement or provides one that is
incomplete or incorrect the tenant may:
terminate the lease at any time up to 6 months after the lease was entered
into; and
seek an order for compensation from the State Administrative Tribunal for
any monetary loss suffered.
Under section 6(3) of the CT Act, the tenant is not able to terminate a lease on the
grounds that the disclosure statement is incomplete or incorrect, or that it contains
false or misleading information, if the landlord has acted honestly and reasonably
and ought reasonably be excused for the failure concerned and if the tenant is in
substantially as good a position as the tenant would have been had the statement
been complete or not contained the false or misleading information. These
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exceptions do not apply if the tenant has not been provided with a Disclosure
Statement in the first place.
The Disclosure Statement contains a statement notifying the tenant that they should
obtain independent legal advice before signing the disclosure statement and the
lease. Commercial property managers and agents should advise their clients to seek
independent legal advice on Disclosure Statements and leasing documentation.
It should be noted that item 32 of the disclosure statement makes provision for the
landlord to include details of any representations made by the tenant. As we have
discussed previously in this session, misleading and deceptive conduct provisions
apply to both landlords and tenants.
It is imperative that the tenant reads and understands the Disclosure Statement. The
tenant should also make sure that ALL statements, representations and promises,
upon which the tenant is relying in entering into the lease, are recorded on the
Disclosure Statement.
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Part Four: Disputes between landlord and tenant
If a dispute arises between a landlord and a tenant, in the first instance you should
discuss any areas of disagreement and attempt to find a workable solution that is
satisfactory to all parties. Sometimes however this is not possible. If an agreement
cannot be reached, the CT Act has a dispute resolution procedure that parties can
follow as detailed below.
Figure 1.2 - Dispute Resolution Procedures
Source: Common Questions about the Commercial Tenancy Act 4th Ed, page 47 – Small Business
Development Corporation publication, 2013.
In most cases a retail tenancy dispute with be considered by the Small Business
Commissioner (the SB Commissioner).
Are you a landlord or tenant, or former
landlord or tenant, of a retail shop lease?
Note: matters requiring an
urgent order that someone
do something or refrain
from doing something may
proceed directly to the
SAT.
YES
You may make a request to the Small
Business Commissioner to:
Provide assistance to attempt to resolve
the matter.
Undertake alternative dispute resolution
to resolve the matter.
HOWEVER – IF:
the matter is unlikely to be resolved with the assistance of alternative dispute resolution; or
it would not be reasonable to commence alternative dispute resolution; or
alternative dispute resolution has failed,
you, or another party to the proceedings, may request that the Small Business Commissioner provide
a certificate permitting the matter to proceed to the State Administrative Tribunal for determination.
State Administrative Tribunal (SAT)
20
What is Alternative Dispute Resolution?
Alternative dispute resolution is a relatively low cost and convenient way that parties
can seek to resolve a dispute without having to go to a court or tribunal. It aims to
achieve a solution to the dispute that is practical, acceptable to all parties and is
binding.
The SB Commissioner is able to provide informal assistance and guidance to the
parties in a dispute before any dispute resolution is undertaken. If however the
parties are not able to resolve their dispute through informal assistance and
guidance, the SB Commissioner may decide to commence the more formal
alternative dispute resolution in an attempt to resolve the dispute.
The SB Commissioner may appoint a facilitator (mediator) with appropriate skills and
experience to undertake the alternative dispute resolution and assist the parties to
achieve a mutually acceptable and practical solution to their dispute. One or both of
the parties may have legal representation during the dispute resolution process
however if it is appropriate, the facilitator may meet with the parties without legal
representation.
If a matter cannot be resolved through the Small Business Commissioner, it may
have to be referred to the State Administrative Tribunal (SAT) for determination. The
SAT is an independent body that deals with a broad range of administrative,
commercial and personal matters including retail shop lease disputes. In these
circumstances, the SB Commissioner will issue a certificate on the request of a party
to a dispute so that the matter can proceed to the SAT.
The certificate issued by the SB Commissioner allows the matter to proceed to the
SAT. There are some matters for which the SAT will not accept an application
without a certificate from the SB Commissioner.
What is the role of the SB Commissioner?
The SB Commissioner’s role is to assist tenants and landlords to resolve
complaints and disputes related to retail tenancies. The SB Commissioner can:
o provide assistance to attempt to resolve the matter; or
o undertake alternative dispute resolution in respect of the matter.
The SB Commissioner provides a range of services in helping the parties resolve
their dispute including advice, information and guidance. The relevant parties may
be brought together informally in an attempt to resolve the dispute or more formally
through an impartial alternative dispute resolution process.
It is important to note that the SB Commissioner cannot make determinations in
relation to a retail tenancy dispute. This is the role of the SAT and the courts.
21
There are also some matters that may proceed directly to the SAT without the need
for a certificate. These matters include those requiring an urgent order that someone
do something or refrain from doing something or matters that are administrative in
nature (e.g. approval of a lease cause).
The following are examples of matters that can proceed directly to the SAT, an
application seeking:
o an interim order pending final determination of an unconscionable conduct
claim;
o approval of a lease term providing for termination earlier than the term
required under the CT Act; or
o an order that the statutory option of renewal under the CT Act will not apply.
Regulation 10 provides a description of the types of matters that can proceed directly
to the SAT. This detailed list is provided at Appendix A.
If a dispute arises that is unable to be resolved between the landlord and the tenant,
either party can initiate action before the SAT by making an application.
22
Bibliography
Government Publications
Common Questions about the Commercial Tenancy Act: 4th
Edition - for leases entered
into on or after 1 January 2013 (advice for landlords and tenants)
Small Business Development Corporation
www.sbdc.wa.gov.au
Commercial Tenancy – information for landlords
Department of Commerce
www.commerce.wa.gov.au
Commercial Tenancy – information for landlords
Department of Commerce
www.commerce.wa.gov.au
23
Resources
The following resources will prove useful in relation to the CT Act, consumer protection and commercial tenancy dispute resolution.
Department of Commerce
An overview of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (and copies of the prescribed relocation clause; revised tenant guide; and revised disclosure statement and other resources) can be found at the Department of Commerce web site [Navigate to Home > Consumer Protection > Business > Commercial tenancy and retail shops > Commercial Tenancy (Retail Shops) Agreements Act 1985]: http://www.commerce.wa.gov.au/ConsumerProtection/Content/Business/Commercial_tenancy/Retail_shop_leases_in_WA.html
Small Business Development Corporation
The Small Business Development Corporation provides small businesses with information, support and resources concerning the leasing of commercial premises. [Navigate to Business Topics > Premises and Location > Leasing Commercial Premises] http://www.smallbusiness.wa.gov.au/leasing-commercial-premises-3/ Retail shop lease disputes can be resolved through guided resolution via the Alternative Dispute Resolution service of the Small Business Development Corporation. [Navigate to Business in WA > Alternative Dispute Resolution http://www.smallbusiness.wa.gov.au/alternative-dispute-resolution/
State Law Publisher
Current copies of the Commercial Tenancy (Retail Shops) Agreements Act 1985 and Commercial Tenancy (Retail Shops) Agreements Regulations 1985 can be found at the State Law Publisher’s web site. [Navigate to Home > Consolidated Act > Commercial Tenancy (Retail Shops) Agreements Act 1985] http://www.slp.wa.gov.au/legislation/statutes.nsf/main_mrtitle_165_homepage.html
State Administrative Tribunal
Some matters may require an application to the State Administrative Tribunal (SAT). SAT hears a range of applications under the Commercial Tenancy (Retail Shops) Agreements Act 1985. Some of these matters can come straight to SAT, while others require a certificate from the Commissioner of the Small Business Development Corporation. Details of the Applications that may be brought directly to SAT under the Act can be found at the SAT web site [Navigate to Home > Types of matters > Commercial Tenancy]
http://www.sat.justice.wa.gov.au/C/commercial_tenancy.aspx
24
Appendix A – Regulation 10 of the CT Regulations
Matters prescribed (Act s. 25D(2))
Section 25D(1) of the CT Act does not apply in respect of the matters set out in the
table below.
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.
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.
25
Item Section of Act Description of matter
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.
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.
[Regulation 10 inserted in Gazette 23 Mar 2012 p. 1365-6; amended in Gazette
30 Nov 2012 p. 5837-9.]
26
Appendix B – Recap on Unconscionable Conduct
Section 15C of the CT Act prohibits a landlord or tenant from engaging in conduct
that in unconscionable and provides that a landlord or tenant (or former landlord or
tenant) who suffers loss or damage because of such unconscionable conduct may
apply to the SAT for an order for compensation or other appropriate relief.
Section 15C of the CT Act has not changed as a result of the amendments. As the
focus of this CPD session is on changed to the legislation and specifically the
disclosure statement, unconscionable conduct is not specifically covered as part of
this training session. However, the case study questions and knowledge check #4 do
address this provision.
Consider the revision points on unconscionable conduct with respect to commercial
tenancies below to assist you in completing the questions in this workbook.
Section 15C(2) outlines the matters the SAT may have regard to for the purpose of
determining whether a landlord has engaged in unconscionable conduct in relation to
a commercial lease.
(a) the relative strengths of the bargaining positions of the landlord and
tenant;
(b) whether the tenant was required to comply with conditions that were
not reasonably necessary for the protection of the legitimate
interests of the landlord;
(c) whether the tenant was able to understand any documents relating
to the lease; and
(d) whether any undue influence or pressure was exerted on, or any
unfair tactics were used against, the tenant by the landlord;
(e) the amount for which, and the circumstances under which, the
tenant could have acquired an identical or equivalent lease from a
person other than the landlord;
(f) the extent to which the landlord’s conduct towards the tenant was
consistent with their conduct in similar transactions with other
tenants;
(g) the requirements of any applicable industry code; and
(h) the requirements of any other industry code, if the tenant acted on
the reasonable belief that the landlord would comply with that code;
(i) the extent to which the landlord unreasonably failed to disclose to
the tenant —
(i) any intended conduct of the landlord that might affect
the interests of the tenant; and
(ii) any risks to the tenant arising from the landlord’s
intended conduct that are risks that the landlord should
have foreseen would not be apparent to the tenant;
(j) the extent to which the landlord was willing to negotiate the terms
and conditions of any lease with the tenant; and
27
(k) the extent to which the landlord acted in good faith;
(l) the extent to which the landlord was not reasonably willing to
negotiate the rent under the lease; and
(m) the extent to which the landlord unreasonably used information
about the turnover of the tenant’s or a previous tenant’s business to
negotiate the rent; and
(n) the extent to which the landlord required the tenant to incur
unreasonable refurbishment or fit out costs.
28
Appendix C - Extracts from the Commercial Tenancy (Retail
Shops) Agreements Act 1985
29
6. Disclosure statement, tenant’s rights if not given by landlord etc.
(1) Where a retail shop lease is entered into and the tenant has not, at least 7 days
before the entering into of the lease, been given a disclosure statement in
accordance with subsection (4) or the disclosure statement given is incomplete or
contains false or misleading information, the tenant may, in addition to exercising
any other right, do either or both of the following —
(a) within 6 months after the lease was entered into give to the landlord written
notice of termination of the lease, unless subsection (3) prevents
termination;
(b) apply in writing to the Tribunal for an order that the landlord pay
compensation to the tenant in respect of pecuniary loss suffered by the
tenant as a result of
(i) the omission of the landlord to give a disclosure statement in
accordance with subsection(4); or
(ii) the giving of an incomplete disclosure statement by the landlord; or
(iii) the giving of false or misleading information by the landlord in the
disclosure statement.
(2) Where the tenant under a retail shop lease gives to the landlord a notice of
termination under subsection (1) the lease terminates upon the expiry of a period of
14 days after the notice was given.
(3) A tenant cannot terminate a lease under this section on the ground that the tenant
has been given a disclosure statement that is incomplete or contains false or
misleading information if —
(a) the landlord has acted honestly and reasonably and ought reasonably to be
excused for the failure concerned; and
(b) the tenant is in substantially as good a position as the tenant would have
been if the statement had been complete or had not contained the false or
misleading information.
(4) A disclosure statement given for the purposes of this section shall be in the
prescribed form duly completed and signed by or on behalf of the landlord and the
tenant and shall contain a statement notifying the tenant that he should seek
independent legal advice.
(5) Where the tenant under a retail shop lease (in this subsection referred to as the
outgoing tenant) assigns the lease to another person (in this subsection referred
to as the incoming tenant), nothing in this section gives to the incoming tenant a
right to terminate the lease that the outgoing tenant would not have had if he had
continued as the tenant under the lease.
(6) A disclosure statement is not required to be given —
(a) on the renewal of a retail shop lease under an option (including the option
arising by reason of section 13(1)); or
(b) on the assignment of a retail shop lease.
[Section 6 amended by No. 48 of 1990 s. 5; No. 59 of 2011 s. 7.]
6A. Tenant guide, tenant’s rights if not in lease etc.
(1) Where a retail shop lease is entered into and the retail shop lease does
not incorporate a tenant guide in accordance with subsection (4), the
30
tenant may, in addition to exercising any other right, do either or both of the following
—
(a) within 60 days after the lease was entered into, give to the landlord
written notice of termination of the lease;
(b) apply in writing to the Tribunal for an order that the landlord pay
compensation to the tenant in respect of pecuniary loss suffered by the
tenant as a result of the failure to incorporate the tenant guide in the
retail shop lease in accordance with subsection (4).
(2) Where the tenant under a retail shop lease gives to the landlord a notice
of termination under subsection (1) the lease terminates upon the
expiry of a period of 14 days after the notice was given.
(3) In addition to exercising the tenant’s rights under subsection (1)(b), the
tenant may, after the expiry of the period referred to in subsection
(1)(a), apply in writing to the Tribunal for an order that the retail shop
lease be terminated.
(4) The tenant guide shall be in the prescribed form and located in the
prescribed position in the retail shop lease.
(5) Where the tenant under a retail shop lease (in this subsection referred
to as the outgoing tenant) assigns the lease to another person (in this
subsection referred to as the incoming tenant), nothing in this section
gives to the incoming tenant a right to terminate the lease that the
outgoing tenant would not have had if he or she had continued as the
tenant under the lease.
(6) The tenant guide is not required to be included —
(a) on the renewal of a retail shop lease under an option (including the
option arising by reason of section 13(1)); or
(b) on the assignment of a retail shop lease.
[Section 6A inserted by No. 66 of 1998 s. 5.]
31
11. Rent review, provisions for in lease and conduct of etc.
(1) A provision in a retail shop lease for review of the amount of rent payable
under the lease during the currency of the lease is void unless the lease
specifies, in respect of each occasion on which the review is to be made, a
single basis on which the review is to be made.
(2) If a retail shop lease provides for the review during the currency of the
retail shop lease of the amount of rent payable under the retail shop lease
having regard to the market rent of the retail shop concerned —
(a) that market rent shall, for that purpose, be taken to be the rent obtainable at
the time of that review in a free and open market as if, all the relevant factors,
matters or variables used in proper land valuation practice having been taken
into account, that retail shop were vacant and to let on similar terms as are
contained in the current retail shop lease, and is not to take into account the
value of —
(i) the goodwill of the business carried on in the retail shop; or
(ii) any stock, fixtures or fittings in the retail shop that are not the property
of the landlord; or
(iii) any structural improvement, or alteration, of the retail shop carried out,
or paid for, by the current tenant;
and
(b) unless specific provision is made in the retail shop lease for the time at
which a review may be initiated, a party to the retail shop lease may not more
than 3 months before the date on which that review is to be carried out and
not more than 6 months after that date, initiate the review by notice in writing
served on the other party to the retail shop lease; and
(c) a provision in the retail shop lease purporting to preclude the increase
or reduction of that market rent or to limit the extent to which that
market rent may be increased or reduced is void.
(2a) A provision in a retail shop lease purporting to preclude the tenant
from voluntarily disclosing the rent under the lease is void.
(3) A retail shop lease that provides for review of the amount of rent
payable during the currency of the lease shall be taken to provide that
where the parties do not agree on the rent payable as a result of the
review, the question shall be resolved, subject to subsection (5), by any of
the following —
(a) a person licensed under the Land Valuer’s Licensing Act 1978 agreed
to by each of the parties;
(ba) a person licensed under that Act and nominated, at the request of each
of the parties, by the Small Business Commissioner;
(b) 2 persons licensed under that Act, one of whom is appointed by the
landlord and one of whom is appointed by the tenant.
32
(3a) If the parties to a retail shop lease referred to in subsection (3) do not
agree on the rent payable as a result of the review concerned, the rent
payable immediately before that review shall not be increased or reduced
before the question is resolved or determined under this section, but nothing
in this subsection prevents any increase or reduction in rent which takes
place after that resolution or determination from being due and payable with
effect from the date of that review.
(3B) A landlord under a retail shop lease must, to assist in determining the rent
payable as a result of the review, within 14 days after being given a written
request to do so by a person who acts under subsection (3), give that person
such relevant information as is requested, including any of the following
information, about leases for retail shops in the same building or retail
shopping centre —
(a) current rental for each lease;
(b) rent free periods or any other form of incentive;
(c) recent or proposed variations of any lease;
(d) outgoings for each lease;
(e) any other information prescribed for the purposes of this
paragraph.
(3C) If a landlord fails to comply with a request made under subsection (3B)
without reasonable excuse —
(a) the person who made the request must, within 7 days after the landlord
has failed to comply with the request, give to the tenant written notice of the
landlord’s failure; and
(b) the tenant may apply in writing to the Tribunal for an order that the
landlord comply with a request made under subsection (3B) to supply the
information requested.
(4) A person who acts under subsection (3) shall, at the request of and on
payment of the required fee by a party to the lease, provide reasons for his
decision in writing to that party.
(5) Notwithstanding subsection (3), a party to a retail shop lease may refer
to the Tribunal for determination a question as to the rent payable as a
result of the review by the parties where —
(a) the persons acting under subsection (3)(b) fail to reach an agreement
on the rent to be paid; or
(b) a person has not acted under subsection (3) and the leave of the
Tribunal has been obtained,
but otherwise such a question shall not be referred to the Tribunal.
[(6), (7) deleted]
33
(8) In determining a question under subsection (5) the Tribunal, after
considering all the circumstances of the case, may determine that any
increase or reduction in rent payable as a result of the determination of the
Tribunal under that subsection is payable over such period as the Tribunal
thinks fit.
[Section 11 amended by No. 48 of 1990 s. 8; No. 66 of 1998 s. 7; No. 55 of
2004 s. 120; No. 20 of 2011 s. 31; No. 59 of 2011 s. 8.]
13. Tenant entitled to at least 5 year term in some cases etc.
(1) Subject to this section, where under a retail shop lease —
(a) the term of the lease (in this section called the current term) is
more than 6 months but less than 5 years; and
(b) the current term plus any term (in this section called the option
term) that may be obtained by the tenant by way of an option to
renew the lease totals more than 6 months but less than 5 years,
the lease shall be taken to give the tenant an option to renew the lease
for a term commencing immediately after the expiry of the current
term and the option term, if any, and ending on a day specified by the
tenant that is not later than 5 years after the day of commencement of
the current term.
(2A) For the purposes of subsection (1), a lease for a term of more than 6
months includes a tenancy where the tenant has been continuously in
possession of the retail shop for more than 6 months as a result of
either or both of the following —
(a) the lease being renewed (one or more times);
(b) the lease being continued.
(2) Subsection (1) does not apply to a retail shop lease in respect of
premises —
(a) if the tenant occupied the premises as a retail shop for a period,
including any time prior to the commencement of this Act,
ending immediately before the commencement of the current
term and that period plus the current term and the option term,
if any, totals 5 years or longer; or
(b) if the landlord holds the premises under a lease (in this section
and section 13A called the head lease) and renewal of the retail
shop lease or, in the case of a retail shop lease containing an
option to renew, renewal for a term longer than the option term,
would be inconsistent with the head lease.
(3) The option that a lease is, by reason of subsection (1), taken to give a
tenant —
(a) is exercisable, by notice in writing in the prescribed form given
to the landlord, not less than 30 days before the expiry of the
current term, or the option term, as the case may require or
34
during such other period before the expiry of the current term,
or the option term, as the case may require as the Tribunal,
having regard to the term of the lease or such other
circumstances as it considers relevant, approves in a particular
case; but
(b) is not exercisable while there exists any unremedied default
under the lease on the part of the tenant notice of which has
been given by the landlord, in writing, to the tenant.
(3a) Notwithstanding subsection (3), where a party to a retail shop lease has
referred to the Tribunal a question as to whether there is an
unremedied default under the lease by the tenant (being a default of
which written notice has been given by the landlord to the tenant), the
Tribunal, after considering all the circumstances of the case, may
determine, by written notice to each party, that the tenant is not
required to exercise the option referred to in subsection (3) before the
expiry of the current term or the option term, as the case may be, if the
question referred to the Tribunal has not been decided by the time of
such expiry; and where the Tribunal makes that determination and the
question is not decided by the time of such expiry, the current term or
the option term, as the case requires, is deemed to be extended —
(a) if the question is decided in favour of the landlord, to the time
when the question is decided; or
(b) if the question is decided in favour of the tenant, to a period
ending 7 days after the tenant receives notification of the
decision,
and where paragraph (b) applies, the tenant may exercise the option referred to in
subsection (3) during the period designated in that paragraph.
(3b) Where the current term or the option term of a lease has been extended
under subsection (3a)(b) and the tenant exercises the option referred to in
subsection (3) during the period of the extension, the lease is deemed to
have been renewed for a term commencing immediately after the time when
the current term or the option term, as the case may be, would have expired
if it had not been so extended.
(4) Where —
(a) the landlord under a retail shop lease holds the premises
concerned under a head lease; and
(b) it would be inconsistent with the head lease for the retail shop
lease to continue until the day provided for by subsection (1);
and
(c) that inconsistency is not, by reason of section 13A(1), removed,
the day that may be specified under subsection (1) as the day until
which the retail shop lease is to be renewed shall be not later than the
last day until which the retail shop lease can lawfully continue.
35
(5) The terms and conditions upon which a lease is renewable under an
option that a lease is, by reason of subsection (1), taken to give a tenant are
the same as those upon which the lease is held at the time notice is given of
the exercise of that option, except that —
(a) the tenant does not have any further option under subsection (1)
to renew the lease; and
(b) where the lease does not provide for a review of rental, the
lease shall be taken to provide that the rental payable during the
term for which the lease is renewed shall be determined having
regard to the market rent of the premises ascertained as
provided in section 11(2).
(6) The landlord under a retail shop lease is not entitled to determine the
lease —
(aa) if the lease is a lease referred to in subsection (1), before the
day on which the term that may be obtained by the tenant under
that subsection expires; or
(ab) if the lease is a lease the current term of which, or the current
term plus the option term, is 5 years or longer, before the day
that is 5 years after the day on which the current term
commenced,
except —
(a) by reason of default by the tenant or failure of the tenant to
remedy any such default in accordance with the lease; or
(b) by reason that —
(i) it would be inconsistent with a head lease under which
the premises are held by the landlord for the retail shop
lease to continue; and
(ii) that inconsistency is not, by reason of section 13A(1),
removed;
or
(c) under and in accordance with a provision that is included in the
lease with the approval in writing of the Tribunal given under
subsection (7) or (7a); or
(da) under and in accordance with a provision of the lease that is the
same, or substantially the same, as a provision prescribed for
the purposes of this section; or
(d) where the Tribunal has granted an application by the tenant
under subsection (7b), in relation to a lease referred to in
paragraph (aa).
(7) The Tribunal may, upon application made to it by the landlord notice
of which has been given to the tenant, approve of the inclusion in a
36
retail shop lease of a provision under which the landlord may
determine the lease (other than under subsection (6)(a), (b) or (da))
before the day set out in subsection (6)(aa) or (ab), as is relevant, if it is
satisfied that special circumstances exist by reason of which such
approval ought to be given.
(7a) A landlord in relation to a retail shopping centre may make an application
under subsection (7) as to any number of retail shop leases in respect of that
centre where he is of the opinion that the same special circumstances exist in
relation to each lease the subject of his application, and the Tribunal may
exercise its powers under that subsection accordingly.
(7b) The Tribunal may, on application in writing by a tenant or prospective
tenant, order that an option of renewal does not arise under subsection (1), if
it is satisfied that —
(a) the application was made by the tenant or prospective tenant of
his own free will; and
(b) the circumstances of the case warrant the granting of the
application.
(8) Where the tenant under a retail shop lease assigns the lease, the term to
which the assignee becomes entitled is the balance of the term of the
assigning tenant, determined as provided by the lease including, where
applicable, the option arising under subsection (1), as at the date of the
assignment.
(9) Notwithstanding any other written law, the right of a tenant under
subsection (1) is not affected by any assignment or other disposition of
the reversion of the premises to which the lease relates.
(10) For the purposes of this section and notwithstanding section 68 of the
Transfer of Land Act 1893, an option in a retail shop lease for the
tenant to renew the lease is exercisable against any person with a
reversionary interest in the premises the subject of the lease whether or
not the lease is registered or protected by caveat.
[Section 13 amended by No. 49 of 1985 s. 4; No. 48 of 1990 s. 10; No. 55 of
2004 s. 124; No. 59 of 2011 s. 11.]
14A. Relocation of tenant’s business, provision in lease for is void in some cases
(1) A provision of a retail shop lease about the relocation of the tenant’s
business is void unless —
(a) it is in the form prescribed for the purposes of this section; or
(b) it is in a form approved by the Tribunal under subsection (3); or
(c) if 5 years of the term of the lease (including any period during the
extension of the term under an option to renew) have already expired,
it is in accordance with subsection (2).
(2) A provision of a retail shop lease about the relocation of the tenant’s
business is in accordance with this subsection if it contains provisions
to the following effect —
37
(a) the tenant’s business cannot be required to be relocated unless the
landlord has given the tenant at least 6 months written notice of
relocation (a relocation notice);
(b) the relocation notice is to give details of an alternative retail shop (the
alternative shop) to be made available to the tenant, and if the existing
retail shop is situated in a retail shopping centre, the alternative shop is
to be situated in that shopping centre;
(c) the tenant is to be offered a new lease of the alternative shop —
(i) on the same, or better, terms and conditions as the existing lease except
that the term of the new lease is to be no shorter than the remainder of
the term of the existing lease; and
(ii) the rent for the alternative shop is to be no more than the rent for the
existing retail shop, adjusted to take into account any difference in the
commercial values of the existing retail shop and the alternative shop
at the time of relocation;
(d) the landlord is to pay the tenant’s reasonable costs of the relocation,
including but not limited to —
(i) costs incurred by the tenant in dismantling fittings, equipment or
services; and
(ii) costs incurred by the tenant in replacing, re installing or modifying
finishes, fittings, equipment or services to the standard existing in the
existing retail shop immediately before the relocation, but only to the
extent that they are reasonably required in the alternative shop; and
(iii) packaging and removal costs incurred by the tenant; and
(iv) legal costs incurred by the tenant;
(e) if the landlord does not offer the tenant a new lease of an alternative
retail shop then the landlord is liable to pay to the tenant such
reasonable compensation as is agreed in writing between the parties, or
determined by the Tribunal.
(3) The Tribunal may, on application made to it by the landlord, notice of
which has been given to the tenant, approve of the inclusion in a retail
shop lease of another form of relocation provision under subsection
(1)(b) if the Tribunal is satisfied that special circumstances exist by
reason of which such approval ought to be given.
(4) A landlord in relation to a retail shopping centre may make an
application under subsection (3) as to any number of retail shop leases
in respect of that centre where the landlord is of the opinion that the
same special circumstances exist in relation to each lease the subject of the
application, and the Tribunal may exercise its powers under that
subsection accordingly.
[Section 14A inserted by No. 59 of 2011 s. 14.]
38
14B. Landlord’s legal costs of lease etc. not claimable from tenant
(1) A landlord under a retail shop lease is not able to claim from any person
(including the tenant) the landlord’s legal or other expenses relating to —
(a) the negotiation, preparation or execution of —
(i) the lease; or
(ii) a renewal of the lease; or
(iii) an extension of the lease;
or
(b) obtaining the consent of a mortgagee to the lease; or
(c) the landlord’s compliance with this Act.
(2) Subsection (1) does not prevent the landlord from claiming the reasonable
legal or other expenses incurred by the landlord in connection with an
assignment of the lease or a sub-lease, including investigating a proposed
assignee or sub-lessee and obtaining any necessary consents to the
assignment or sub-lease.
[Section 14B inserted by No. 59 of 2011 s. 14.]
15C. Landlord not to engage in unconscionable conduct
(1) A landlord under a retail shop lease shall not, in connection with the lease,
engage in conduct that is, in all the circumstances, unconscionable.
(2) Without in any way limiting the matters to which the Tribunal may have
regard for the purpose of determining whether a landlord has contravened
subsection (1), the Tribunal may have regard to —
(a) the relative strengths of the bargaining positions of the landlord and
tenant; and
(b) whether, as a result of conduct engaged in by the landlord, the
tenant was required to comply with conditions that were not
reasonably necessary for the protection of the legitimate interests of
the landlord; and
(c) whether the tenant was able to understand any documents
relating to the lease; and
(d) whether any undue influence or pressure was exerted on, or any
unfair tactics were used against, the tenant (or a person acting on
behalf of the tenant) by the landlord or a person acting on behalf of
the landlord in relation to the lease; and
(e) the amount for which, and the circumstances under which, the
tenant could have acquired an identical or equivalent lease from a
person other than the landlord; and
(f) the extent to which the landlord’s conduct towards the tenant was
consistent with the landlord’s conduct in similar transactions between
the landlord and other similar tenants; and
(g) the requirements of any applicable industry code; and
(h) the requirements of any other industry code, if the tenant acted on
the reasonable belief that the landlord would comply with that code;
and
39
(i) the extent to which the landlord unreasonably failed to
disclose to the tenant —
(i) any intended conduct of the landlord that might affect the
interests of the tenant; and
(ii) any risks to the tenant arising from the landlord’s intended
conduct that are risks that the landlord should have foreseen
would not be apparent to the tenant;
and
(j) the extent to which the landlord was willing to negotiate the terms
and conditions of any lease with the tenant; and
(k) the extent to which the landlord acted in good faith; and
(l) the extent to which the landlord was not reasonably willing to
negotiate the rent under the lease; and
(m) the extent to which the landlord unreasonably used information about
the turnover of the tenant’s or a previous tenant’s business to
negotiate the rent; and
(n) the extent to which the landlord required the tenant to incur
unreasonable refurbishment or fit out costs.
(3) In considering whether a landlord has contravened subsection (1), the
Tribunal —
(a) is not to have regard to any circumstances that were not reasonably
foreseeable at the time of the alleged contravention; and
(b) may have regard to circumstances existing before the
commencement but not to conduct engaged in before the
commencement.
[Section 15C inserted by No. 47 of 2006 s. 23.]
15D. Tenant not to engage in unconscionable conduct
(1) A tenant under a retail shop lease shall not, in connection with the lease,
engage in conduct that is, in all the circumstances, unconscionable.
(2) Without in any way limiting the matters to which the Tribunal may have
regard for the purpose of determining whether a tenant has contravened
subsection (1), the Tribunal may have regard to —
(a) the relative strengths of the bargaining positions of the landlord and
tenant; and
(b) whether, as a result of conduct engaged in by the tenant, the landlord
was required to comply with conditions that were not reasonably
necessary for the protection of the legitimate interests of the tenant;
and
(c) whether the landlord was able to understand any documents relating
to the lease; and
(d) whether any undue influence or pressure was exerted on, or any
unfair tactics were used against, the landlord (or a person acting on
behalf of the landlord) by the tenant or a person acting on behalf of
the tenant in relation to the lease; and
40
(e) the amount for which, and the circumstances under which, the
landlord could have granted an identical or equivalent lease to a
person other than the tenant; and
(f) the extent to which the tenant’s conduct towards the landlord was
consistent with the tenant’s conduct in similar transactions between
the tenant and other similar landlords; and
(g) the requirements of any applicable industry code; and
(h) the requirements of any other industry code, if the landlord
acted on the reasonable belief that the tenant would comply with that
code; and
(i) the extent to which the tenant unreasonably failed to disclose to the
landlord —
(i) any intended conduct of the tenant that might affect the
interests of the landlord; and
(ii) any risks to the landlord arising from the tenant’s
intended conduct that are risks that the tenant should
have foreseen would not be apparent to the landlord;
and
(j) the extent to which the tenant was willing to negotiate the terms and
conditions of any lease with the landlord; and
(k) the extent to which the tenant acted in good faith; and
(l) the extent to which the tenant was not reasonably willing to
negotiate the rent under the lease; and
(m) the extent to which the tenant unreasonably used information
about the turnover of the tenant’s or a previous tenant’s business to
negotiate the rent; and
(n) the extent to which the tenant was willing to incur reasonable
refurbishment or fit out costs.
(3) In considering whether a tenant has contravened subsection (1), the
Tribunal —
(a) is not to have regard to any circumstances that were not reasonably
foreseeable at the time of the alleged contravention; and
(b) may have regard to circumstances existing before the
commencement but not to conduct engaged in before the
commencement.
[Section 15D inserted by No. 47 of 2006 s. 23.]
15E. Conduct that is not unconscionable for s. 15C and 15D
A person is not to be taken for the purposes of section 15C or 15D to engage in
unconscionable conduct in connection with a retail shop lease only because —
(a) the person institutes legal proceedings in relation to the lease or
refers a dispute or claim in relation to the lease to arbitration; or
(b) the person fails to renew the lease or enter into a new lease; or
(c) the person does not agree to having an independent valuation of
current market rent carried out.
[Section 15E inserted by No. 47 of 2006 s. 23.]
41
15F. SAT’s powers as to unconscionable conduct
(1) A landlord or tenant, or former landlord or tenant, under a retail shop
lease or former retail shop lease who suffers, or is likely to suffer, loss or
damage because of unconscionable conduct of another person that
contravenes section 15C or 15D may apply in writing to the Tribunal for an
order that the other person pay compensation in respect of the loss or
damage, or for other appropriate relief.
(2) An unconscionable conduct application is required to be lodged within
6 years after the alleged unconscionable conduct occurred.
(3) Without limiting section 26, in proceedings in relation to an unconscionable
conduct application, the Tribunal may make any one or more of the following
orders that it considers appropriate —
(a) an order that a party to the proceedings pay money to a specified
person, whether by way of debt, damages or restitution, or refund
any money paid by a specified person;
(b) an order that a specified amount of money is not due or owing by a
party to the proceedings to a specified person, or that a party to the
proceedings is not entitled to a refund of any money paid to another
party to the proceedings.
(4) The Tribunal may make any ancillary orders that it considers necessary for
the purpose of enabling an order under this section to have full effect.
(5) The Tribunal may impose any conditions that it considers appropriate
when making an order under this section.
(6) The Tribunal may make an interim order under this section pending final
determination of an unconscionable conduct application, if the Tribunal
considers it appropriate to do so.
(7) In this section —
specified, in relation to an order, means specified in the order.
[Section 15F inserted by No. 47 of 2006 s. 23; amended by No. 59 of 2011 s. 19.]
Division 2 — Misleading or deceptive conduct
[Heading inserted by No. 59 of 2011 s. 20.]
16A. Term used: misleading or deceptive conduct
In this Division —
misleading or deceptive conduct means conduct to which section 16C applies.
[Section 16A inserted by No. 59 of 2011 s. 20.]
16B. Application of Division
(1) In addition to a retail shop lease to which or in relation to which this
Division would otherwise apply, this Division also applies to or in relation to a
retail shop lease that was entered into —
(a) before the relevant day; or
42
(b) pursuant to an option granted or agreement made before the
relevant day,
if this Act would have applied to the lease had it been entered into on or after
that day.
(2) In subsection (1) —
relevant day has the meaning given to that term by section 4(3).
(3) This Division does not apply to conduct that occurred before the
commencement of the Commercial Tenancy (Retail Shops) Agreements
Amendment Act 2011 section 20 1.
(4) Nothing in this Division affects the operation of Division 1.
[Section 16B inserted by No. 59 of 2011 s. 20.]
16C. Parties to lease not to engage in misleading etc. conduct
A party to a retail shop lease must not, in connection with the lease, engage in
conduct that is misleading or deceptive to another party to the lease or that is likely
to mislead or deceive another party to the lease.
[Section 16C inserted by No. 59 of 2011 s. 20.]
16D. SAT’s powers as to misleading etc. conduct
(1) A party, or former party, under a retail shop lease or former retail shop
lease who suffers, or is likely to suffer, loss or damage because of
misleading or deceptive conduct of another party or former party to the
lease may apply in writing to the Tribunal for an order that the other
party, or former party, pay compensation in respect of the loss or
damage, or for other appropriate relief.
(2) A misleading or deceptive conduct application is required to be lodged
within 6 years after the alleged misleading or deceptive conduct occurred.
(3) Without limiting section 26, in proceedings in relation to a misleading or
deceptive conduct application, the Tribunal may make any one or more of the
following orders that it considers appropriate —
(a) an order that a party to the proceedings pay money to a specified
person, whether by way of debt, damages or restitution, or refund
any money paid by a specified person;
(b) an order that a specified amount of money is not due or owing by a
party to the proceedings to a specified person, or that a party to the
proceedings is not entitled to a refund of any money paid to another
party to the proceedings.
(4) The Tribunal may make any ancillary orders that it considers necessary for
the purpose of enabling an order under this section to have full effect.
(5) The Tribunal may impose any conditions that it considers appropriate
when making an order under this section.
(6) The Tribunal may make an interim order under this section pending final
determination of a misleading or deceptive conduct application, if the Tribunal
considers it appropriate to do so.
43
(7) In this section —
specified, in relation to an order, means specified in the order.
[Section 16D inserted by No. 59 of 2011 s. 20.]
Division 3 — Reference of questions to State Administrative Tribunal
[Heading inserted by No. 59 of 2011 s. 21.]
16. Party to lease may refer question to SAT
(1) Subject to section 11(5), a party to a retail shop lease may refer to the
Tribunal any question between the parties which he believes to be a
question arising under the lease and the Tribunal shall —
(a) determine whether or not the question referred to the Tribunal is a
question arising under the lease; and
(b) if it is such a question, hear and determine it.
(2) The matter for determination referred to in subsection (1)(a) may be
determined by the Tribunal in such manner as it thinks fit, subject to
each party being given an opportunity to make a written submission.
[Section 16 inserted by No. 48 of 1990 s. 14; amended by No. 55 of 2004 s. 127;
No. 47 of 2006 s. 25; No. 5 of 2008 s. 19.]
[17. Deleted by No. 48 of 1990 s. 14.]
[18-23. Deleted by No. 55 of 2004 s. 128.]
Part III — Powers and procedure for dealing with matters
[Heading inserted by No. 5 of 2008 s. 20.]
24. Term used: matter
In this Part —
matter means any application that may be made, or any question or matter that
may be referred or submitted, to the Tribunal under this Act.
[Section 24 inserted by No. 5 of 2008 s. 20.]
25A. Resolution of matter using Small Business Development Corporation Act 1983
s. 15C or 15E, request for
A person who may, under this Act, make an application, referral or submission to
the Tribunal may request the Small Business Commissioner —
(a) to provide assistance to attempt to resolve the matter under the Small
Business Development Corporation Act 1983 section 15C; or
(b) to undertake alternative dispute resolution in respect of the matter under
the Small Business Development Corporation Act 1983 section 15E.
[Section 25A inserted by No. 20 of 2011 s. 32.]
25B. Confidential information may be disclosed to Commissioner
(1) In this section —
44
confidential information, in relation to a matter, means information
given to a person who acts under section 11(3) in the matter.
(2) A person who has confidential information in relation to a matter that is the
subject of a request under section 25A may disclose the information if the
Small Business Commissioner so requires.
[Section 25B inserted by No. 20 of 2011 s. 32.]
25C. Commissioner to issue certificate if matter not resolved etc.
(1) The Small Business Commissioner must, on the request of a person who
may, under this Act, make an application, referral or submission to the
Tribunal, issue a certificate to the person if the Commissioner is satisfied
that —
(a) the matter is unlikely to be resolved with the assistance of
alternative dispute resolution; or
(b) it would not be reasonable in the circumstances to commence an
alternative dispute resolution proceeding in respect of the
matter; or
(c) alternative dispute resolution has failed to resolve the matter.
(2) The certificate is to be in a form approved by the Small Business
Commissioner and may include any information about the conduct of the
parties that the Commissioner considers appropriate in the circumstances.
[Section 25C inserted by No. 20 of 2011 s. 32.]
25D. Application to SAT restricted in certain circumstances
(1) An application, referral or submission in respect of a matter may not be
made to the Tribunal under this Act unless the Small Business
Commissioner has issued a certificate in respect of the matter under
section 25C.
(2) Subsection (1) does not apply in respect of a matter prescribed by the
regulations for the purposes of this section.
(3) Nothing in this section prevents a person from making a request to the
Small Business Commissioner under section 25A.
[Section 25D inserted by No. 20 of 2011 s. 32.]
25E. Commissioner may intervene in SAT proceeding
The Small Business Commissioner may intervene at any time in a proceeding of
the Tribunal in relation to a matter.
[Section 25E inserted by No. 20 of 2011 s. 32.]
25. State Administrative Tribunal Act 2004, relationship of this Part to
Nothing in this Part prevents a matter from being dealt with through a compulsory
conference or mediation process under the State Administrative Tribunal Act 2004.
[Section 25 inserted by No. 5 of 2008 s. 20.]
45
26. SAT’s powers to make orders
(1) Without limiting any power to make an order that is conferred by the State
Administrative Tribunal Act 2004 but subject to this Act the Tribunal may make —
(a) an order that requires a party to any matter before it to pay money to a
person specified in the order; or
(b) an order for a party to any matter before it to do, or refrain from doing,
anything specified in the order; or
(c) an order dismissing any matter before it.
(1a) The power in subsection (1)(b) includes power for the Tribunal to order the parties
to enter into an agreement varying a retail shop lease as specified in the order
where the Tribunal has found that the tenant under the lease was before entering
into the lease misled by the landlord as to the meaning or effect of a term or
condition of the lease.
(1aa) The Tribunal may, where it considers it appropriate to do so to resolve the matter
concerned, make an order terminating a retail shop lease.
(2) In considering whether to make an order under the State Administrative Tribunal
Act 2004 section 87(2) in a proceeding, the Tribunal may have regard to a
certificate issued under section 25C that relates to the proceeding.
(3) An order of the Tribunal requiring anything to be done or discontinued may fix the
time within which that thing is to be done or discontinued, as the case may be.
(4) The Tribunal may allow any equitable claim or defence, and give any equitable
remedy, in a matter before it that the Supreme Court may allow or give.
[Section 26 amended by No. 48 of 1990 s. 20; No. 66 of 1998 s. 11; No. 55 of 2004
s. 129; No. 5 of 2008 s. 21; No. 20 of 2011 s. 33; No. 59 of 2011 s. 22.]
46
Appendix D - Disclosure Statement – Form 1
47
DISCLOSURE STATEMENT - FORM 1
Landlord
Tenant
Premises
KEY DISCLOSURE ITEMS
1 Annual base rent under the lease
See item 10.1
$ _________ p.a.
Including/excluding GST
2 Is rent based on turnover payable by the tenant in year 1
See item 12
Yes
No
3 Total estimated outgoings/operating expenses, promotion and
marketing costs and contributions to sinking fund for the tenant
in year 1
See Item 14.2 and Part 6
$ __________ p.a.
Including/excluding GST
4 Term of the lease
See item 5.2
_____ years _____ months
5 Commencement date is
See item 5.1
____ /____/20____
Actual/estimated
[Insert the commencement date, or details of how the
commencement date is to be determined, e.g. on receipt of
council approval]
6 Handover date is
See item 7.1
____ /____/20____
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 option to renew for a further period
(to be exercised in the manner specified, on or before the
last date stated in the option clause)
See item 6
Yes - see item 6.1
No
8 Does the lease provide the tenant with exclusivity in
relation to the permitted use of premises
See item 2.2
Yes
No
48
--------------------------------------------------------------------------------------------------------------------------
DISCLOSURE STATEMENT - FORM 1 - CONTINUED
CONTENTS
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 Part 13 Tenant acknowledgments and signing Part 14 Attachments
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
1.3 Lettable area of the premises (in m2) New premises - approximately m2
Existing premises - certified at m2
Will a survey be conducted?
Yes No
49
1.4 Existing structures, fixtures, plant and equipment in the premises provided by the landlord at the cost of the landlord (excluding any works, fitout and refurbishment described in Part 3) [Select as appropriate]
air conditioning
plastered walls
cool room/freezer
shop front
floor coverings
sink
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
separate utility meter — electricity
other [Please specify]
1.5 Services and facilities provided by the landlord for the benefit of the premises [Select as appropriate]
tenancy cleaning
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 the tenant in relation to the premises [Select as appropriate]
air control
delivery access
drainage
floor loading
wall loading
other [please specify]
50
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 in item 2.1 exclusive to the tenant?
Yes No
2.4 Do the premises meet all requirements of current health, safety, building and fire legislation for
the permitted use?
Yes
No
Not known
3 Number of car parking spaces
3.1 Approximate total spaces spaces
3.2 Available spaces for customers of the building/centre spaces
3.3 Reserved spaces for use of the tenant only spaces
4 Head lease
4.1 Is the premises under a head lease or Crown lease?
Yes No
Note: A tenant who is a
sublessee should seek
independent legal
advice on the security of
the tenant’s tenure
4.2 If this is a Crown lease, is the Minister’s consent to the lease required?
Yes
No
Not applicable
51
4.3 Has the landlord provided a copy of the head lease or Crown lease to the tenant?
Yes
No
Not applicable
Attached at item 38.2
4.4 Current term under the head lease or Crown lease and option/s to renew
Not applicable
Details of head lease as 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 to the lease required?
Yes No
PART 2 — TERM OF LEASE AND OPTION/S TO RENEW LEASE
5 Term of lease
5.1 Date lease commences (see also date of handover at item 7)
/ /20 Actual / Estimate
[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
5.3 Date lease expires: / /20____
(based on the date indicated at item 5.1 as the date the lease commences)
52
6 Option/s to renew lease
6.1 Option/s details
Not applicable Options as follows:
Length of option Period of option Exercise date
years / /20 to
/ /20___
Actual/ Estimate
/ /20 to
/ /20___
Actual/ Estimate
years / /20 to
/ /20___
Actual/ Estimate
/ /20 to
/ /20___
Actual/ 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
the option clause of the
lease
How option is to be exercised
PART 3 — WORKS, FITOUT AND REFURBISHMENT
7 Date of handover
7.1 Date of handover on which premises will be available for occupation or fitout (if different to the
date the lease commences indicated at item 5.1)
/ /20 Actual / Estimate
[Insert the handover date, or details of how the handover date is to be determined, e.g. on 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)
53
8.2 Is the tenant required to contribute towards the cost of any of the landlord’s finishes, fixtures, fittings, equipment, or services?
See lease clause
[Insert details of tenant’s contribution.]
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 contribution by the tenant towards the costs of the landlord’s works
[List items of work and costs]
Note: See also
outgoings/ operating
expenses (item 13) in
relation to any
maintenance and
repairs outgoings and
sinking fund (item 16)
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 contribution towards the cost of the tenant’s fitout?
Yes [insert details of landlord’s contribution, including any amortisation arrangements]
No
9.3 Does the landlord have requirements as to the quality and standard of shop front and fitout?
Yes [Insert details or provide fitout guide]
No
54
9.4 Are there any requirements for the tenant to refurbish or refit the premises during the term or at the end of the term of the lease?
Yes [Insert details of nature, extent and timing of the refurbishment 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_____
10.4 How rent payments are to be made?
[Insert description of how rent 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 abatement of rent on damage or destruction of the premises?
Yes
See lease clause: [Insert details]
No
11 Rent adjustment (rent review)
11.1 Rent adjustment date/s and adjustment method
[Insert a list of all rent adjustment dates and adjustment methods, e.g. fixed increase by ______%, fixed increase by $_________, market rent, indexed to CPI]
55
12 Rent based on turnover
12.1 Is rent based on turnover payable by the tenant?
Yes — [Insert method of 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:
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).
Note: 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
13 Contribution by tenant towards the landlord’s outgoings/operating expenses
13.1 Is the tenant required to pay or contribute towards the landlord’s outgoings/operating expenses?
Yes No
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))
13.2 Describe any period during which the tenant is not required to pay any outgoings/operating expenses
13.3 Date on which payment of outgoings/operating expenses is to commence
/ /20____
13.4 Frequency of operating expenses payments
[Insert details of when 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
56
13.6 Proportion of total operating expenses apportioned to the tenant (if applicable) as at the date of lease commencement
Note: The proportion of the total cost of operating expenses for the building/centre payable 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: $ ________
PART 6 — OTHER COSTS
15 Advertising and promotional costs
15.1 Is the tenant required to contribute towards advertising and promotional costs (including marketing fund contributions) for the building/centre?
Yes No
15.2 Tenant’s contribution to advertising and promotional costs per annum
Not applicable
Yes — contribution per 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 input into how the marketing and promotional fund is used? [Insert details as to how tenant can have input]
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16 Sinking fund for repairs and maintenance
16.1 Is the tenant required to contribute towards a sinking fund for repairs or maintenance for the
building/centre?
Yes No
16.2 Tenant’s contribution to sinking fund for repairs or maintenance per annum
Not applicable
Yes — contribution per 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 under the lease, including upfront costs or other costs not part of the
outgoings/operating expenses and not referred to elsewhere in this disclosure statement
costs following default
legal costs (as permitted by the Act)
interest on outstanding moneys
pre-payment of rent or operating expenses
grease trap cleaning
after hours security
after hours airconditioning
wet waste removal
other [please specify]
17.2 Compulsory contributory membership of Tenants’ Association
Yes
Date on which contributions to commence: / /20____
No
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PART 7 — ALTERATION WORKS (INCLUDING RENOVATIONS, EXTENSIONS,
REDEVELOPMENT, DEMOLITION)
18 Alteration works
18.1 Are there any alteration works, planned or known to the landlord at this point in time, to the
premises or building/centre including surrounding roads during the term or any further term/s?
Yes — [Insert details of the proposed works]
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. 19 Orders of statutory or local authorities
19.1 Are there any outstanding orders of a statutory authority or a local government affecting the
premises?
[Select one of the following and provide details]
Yes — [Insert details]
No
20 Clause/s in lease dealing with relocation, demolition and destruction
20.1 Clause/s in lease providing for relocation of the tenants
Clause/s of the lease
Not applicable
20.2 Clause/s in lease which provide/s for the total or partial demolition or destruction of the
premises or building/centre
Clause/s of the lease
Not applicable
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PART 8 — TRADING HOURS
21 Core trading hours relevant to the tenant 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).
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 access the premises and building/centre outside the core trading hours?
Yes — [Provide details including cost of access]
No
PART 9 — RETAIL SHOPPING CENTRE DETAILS Note: 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
23.2 Number of shops leased/occupied
[Insert details for shops owned by the landlord]
Leased: • Number occupied:_________
• Number unoccupied:__________
Number unleased:_________
23.3 Total lettable area of the centre (in m2): m2 Actual/Estimate
24 Major/anchor tenants
24.1 Major/anchor tenants and lease expiry dates
[List all major and anchor tenants (e.g. department stores, discount department stores, supermarkets), and the dates on which leases held by those tenants expire]
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25 Floor plan and tenancy mix
25.1 Floor plan showing tenancy mix, common areas, common area trading, kiosks and major tenants
Attached
Attached as per item
39.1
25.2 Does the landlord assure the tenant that the current tenant mix will not be altered by the introduction of a competitor?
Yes No
26 Customer traffic flow information
26.1 Does the landlord collect customer traffic flow information?
Yes No
Attached as per item
39.2
27 Use of common areas
27.1 Are common areas able to be used for trading?
Yes — [insert details of basis upon which trading permitted]
No
28 Casual mall licensing for common areas
28.1 Do you adhere to the Shopping Centre Council of Australia’s Casual Mall Licensing Code of
Practice?
Yes No
Casual mall licensing
policy attached as
per item 39.3
PART 10 — GROUP OF PREMISES Note: 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 group leased/occupied
[Insert details for premises owned by the landlord]
Leased: • Number occupied: .
• Number unoccupied: .
Number unleased: .
29.3 Total lettable area of the group of premises (in m2): m2 Actual/Estimate
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PART 11 — OTHER DISCLOSURES
30 Other disclosures
30.1 Are there any current legal proceeding in relation to the lawful use of the premises or
building/centre?
Yes — [provide details]
No
31 Representations by landlord
31.1 Any other representations by the landlord or the landlord’s agent
[Landlord to insert details of any other oral or written representations made by the landlord or the
landlord’s agent]
32 Representations by the tenant
32.1 Any other representations by the tenant or the tenant’s agent
[Landlord to insert details of any other oral or written representations made by the tenant or the
tenant’s agent]
33 Other agreements
33.1 Any other agreements between the tenant and the landlord
[Insert details of any other agreements between the tenant and the landlord]
62
PART 12 — LANDLORD ACKNOWLEDGMENTS AND SIGNATURE
34 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.
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 landlord’s agent [Insert name of the person signing with the authority
of the landlord]
35.4 Date: / /20_____
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PART 13 — TENANT ACKNOWLEDGMENTS AND SIGNATURE
36 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.
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?
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 authorised representative [Insert name of the person signing with the authority of the tenant]
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37.4 Date: / /20_____
PART 14 — ATTACHMENTS
38 List of attachments
38.1 Plan of premises (see item 1.2)
Yes Not applicable
38.2 Head lease or Crown lease (see item 4.2)
Yes Not applicable
38.3 Annual estimate of expenditure (outgoings/operating expenses) (see item 14)
Yes Not applicable
38.4 Additional attachments [List any additional attachments]
39 List of attachments — retail shopping centre Note: 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
39.3 Casual mall licensing policy (see item 28.1)
Yes Not applicable
39.4 Additional attachments relating to the retail shopping centre [List any additional attachments relating to the retail shopping centre]
65
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.
66
Appendix E - Allocation of Operating Expenses for Non-Standard Hours
A Commerce Fact Sheet
67
68
69
70
Appendix F – Face-to-Face Session Activities with Answers
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Quick Check #1 - Is it a retail shopping centre?
For each of the scenarios below, determine whether the cluster of premises is
a retail shopping centre or not. Explain the reasons for your answer in the
space provided below.
Scenario A:
Answer: This is not a retail shopping centre because less than five of the premises
above are carrying on a retail business. In the scenario above the retail shops are the
cafe, bakehouse, butcher and hair salon. The hair salon is a specified business in
accordance with Regulation 3A.
The settlement agency, real estate agency and medical centre provide a service and
are not involved in the sale of goods or retail. In this scenario these are not retail
shop leases.
Scenario B:
Answer: This is a retail shopping centre because five of the premises above are
carrying on a retail business. In the scenario above, the retail businesses include the
cafe, bakehouse, butcher, sporting goods store and hair salon. The hair salon is a
specified business in accordance with Regulation 3A and therefore a retail business.
The settlement agency and medical centre provide a service and are not involved in
the sale of goods or retail, but will be classed as retail shop leases because they are
businesses located in a retail shopping centre.
Café 101 Martha’s
Bakehouse
Bonny’s
Hair Design
Bob the
Butcher
East Coast
Realty
Westview
Medical
Speedy
Settlements
Café 101 Martha’s
Bakehouse
Bonny’s
Hair Design
Bob the
Butcher
Southport
Sports
Speedy
Settlements
Westview
Medical
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Knowledge Check #1 – When does the CT Act apply?
1. Is the CT Act applicable to all commercial leases? Explain why.
Answer: The CT Act only applies to retail shop leases. There are some retail shops
or businesses that are excluded from the application of the CT Act. A travel agency,
retail estate agency or an accountancy practice are examples of businesses which
are non-retail and therefore would not be covered by the CT Act, unless of course
they are situated in a retail shopping centre as defined in section 3(1) of the CT Act.
If these businesses were not located in a retail shopping centre then the CT Act
would not apply.
2. The following businesses lease premises in a retail shopping centre.
Which of these are retail shop leases? Explain your answer in the
space below.
Type of business Lessee Size of premises Is it a retail shop
lease?
Supermarket Publicly listed
company 2,000m
2 No
Jewellery store Publicly listed
company 200m
2 No
Newsagency Sole proprietor 150m2 Yes
ATM Bank 3m2 No
Beauty salon Pty Ltd company 100m2 Yes
Podiatrist Partnership 100m2 Yes
The supermarket is not a retail shop lease because it is a publicly listed
company and has a lettable area that exceeds 1000 square metres.
The jewellery store has a lettable area under 1000 square metres however it
is a publicly listed company and therefore it is not considered to be a retail
shop lease in accordance with section 3 of the CT Act.
The newsagency is a retail shop lease because it has a lettable area under
1000 square metres and the lessee is not a publicly listed company.
The ATM is not a retail shop lease because Regulation 3AB(c) provides that a
lease of premises for the purpose of the lessee operating a vending machine
or automatic teller machine on those premises is excluded from the CT Act.
73
The beauty salon is a retail shop lease because it has a lettable area under
1000 square metres, the lessee is not a publicly listed company and it is
defined as a specified business in accordance with Regulation 3A. The
podiatrist would hold a retail shop lease even though it does not meet the
requirements of the definition of a retail business by virtue of the fact that it is
located in a retail shopping centre. (Refer section 3(1) of the CT Act)
The podiatrist is not a retail business however it is a retail shop lease by
virtue of the fact that it is located in a retail shopping centre.
3. Would the answers in question two be different if they were located
outside the shopping centre?
Answer: Yes. A podiatrist is an example of a business which is not retail and would
not be covered by the CT Act unless it is situated in a retail shopping centre as
defined in the CT Act. Therefore, if the podiatrist is not located in a retail shopping
centre the CT Act does not apply.
Quick Check #2 – Group Discussion
What systems and/or processes are in place in your office for ensuring
appropriate notices are given on time and in accordance with the requirements
of section 13C?
Neither the DOC, nor the SBDC or the SAT prescribes the systems or procedures
agencies should have in place to ensure they comply with the requirements of
section 13C. What is important is that you and your agency have a system/process in
place that works and you can meet your obligations under the CT Act and
Regulations.
The purpose of this question is to generate discussion about the different systems
and processes agencies use as it may be that some agencies have an approach that
is working that others may want to adopt.
Examples include but are not limited to:
- Creating a standard proforma template. As written notice is required but a form is
not prescribed, agencies may have designed their own form or standard letter.
- Some agents/property managers may diarise important dates or use a bring-up
system in Microsoft Outlook.
- Referring to a client database with key dates pertaining to leases.
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Check #2: Application of the new provisions
4. You are about to place a new tenant into a vacant shop that you manage.
a) Who is going to pay the legal fees for preparation of the lease?
Answer: Section 14B of the CT Act provides that a landlord under a retail
shop is NOT able to claim from the tenant or any other person the landlord’s
legal or other expenses relating to the negotiation, preparation or execution of
the lease.
b) Three years later, the tenant wants to exercise an option for a further
three-year term. Who pays the legal fees for the renewal document?
Answer: Section 14B of the CT Act provides that a landlord under a retail
shop is NOT able to claim from the tenant or any other person the landlord’s
legal or other expenses relating to the negotiation, preparation or execution of
an extension of the lease or a renewal of the lease.
c) During the term of a lease, a tenant decides to sell his business and
seeks to assign the lease to the new buyer. Who pays the legal fees
for the assignment document?
Answer: Section 14B(2) allows a landlord to claim reasonable legal or other
expenses incurred in connection with an assignment of the lease or a sub-
lease, including investigating a proposed assignee or sub-lessee and
obtaining any necessary consents to the assignment or sub-lease. Therefore,
in this circumstance, the landlord is entitled to claim reasonable legal or other
expenses from the tenant for the assignment document. However, there must
be an agreement between the landlord and the party being required to pay
the costs for the payment of those costs.
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Scenarios
Consider each of the scenarios below in small groups or individually and
answer the questions that follow.
Scenario 1:
a) Where does this leave the landlord?
b) Is there provision within the legislation for the landlord to limit
the tenant to the 3 year term?
Answer:
a) Section 13 of the CT Act provides that where a lease is for a period longer
than 6 months but less than 5 years, the tenant has a right to an option to
extend the lease to 5 years from its commencement date.
The tenant is required to give the minimum 30 days’ notice to the landlord
using the prescribed form (Form 3).
It should be noted that section 13C of the CT Act requires that a landlord
notify a tenant as to the date on which an option to renew a lease expires
(including any option that arises under section 13).The landlord needs to
provide this notification in writing between 6 and 12 months before the option
expiry date.
In this scenario, the option expiry date is 30 days before the end of the term,
so the landlord would need to have given the tenant a notice about the option
expiry date at some time between 7 and 13 months prior to the end of the
term.
b) Section 13(7a) of the CT Act provides that a landlord may apply to the SAT
for approval of a term in a lease allowing a landlord to terminate a lease
before the time that would usually apply under section 13(1) if the landlord
can demonstrate special circumstances exist. It may be possible that plans to
develop the business after a certain period of time are special circumstances.
A tenant signs a 3-year lease. He insists that he does not want any options to
extend the lease as he and his wife intend to return to the UK at the end of the three
years. This suits the landlord as he has some plans to use the premises for a
business in three years’ time.
Two years and nine months into the lease, the tenant contacts the managing agent.
He advises that the business has gone better than expected and that he intends to
delay his return to the UK and continue the business for another couple of years.
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The CT Act provides for the tenant to make an application to the SAT under
section 13(7)(b) for an order that the option for renewal of the lease does not
arise under section 13(1). This mechanism could be used to ensure that the
lease only had duration of 3 years as agreed.
It should be noted that the SAT will examine an application made under
section 13(7)(b) on a case by case basis. The SAT will need to be satisfied
that the application was made by the tenant or prospective tenant of his own
free will and the circumstances of the case warrant the granting of the
application.
Scenario 2:
What does the agent have to do in order to get vacant possession of the shop?
Answer: Section 13(6)(da) of the CT Act and Schedule 1 of the CT Regulations
allows for a lease to include provision for termination on bankruptcy or insolvency of
the tenant, however it does not provide an automatic right to termination.
The landlord can only terminate the lease by reason of bankruptcy if there is a
specific clause in the lease allowing for this. However, if the tenant defaults under the
lease (which they would likely do if they were bankrupt) section 13(6)(a) provides that
the landlord may determine the lease.
Scenario 3:
a) Is it possible to require the tenant to relocate and what are the
implications of doing so?
b) Would the answer to the question above be different if the tenant had
already been in possession for 5 years and was entering into a new
lease to extend the term for a further 5 years?
A tenant in a retail shop lease is half way through his current lease and has been
experiencing a decline in gross takings for some time. His accountant has advised
him that his business is no longer financially viable. He is in serious financial
trouble and has just advised the managing agent that he has declared
bankruptcy.
A shopping centre owner has decided that he would like to change the dynamics
of his shopping centre and is looking at entering into some new leases. There is
one tenant in particular that he would like to relocate to a different shop within the
centre.
This tenant is mid-way through the term of his 5-year lease and no extensions
have been exercised.
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Answer:
a) Yes. The landlord can require the tenant to relocate, but only if the lease was
entered into on or after 1 January 2013, contains a relocation clause that the
tenant has agreed to and the terms of the clause comply with the CT Act in
accordance with section 14A.
If the relocation is within the first 5 years of the lease, the clause must be
included in the lease in the prescribed form or the relocation must be
approved by the SAT.
b) If relocation is required after the first 5 year period, the relocation clause must
meet the requirements of section 14A(2) or be approved by the SAT. For
leases entered into before 1 January 2013 however, this may not be
applicable.
The important thing to emphasise with this scenario is that the landlord can
only relocate a person in accordance with a relocation clause that is in a
lease.
Scenario 4:
Does the landlord/managing agent have to provide any information to the
valuer? If so, what information would they need to provide?
Answer: Yes. The lessor or agent needs to provide the valuer with any information
that they request about the lease or leases for retail shops in the same building or
retail shopping centre in accordance with the requirements of section 11(3B) of the
CT Act. Section 11(3B) provides that the landlord is required to provide the valuer
with such relevant information as is requested including any of the following
information about leases for retail shops in the same building or retail shopping
centre. This information may include:
a) current rental for each lease;
b) rent free periods or any other form of incentive;
c) recent or proposed variations of any lease;
d) outgoings for each lease; and/or
e) any other information prescribed (none prescribed at the moment)
An agent manages a small retail shopping centre for an overseas owner. All of
the leases in the shopping centre contain a market rent review clause. One of the
tenants has disagreed with the agent’s assessment of the amount of an
appropriate increase. Consequently, the tenant has appointed a valuer in
accordance with the CT Act for the purpose of determining the rent.
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Quick Check #3 – Group discussion
Depending on the instructions of your facilitator, the questions below may be
discussed in small groups or a part of a class discussion.
What information is the landlord entitled to know about the tenant
before entering into a lease?
Answer: It is important to note that the CT Act does not address this issue
specifically. As you may know from your experience working with commercial
tenancies, very few landlords would be prepared to lease premises to tenants
unless they are fully informed of the tenant’s financial position and retail
experience, and about the type and style of retailing proposed. For example, if a
prospective tenant wanted to lease premises in a small retail shopping centre to
open a new coffee lounge, the landlord may want to know what (if any) previous
café experience the prospective tenant has.
What advice would you be giving to a landlord that has doubts about
the information they have been given by the tenant before the lease
commences?
Answer: It should be acknowledged that a landlord is not under any obligation to
lease premises to anyone. It is important that the landlord is comfortable with the
tenant and the information that the tenant has provided to them because once the
tenant and landlord have contracted to lease a premises, it is too late to withdraw
unless both parties agree.
If with respect to a lease, the information provided by the tenant is misleading or
deceptive and the landlord suffers loss or damage, the landlord may take legal
action which may include seeking compensation from the tenant for the financial
loss they have suffered.
Knowledge Check #3 – Disclosure Statement
5. Under the Commercial Tenancy (Retail Shops) Agreements Act 1985 a
Disclosure statement is (circle the correct answer(s)):
a) For all retail shop leases
b) For new retail shop leases
c) On assignment of a retail shop lease
d) On renewal of a retail shop lease under an option.
Answer: b) For new retail shop leases.
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6. What are some examples of information, apart from rent, length of the
lease and rent reviews, that should be included in the disclosure
statement?
Answer: The prescribed disclosure statement sets out all the information that is
required.
It should be noted that the landlord should include relevant information such as any
changes to the landscape that are planned for the near future, proposed road
changes, future council plans for the area, the proximity of other businesses that may
affect the premises in question, the landlord’s financial commitment to promotions
and marketing. NOTE: This is not an exhaustive list and participants may come up
with other examples.
7. Are there any consequences for the landlord if they do not provide a
Disclosure Statement to the tenant and if you think ‘yes’, what are they?
Answer: In accordance with section 6(1) of the CT Act, if the landlord does not
provide a disclosure statement to the tenant at least 7 days before entering into the
lease, or the disclosure statement that is given is incomplete or contains false and
misleading information, the tenant may do either or both of the following:
terminate the lease at any time up to 6 months after the lease was entered
into; and/or
seek an order for compensation from the SAT for any monetary loss suffered.
8. The Disclosure Statement allows for a tenant to terminate a lease if the
incorrect information was provided in the statement.
Is this right restricted in any way?
Answer: Refer to section 6(3). Yes, this right is restricted if the landlord has acted
honestly and reasonably and ought reasonably be excused for the failure concerned,
and if the tenant is in substantially as good a position as the tenant would have been
had the statement been complete or not contained the false or misleading
information.
It should also be noted that the tenant also has the right to apply to SAT for an order
for compensation for any money the tenant may have lost.
What is the time frame for this termination?
Answer: The tenant can terminate the lease within 6 months of the lease being
entered into (provided section 6(3) does not apply).
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Scenario 5: Disclosure Case Study
Taking into account what you know about the disclosure requirements in the CT Act,
consider the following scenario and answer the questions below. Please note, this
case study will also be referred to in Part Four: Disputes between the landlord and
the tenant.
Questions and discussion:
Read the case study and answer the questions below. This activity may be
conducted in small groups or individually depending on the instructions of your
facilitator.
Louis Lim decided to start his own business – Café 101 after immigrating to Australia from
Taiwan several years ago. English is Louis’s second language and he has no previous
business experience.
Louis Lim entered into a commercial tenancy lease (the lease) for the first time on or
about 30 November 2013 for No. 101 Cherry Tree Lane, Nedlands which has a lettable
area of 95 square metres. The premises are in a small retail shopping centre with six
premises. Five of the premises, (including Louis’s café) have been leased. There is a
butcher, a jeweller, a bakery, a hair salon and now Louis’s café in the centre. The term of
Louis’s lease was five years with a five year option to renew.
Before signing the lease, Louis did he own research into the lease, the premises and the
surrounding area. Louis was curious about what was planned for the other vacant
premises and he asked the managing agent if there had been any interest.
The managing agent responded by saying that a lady wanting to open a bookstore had all
but signed a lease on the dotted line. Louis was relieved as he was not willing to lease
premises in the group if there was another café or restaurant serving coffee in the centre.
Louis discussed this with the managing agent and he was assured that the vacant
premises was going to be a bookstore and that his would be the only café. Accordingly the
permitted use in the disclosure statement for Café 101 was described as ‘café serving
breakfast, lunch, coffee and cake.’ Item 2.2 was answered as ‘yes’.
It should be noted that Item 25.2 in the disclosure statement was not completed.
Confident and excited about his new café venture, Louis received a copy of the disclosure
statement prepared by the managing agent 10 days before the lease was due to
commence. Given the short time frame, Louis was told he needed to review the disclosure
statement, obtain legal advice and sign the document ASAP. The managing agent told
Louis “Don’t worry, it’s a simple straight forward lease. Just get it signed ASAP as I have
another party who will take this spot if you won’t!”
As Louis didn’t think he had enough time to get legal advice he decided to have a friend
who had experience with commercial leasing look over the disclosure statement quickly to
give him some peace of mind. As his friend didn’t notice any obvious flaws with the
disclosure statement, Louis read the disclosure statement carefully before signing it and
was provided with a copy.
Three months after Louis commenced trading, a bookcafe opened in the vacant premises.
Louis was furious as he had specifically told the managing agent that he was not prepared
to enter into a lease in the centre if another café or restaurant serving coffee also opened
in the centre. In the first two weeks of the bookcafe’s trade, Louis’s gross takings are
down 40%. He is concerned about the viability of his business.
Louis rings the managing agent threatening to take legal action to terminate his lease.
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You may like to refer to the extracts from the CT Act contained at the back of this
workbook to assist you in answering the questions below. Please note, this is a
fictional case study designed only for training purposes.
9. Does Louis have grounds to terminate his lease? If you think yes, on
what grounds? (In providing an answer, consider any provisions of the CT Act
you think may have been breached).
Answer: Yes. Louis may have grounds to terminate the lease. Section 6(1) of the CT
Act provides that a tenant can provide a landlord with written notice of a termination
of the lease within 6 months of entering into it if the disclosure statement is
incomplete or if the disclosure statement contains false or misleading information.
The information provided in the case study suggests that the Disclosure Statement
contained false or misleading representations and was also incomplete.
Firstly, the managing agent has provided false and misleading information in item 1.2
of the disclosure statement by indicating that the permitted use was exclusive to Café
101 when this was not the case.
The managing agent also made oral representations in relation to who would be
taking up the lease in the vacant premises that have not eventuated. This may be a
potential breach of section 16C of the CT Act. Section 16C provides that a party to a
lease must not engage in conduct that is misleading or deceptive or likely to mislead
or deceive.
Louis specifically told the managing agent that he was not prepared to enter into a
lease if another business in the shopping centre was going to serve coffee. Item 25.2
of the disclosure statement which provides an assurance from the landlord to the
tenant that the current tenant mix will not be altered by the introduction of a
competitor was also not completed.
While the Bookcafe’s predominate source of revenue may come from book sales and
not coffee, the managing agent should have disclosed to Louis the fact that the
bookstore was going to be a Bookcafe and not just a regular bookstore. From this
point of view, it could be argued that the landlord has potentially breached the
misleading and deceptive conduct provision of the CT Act by not informing him of this
fact.
The case study is silent on whether this representation was detailed in the Disclosure
Statement. It would be difficult for Louis to prove that the conversation took place
unless it was documented in the Disclosure Statement or elsewhere. Any
representations or promises that were made by the managing agent or the landlord
during negotiations about the introduction of a competitor should have been detailed
at Item 25.2 of the Disclosure Statement.
It also seems from the information provided in the case study that the managing
agent may have engaged in unconscionable conduct in his dealings with Louis Lim.
Section 15C of the CT Act provides that a landlord under a retail shop lease cannot
engage in conduct that is, in all the circumstances, unconscionable.
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English was Mr Lim’s second language and coupled with the fact that he had no
previous business experience or experience with commercial leasing, it could be
argued that Mr Lim did not completely understand the Disclosure Statement and he
was pressured into signing it before seeking independent legal advice. The managing
agent provided Mr Lim with the Disclosure Statement to review just 10 days before
the lease was due to commence. Notwithstanding, the CT Act provides the
disclosure statement must be provided to the tenant at least 7 days before the lease
commences, ideally it would have been preferable for the managing agent to give
Louis the disclosure statement earlier than 10 days before the lease was due to
commence to give him sufficient time to go through the Statement in detail.
It could also be argued that the managing agent misled Mr Lim by telling him that the
Disclosure Statement was “….a simple straight forward lease.” This could amount to
undue influence or pressure to get Mr Lim to sign the Disclosure Statement before
seeking legal advice.
Assume that Louis was not provided with a disclosure statement at all.
10. Does Louis have grounds to terminate his lease? If you think yes, cite
the relevant provisions of the CT Act?
Answer: Yes. Section 6(1) of the CT Act provides that a tenant can provide a landlord
with written notice of a termination of the lease within 6 months of entering into it if
within 7 days the tenant was not provided with a disclosure statement.
11. Are there any exceptions to the tenant’s right to terminate the lease in
circumstances where the disclosure statement is incomplete or
contains false or misleading information?
Answer: Yes. Section 6(3) of the CT Act provides that a tenant is not able to
terminate a lease even if the landlord has provided a Disclosure Statement that is
incomplete or contains false or misleading information if:
the landlord has acted honestly and reasonably and sought reasonably to
be excused; and
the tenant is in substantially as good a position as if the failure had not
occurred.
It is important to note that these exemptions do not apply if a Disclosure Statement is
not provided to the tenant.
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12. a) With the benefit of hindsight, what advice would you give Louis
in his approach to signing the disclosure statement and lease?
Answer: Louis Lim should have sought independent legal advice before signing the
Disclosure Statement.
It is not sufficient to have a friend, colleague or family member for example to review
leasing documentation in place of having a lawyer review it as any feedback they
provide could not be relied upon in disciplinary proceedings.
b) Is there anything Louis could have done differently that may have
resulted in a better outcome for him?
Answer: Louis should have made sure that all of the representations and promises
that were discussed during negotiations and were material to his decision to enter the
lease, were documented in the Disclosure Statement in Part 11 – Other Disclosures.
The case study is silent on how the permitted use of Café 101 was described and
detailed. Assuming it was described as “serving coffee” the reader is not sure
whether this permitted use was exclusive to Café 101. With the benefit of hindsight
however, Louis should have made sure that it was detailed in the Disclosure
Statement that he was the only tenant that could serve coffee in the shopping centre.
The case study acknowledges that Louis Lim had done some research into the lease
and the surrounding area. Louis would have done well to speak to the other tenants
about their experience with the landlord. He could have also asked further questions
of the managing agent about the bookstore and the other businesses in the centre.
Louis should have made sure that any responses that were made that he considered
were material to his decision to lease the premises were documented in the
Disclosure Statement.
13. What advice would you give the managing agent that may have resulted
in a better outcome for both parties?
Answer: Louis Lim should have sought independent legal advice before signing the
Disclosure Statement, particularly given he didn’t have previous business experience
and English was his second language. Notwithstanding, the CT Act provides the
disclosure statement must be provided to the tenant at least 7 days before the lease
commences, ideally it would have been preferable for the managing agent to give
Louis the disclosure statement earlier than 10 days before the lease was due to
commence to give him sufficient time to go through the Statement in detail. This
would have allowed Louis more time to review the Statement and seek independent
legal advice. The managing agent should have not pressured Louis into signing the
Disclosure Statement and alleged that another prospective tenant was going to sign
if he didn’t sign the Statement as soon as possible.
The managing agent ought to have known that the bookcafe was serving coffee and
should have disclosed this to Louis and included it in the Disclosure Statement. The
managing agent should have recognised that this would have influenced Louis’s
decision to lease the premises.
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If the managing agent was aware that Louis was having a friend look over the
Statement in place of getting independent legal advice, they should have suggested
to Louis that while this might give him peace of mind and might provide him with
some useful feedback, it was also very important that he get proper legal advice.
Knowledge Check #4 – Louis and Café 101
NOTE: The questions provided below should be answered taking into
account the information provided in the case study ‘Louis and Café 101.’
14. Is Louis able to proceed directly to the SAT with an application for an
order seeking compensation for unconscionable conduct and
misleading and deceptive conduct by the managing agent or would he
need to approach the SB Commissioner in the first instance?
Provide/discuss an explanation to support your answer.
Answer: In the first instance, Louis should approach the Small Business
Commissioner by contacting the SBDC for assistance.
Section 25D of the CT Act provides that an application, referral or submission cannot
be made to the SAT under the CT Act unless the Small Business Commissioner has
issued a certificate or the matter is prescribed in the CT Regulations as one that can
proceed directly to the SAT.
While the SAT may consider an application for an interim order immediately pending
final determination of an unconscionable conduct application under section 15F(1) of
the Act, it would not make a compensation order without a certificate from the SB
Commissioner.
Similarly, while the SAT may consider an application for an interim order immediately
pending final determination of a misleading or deceptive conduct application under
section 16D(1) of the CT Act, it would not make a compensation order without a
certificate from the SB Commissioner.
Section 25(C) requires the SB Commissioner, on the request of a person who may
under the CT Act make an application, referral or submission to the Tribunal to, issue
a certificate to the person if the SB Commissioner is satisfied that the matter is
unlikely to be resolved with the assistance of alternative dispute resolution, or if it
would not be reasonable to commence alternative dispute resolution, or if alternative
dispute resolution has failed.
You will recall the case of Louis Lim and his new business – Café 101. Louis is
furious that a new bookcafe has opened up in the small retail shopping centre
where he has recently opened Café 101. Louis was arguably led to believe that
the permitted use for Café 101 was exclusive to his café.
Now let’s look at what options and possible remedies are now available to Louis
through the SB Commissioner and the SAT.
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15. a) If Louis did proceed with the alternative dispute resolution
process through the SB Commissioner and it was not
successful, what would he need to do to make an application to
the SAT for compensation?
Answer: If alternative dispute resolution with the SB Commissioner was not
successful or the SB Commissioner refused to commence alternative dispute
resolution, Louis may request a certificate from the SB Commissioner for the purpose
of making an application to the SAT for a determination as to compensation.
Let’s assume Louis makes an application to the SAT seeking compensation for
financial loss he suffered as a result of the bookcafe opening in the retail
shopping centre where he recently commenced trading as Café 101.
b) What are the relevant facts of the case that Louis may highlight
in his application for compensation? (Hint: Refer to the extracts
of the CT Act at the back of the workbook).
Answer: Louis may apply for compensation under several sections in the CT Act.
The relevant facts used by Louis in making his application may differ according to
which section of the Act he is relying on to seek compensation.
Section 6 – Disclosure Statement
The facts of the case study indicate that there may have been some defaults in the
disclosure statement provided by the Landlord to Louis. Therefore, Louis may apply
for compensation under section 6 of the CT Act.
In particular, section 6(1)(b) allows a tenant to apply to the Tribunal for an order that
a landlord pay compensation for any pecuniary loss suffered by the tenant as a result
of the landlord:
failing to provide a disclosure statement (s.6(1)(b)(i));
giving an incomplete disclosure statement (s.6(1)(b)(ii); or
giving false or misleading information in the disclosure statement
(s.6(1)(b)(iii)).
The case study indicates that item 25.2 of the disclosure statement provided to Louis
was not completed. Item 25.2 asks the landlord to assure the tenant that the current
tenant mix will not be altered by the introduction of a competitor. Arguably, had this
item been completed and the answer been ‘no’, Louis would not have entered into
the lease.
Further, item 2.2 which requires the landlord to indicate whether or not the permitted
use described in item 2.1 (in this case a café serving breakfast, lunch, coffee and
cake) is exclusive to the tenant was answered as ‘yes’. This item would now appear
to have been answered incorrectly because since the Bookcafe opened, Café 101 is
not operating exclusively as a café in the shopping centre in accordance with the
permitted use outlined in item 2.1.
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Therefore, based on the facts, Louis may apply for an order seeking compensation
under section 6(1)(b)(i) & (ii).
It is also worthwhile noting that, as the duration of the lease is less than 6 months,
Louis may also have the right to terminate the lease under section 6(1)(a) of the CT
Act.
Section 15C – Unconscionable Conduct
It could also be argued that the statements made by the landlord prior to Louis
signing the lease, amounted to unconscionable conduct.
Section 15D(2) provides that in determining whether a landlord has acted
unconscionably the Tribunal can consider (amongst other things) a number of
matters listed in that section.
Some of these matters may be relevant to facts of the case study. In particular,
section 15D(2)(a) states that the Tribunal may consider the relative bargaining
positions of the landlord and tenant. To this end, Louis could argue that given this is
his first commercial lease and that English is his second language, he is in a much
weaker bargaining position than the landlord.
It could also be argued that the landlord exerted undue influence or pressure on
Louis by suggesting that Louis needed to sign the disclosure statement straight away
as he had another interested party that was ready to sign if he didn’t. This is another
matter the Tribunal can specifically consider under section 15D(2)(d).
Finally, the Tribunal is directed to consider whether the landlord acted in good faith
(section 15D(2)(k)). Louis could argue that the landlord has not acted in good faith
by not disclosing that the book shop would be operating a competing coffee
business.
In accordance with section 15F(1) of the CT Act, Louis may apply in writing to the
SAT for an order that compensation is payable in respect of the loss or damage
caused because of unconscionable conduct of the landlord.
Section 16C – Misleading or deceptive conduct
Section 16D of the Act prohibits a party to a retail shop lease from engaging in
conduct that is misleading or deceptive. The lack of full disclosure and the oral
representations made to Louis by the landlord prior to entering the lease, could also
amount to misleading and deceptive conduct.
Section 16D(1) of the CT Act provides that Louis may apply in writing to the SAT for
compensation that is payable in respect of the loss or damage caused because of
misleading or deceptive conduct by the landlord.
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c) What would Louis need to prove to be successful in seeking an
order for compensation?
Answer: To be successful, Louis would need to satisfy the SAT that he had suffered
a pecuniary loss as a result of the actions of the landlord. The case study indicates
that Louis’s gross takings are down 40%. Louis would need to demonstrate that this
pecuniary loss was caused by the actions of the landlord in contravening either
section 6, section 15C or section 16C.
Additional space for notes: