Guide to Retail Shop Leases in Queensland

Signing a retail shop lease is a significant financial and legal commitment, comparable to buying a home or signing a mortgage. Before entering into such a lease, it's essential to carefully consider your obligations as a tenant, as well as the protections afforded under Queensland's Retail Shop Leases Act 1994 (RSLA). This guide provides an overview of key legal terms and protections to help you navigate the leasing process, though it should not replace the advice of an experienced business lawyer.

What Is a Retail Shop Lease?

A retail shop lease is a legally binding contract where the landlord allows the tenant (typically a business owner) to occupy a property under agreed terms and conditions. Under the RSLA, a lease is considered a retail shop lease if it meets one of the following conditions:

• The premises are located in a Retail Shopping Centre, such as a shopping mall or arcade, with five or more retail shops.
• The premises are on a floor in a multi-level building that contains at least five retail shops.
• The premises are used primarily for conducting a Retail Business as defined in the schedule to the RSLA.

Which Businesses Qualify as Retail Shops?

Retail shop leases generally apply to businesses engaged in the sale of goods directly to consumers. Some examples include:

• Restaurants
• Fashion boutiques
• Pet supply stores
• Bakeries
• Convenience stores

These types of businesses typically enter into retail shop leases under the RSLA.

What Premises Do Not Qualify as Retail Shops?

Certain businesses and premises do not qualify as retail shops under the RSLA, including:

• Premises over 1,000 m²
• Businesses providing services (e.g., hairdressers, gyms, doctor’s surgeries, real estate offices) unless located within a retail shopping centre or multi-level building with at least five retail shops
• Theme parks and amusement parks
• Telecommunication or leisure services
• Warehouses or vehicle parking facilities

These premises and businesses are not governed by the RSLA and may be subject to different leasing regulations.

Protections Under the Retail Shop Leases Act

The RSLA offers significant protections to retail tenants, prohibiting certain practices that are allowed in other types of commercial leases and imposing obligations on landlords. Here are some key protections:

1. Lease Preparation Costs

Landlords cannot require tenants to pay for the landlord’s legal costs in preparing the lease. However, tenants may still be responsible for lease registration costs and surveyor fees, as well as costs related to obtaining the landlord's mortgagee's consent.

2. Disclosure Statement

Before signing a lease, the landlord must provide the tenant with:

• A draft lease
• A disclosure statement outlining essential terms such as rent, term, permitted use, rent increases, and options to renew

This must be given at least 7 days before the tenant enters into the lease. If the disclosure statement contains false or incomplete information, the tenant may terminate the lease within 6 months and seek compensation for any losses incurred.

3. Prohibition of Key Money

Key money is a non-refundable benefit landlords may ask tenants to pay beyond rent and outgoings. The RSLA prohibits such payments. This is different from a security deposit, which is refundable and legally permitted.

4. Rent Reviews

Retail shop leases must specify only one method for annual rent reviews, such as:

• Fixed amount
• Fixed percentage escalation
• Consumer Price Index (CPI) increase
• Market rent review

Ratchet clauses and dual method rent reviews (which prevent rent decreases or allow landlords to choose the highest rent outcome) are prohibited under the RSLA.

Key Clauses in Retail Shop Leases

1. Option to Renew

An option to renew gives tenants the right to extend their lease. Tenants must typically notify the landlord 6 months before the lease expires. In Queensland, tenants have additional rights under the RSLA, such as the ability to request a market rent review before exercising the option.

2. No Option to Renew

If there is no option to renew, the landlord must notify the tenant 6 months before the lease expiration whether they intend to offer a new lease. Failure to do so entitles the tenant to an automatic 6-month renewal upon request.

Compensation and Dispute Resolution

1. Business Disturbance Compensation

Tenants are entitled to compensation if the landlord:

• Fails to maintain or repair the premises (e.g., defects, breakdowns)
• Neglects cleaning or repainting obligations
• Forces the tenant to vacate due to building works (e.g., refurbishment or demolition)

Tenants must notify the landlord of any losses incurred due to these issues to claim compensation.

2. Dispute Resolution

Disputes under the RSLA follow a two-step process:

1. Mediation
2. Queensland Civil and Administrative Tribunal (QCAT) for unresolved matters

Tenants can seek compensation if the landlord substantially restricts access to the premises or disrupts the tenant's business operations.

Unconscionable Conduct

The RSLA prohibits landlords from engaging in unconscionable conduct. This includes:

• Demanding unnecessary conditions
• Using excessive pressure or unfair tactics
• Failing to disclose detrimental information
• Acting in bad faith

FAQs: Retail Shop Leases in Queensland

1. What is a retail shop lease?
A retail shop lease is a legally binding contract for premises primarily used for selling goods directly to consumers, located in a retail shopping centre or a multi-level building with at least five retail shops.

2. Are all businesses eligible for retail shop leases under the RSLA?
No. Certain businesses, such as gyms, real estate offices, and medical practices, are excluded unless they are located within a retail shopping centre or multi-level building with five or more retail shops.

3. Can a landlord charge me for preparing the lease?
No. Under the RSLA, landlords cannot charge tenants for lease preparation legal costs but may charge for lease registration and related costs.

4. What happens if the landlord provides false information in the disclosure statement?
If the disclosure statement contains false or incomplete information, the tenant can terminate the lease within 6 months and claim compensation for any losses.

Final Thoughts

Understanding the protections offered by the Retail Shop Leases Act is essential for any business owner considering a retail lease in Queensland. Before signing a lease, it’s crucial to have a business lawyer review the agreement and provide tailored advice. Proper review and negotiation can ensure that your rights are protected, and your business can operate smoothly within the leased premises.

If you need assistance with your retail shop lease, contact QLD Business + Property Lawyers for expert advice on your leasing rights and obligations.