Is your leased property ‘retail premises’?

It has now been 18 months since Cold Storage was decided (and as a result of this and more recent cases relying on the position in Cold Storage), a greater number of leased premises previously thought to be excluded from the Act may now be subject to the ‘tenant friendly’ provisions of the Act. These provisions impose a different set of obligations on both landlords and tenants. 

Below are some points for landlords, agents and leasing managers to keep in mind when negotiating, reviewing or renewing a lease: 

• The actual use of the premises will be the main consideration when determining whether or not a lease falls under the Act and the absence of a specific reference to ‘retail’ (or any express denial of it) may not be sufficient to exclude it.
• The traditional understanding of the distinction between ‘retail’ and ‘wholesale’ no longer applies.
• The ‘retail provision of services’ (one of the defining criteria under the Act) includes any situation where a tenant is providing services to a customer who is the ‘ultimate consumer’ of those services.  This newly clarified interpretation may now change previously held views on what uses were historically considered not to be of a ‘retail’ nature.  In particular, consider circumstances where electronic or online sales are taking place within a premises.  If the e-commerce business is the predominant service provided from the premises, it may be a retail lease.
• The Act will apply to the lease if the use of the premises satisfies the ‘retail’ criteria at the time the lease is entered into or renewed.
• A landlord cannot contract out of the Act by including exclusionary wording in a lease.
• Leases of some retail premises are excluded from the coverage of the Act, including leases where:
  • occupancy costs exceed $1 million per annum; and
  • the tenant is a listed corporation, whether local or foreign, or a subsidiary of one.​
• Under a retail premises lease, the landlord will be responsible for land tax payments, capital costs, and a number of other expenses customarily recovered as outgoings under leases which are not regulated by the Act. Other changes imposed by the Act on a landlord affect matters such as:
  • rent/adjustment review provisions;
  • notice to the tenant of options for renewal; and
  • potential extension of the term (if for example the initial term of the lease is for less than 5 years).
• If a lease is found to be a ‘retail lease’, a tenant may be able to recover any land tax payments made by the tenant to the landlord on the basis that the parties considered the lease to be a commercial premises lease.

Arnold Bloch Leibler’s Property & Development team have extensive experience in the negotiation, preparation and enforcement of all types of commercial, industrial and retail tenancies. We are recognised as a market leader in lease innovation.