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.
