The Retail Shop Leases Act 1994 (‘the Act’) was enacted in Queensland to protect the interests of small retail business owners. The Act aims to provide transparency and fairness in commercial leasing transactions. Lessors (landlords) and lessees (tenants) must ensure they understand the Act to ensure they’re complying with their obligations. This article outlines key features of the Act, focusing on lessor’s disclosure obligations for lease entry and renewal, disclosure obligations for lease assignments, and the ramifications of failing to adhere to these obligations.
Disclosure Obligations Under The Act
The Act mandates that before a retail shop lease is entered into, renewed, or assigned, certain key information must be provided by the lessor to the lessee. This information aims to ensure that lessees are well-informed about the terms and conditions of the lease, creating a more equitable relationship between the parties and pre-empting potential later legal disputes about the lease.
Lessor’s disclosure obligations for lease entry and renewal: When entering into a new lease agreement, the lessor must provide the prospective lessee with a disclosure statement. This statement contains comprehensive information about the terms of the lease, including details about rent, outgoings, lease term, and any incentives provided. This allows the lessee to make an informed decision regarding the lease agreement.
When it comes to lease renewal, the lessor has the obligation to provide a lessee with a renewal notice and a current disclosure statement at least seven days before the option to renew expires. Failure to do so could lead to disputes and complications during the renewal process.
Disclosure obligations for entering into an assignment of a lease: In cases where a lessee wishes to assign their lease to another party, the Act requires the lessor to provide both the current lessee and the proposed assignee with a disclosure statement. This document must be provided within seven days of receiving a written request from either party. The disclosure statement provides critical information about the lease and allows the assignee to evaluate the terms and conditions before taking over the lease.
It should be noted the prospective assignee can give the assignor a notice to waive the seven-day period for the disclosure statement (but the assignor disclosure must still be given before the lessor is asked to consent), thereby satisfying section s22B(1) of the Act. Failure to comply with this section could result in the assignor and any guarantors continuing to remain liable under the lease for any default by the assignee.
Effect of failure to comply with disclosure obligations: Non-compliance with the disclosure obligations outlined in the Act can have significant consequences for both the lessor and the lessee. If a lessor fails to provide the necessary disclosure statement, the lessee may have the right to terminate the lease within the first six months of the lease term. Additionally, the lessor may face penalties for failing to meet their obligations.
In cases of lease assignment, failure to provide the required disclosure statement can also result in the assignee having the right to terminate the assignment within six months of the assignment taking effect. Therefore, it is important to ensure that disclosure obligations are adhered to within the timeframes specified under the Act to ensure the lease is enforceable for the entirety of the term.
For expert advice contact our professional team
Our team of commercial and property law experts are well versed in the complexities of the Retail Shop Leases Act 1994, helping clients navigate its requirements as a lessor or lessee. We will help you understand the importance of diligently observing the Act’s disclosure requirements before entering a lease, renewing an existing lease, or considering an assignment.