Commercial Tenancy (Retail Shops) Agreements Act 1985

The Act primarily affects three classes of persons: landlords, tenants and their advisers in respect of "retail shop leases" as defined in s 3(1). Tenants are the principal beneficiaries. A tenant is the person entitled to occupy the premises (s 3(1)). The definition of retail shop lease captures most small retail operations—whether standalone or within a centre—provided the lettable area does not exceed 1,000 m² (or is of a prescribed kind) and the tenant is not a listed corporation or its subsidiary meeting the Corporations Act 2001 (Cth) s 9 criteria. Franchisees, independent retailers, cafes, newsagencies and prescribed "specified businesses" all fall within scope. Incoming assignees receive the same statutory protections as original tenants (ss 6(5), 6A(5)), and former tenants retain rights to compensation for pre-assignment conduct or fund repayments on centre closure (ss 12A(7), 12B(7)).

Landlords—defined in s 3(1) to include the grantor, any reversioner but not an assigning tenant—are subject to positive obligations and prohibitions. They must furnish disclosure statements and tenant guides, supply comparable lease data for rent reviews, provide audited outgoings statements, hold sinking and marketing funds on trust-like terms, and refrain from unconscionable or misleading conduct. Head lessors of centres may find their head leases statutorily varied under s 13A where related to the retail tenant and commercial consistency exists. Mortgagees consenting to leases cannot pass legal costs to tenants (s 14B(1)(b)).

The Small Business Commissioner occupies a gatekeeper role. Under ss 25A-25E the Commissioner can attempt resolution or alternative dispute resolution, issue certificates as a precondition to SAT applications (subject to limited exceptions), receive otherwise confidential valuation information (s 25B), and intervene in SAT proceedings. Registered company auditors, land valuers licensed under the Land Valuers Licensing Act 1978, and accountants (defined by membership of prescribed professional bodies in s 3(1)) are drawn into the statutory scheme through mandatory audit and valuation roles.

The State Administrative Tribunal is the primary adjudicator. Its jurisdiction extends to questions arising under a lease (including existence, whether it is a retail shop lease, pre-lease representations, outgoings disputes and unconscionable or misleading conduct). Courts retain concurrent jurisdiction but proceedings cannot run in both forums (s 27). Legal practitioners advising on lease negotiation, assignment or dispute must navigate the voidness rules and implied terms, while shopping centre owners must manage common-area expenses across multiple tenancies in accordance with lettable-area ratios (s 12(3)).

Transitional provisions in Sch 1 cl 5 ensure that certain pre-2013 "existing leases" that only became retail shop leases on 1 January 2013 remain outside the Act entirely, while Sch 1 cl 4 carves out specific 2011 amendments from applying to earlier leases. The Crown is bound (s 5), so government landlords of retail premises must comply. Ultimately, the legislation affects every participant in the Western Australian retail property ecosystem except those expressly excluded by size, corporate status or regulation.

Tenants enjoy a suite of statutory rights. The right to a minimum five-year term (current term plus option) is implied by s 13(1), exercisable by prescribed-form notice at least 30 days before expiry (or such other period as the SAT approves). Termination rights arise for non-disclosure or missing tenant guide (ss 6(1)(a), 6A(1)(a)), with leases terminating 14 days after notice. Compensation rights exist for pecuniary loss from incomplete or misleading disclosure (s 6(1)(b)), failure to provide a tenant guide (s 6A(1)(b)), disruption to trading (s 14), non-renewal linked to opening hours (s 12C(2)), landlord breach of non-discrimination on tenants' associations (s 12D(3)), relocation without prescribed safeguards (s 14A(2)(e)), and unconscionable or misleading conduct (ss 15F(1), 16D(1)).

Tenants may refer any "question arising under the lease" (defined expansively in s 3(3) to include pre-lease representations and outgoings apportionment) to the SAT after Small Business Commissioner certification (s 16, read with ss 25A-25D). They can demand audited outgoings statements and, if these are not provided, withhold payment (s 12(1d)). Turnover information need only be supplied where rent is turnover-based, and even then is protected by the exclusions in s 7(4). Tenants cannot be required to contribute to management fees (s 12(1f)) or amortisation of construction costs (s 12(2)), and land tax recovery is limited to notional land tax on a single-parcel basis (s 12(1g)).

Landlords' key duties include honest completion of disclosure statements (s 6(4)), provision of comparable lease data within 14 days (s 11(3B)), half-cost contribution to outgoings audits (s 12(1b)), segregation and proper application of sinking and marketing funds (ss 12A(3), 12B(3)), and notification of option expiry dates 6-12 months in advance (s 13C(1)). They must act in good faith, avoid unconscionable conduct (having regard to the s 15C(2) factors), and refrain from misleading or deceptive conduct (s 16C). Where a lease is varied by SAT order under s 26(1a) because the tenant was misled as to its meaning, landlords are bound by that variation.

Both parties share the right to SAT determination of market rent where valuers cannot agree (s 11(5)), and to equitable remedies (s 26(4)). Guarantors and assignors are protected by the voiding of post-assignment liability clauses (s 10(3)-(4)). The Small Business Commissioner has statutory functions to assist resolution and provide guidance (s 30A). Protection from liability is afforded to persons exercising powers in good faith (s 28).

The Act is civilly enforced; it creates no criminal offences. Enforcement occurs principally through SAT applications or, where jurisdiction is concurrent, court proceedings (s 27). Compensation for pecuniary loss is the primary remedy. Orders may require payment of money, refund of amounts paid, declaration that money is not owing, variation of leases, termination, or any ancillary order the SAT considers necessary (ss 15F(3)-(6), 16D(3)-(6), 26(1)). The SAT may impose conditions and make interim orders (ss 15F(5)-(6), 16D(5)-(6)).

Failure to provide disclosure statements or tenant guides exposes landlords to termination and compensation orders (ss 6, 6A). Non-compliance with information requests under s 11(3B) can lead to SAT compulsion and potential adverse costs considerations via certificates issued under s 25C(2). Wrongful recovery of operating expenses after non-provision of audited statements triggers repayment obligations and suspension of further liability (s 12(1d)). Deficiencies in sinking or marketing funds must be topped up by the landlord if caused by breach, with claims available for three years after the audited report (ss 12A(5), 12B(5)).

Unconscionable or misleading conduct carries no fixed monetary penalty but opens the door to full compensatory relief, including for foreseeable loss. The six-year limitation periods in ss 15F(2) and 16D(2) provide certainty. Where a landlord obtains SAT approval under s 13(7) for an early termination clause on special circumstances, the lease may be determined earlier than the five-year minimum; conversely, tenants can seek relief under s 13(7b) to avoid the implied option. Breaches of the implied compensation term in s 14 or the relocation safeguards in s 14A sound in damages determined by the SAT if not agreed.

The Commissioner's certificate under s 25C can record party conduct and is relevant to SAT costs orders under s 26(2). Protection from liability in s 28 shields good-faith actors but not those without reasonable and probable cause. Overall, the enforcement mechanism is remedial and restorative rather than punitive, consistent with the Act's protective rather than penal character.

The Act sits within a web of Commonwealth, State and general law. It expressly references the Corporations Act 2001 (Cth) for listed corporation exclusions (s 3(1)), the Community Titles Act 2018 and Strata Titles Act 1985 for retail shopping centre definitions and levy contributions (ss 3(1), 12(3)), the Land Tax Act 2002 and Planning and Development Act 2005 for notional land tax calculations (s 12(3)), the Land Valuers Licensing Act 1978 for rent review valuers (s 11(3)), and the Small Business Development Corporation Act 1983 for Commissioner functions (ss 25A-25E, 30A).

Relationship with the State Administrative Tribunal Act 2004 is preserved: the Tribunal's general powers apply except where modified by the Act (s 25), and compulsory conferences or mediation remain available (s 25). The Act yields to general equitable principles; s 26(4) expressly permits the SAT to grant equitable relief the Supreme Court could grant. Common-law rules on lease assignment, forfeiture and estoppel continue to apply except where displaced (s 3(3)(a)).

Interaction with the Transfer of Land Act 1893 is modified by s 13(10): options arising under s 13 are enforceable against reversioners regardless of registration or caveat. The Act overrides inconsistent lease terms (s 15(2)) and prevents contracting out (s 15(1), Sch 1 cl 6). It does not affect the Interpretation Act 1984 (Sch 1 cl 1).

Commonwealth consumer law overlaps exist. Part IIA's unconscionable and misleading conduct provisions mirror but do not duplicate the Australian Consumer Law (ACL) ss 20-22 and 18; the SAT's specialised jurisdiction and six-year limitation may offer practical advantages over Federal Court proceedings. However, nothing in the Act limits ACL rights (s 15B(3), 16B(4)). The Fair Trading Act 2010 (WA) interacts indirectly through the Commissioner's broader role.

Transitional provisions in Sch 1 ensure continuity for pre-amendment leases, while regulations may exempt classes of persons or premises (s 4(4)-(5)). In insolvency, the Act's implied terms bind liquidators and administrators as lease covenants. Planning and heritage laws may intersect with relocation or refurbishment obligations but do not override the statutory protections.

The most significant recent amendments occurred via the Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011, which commenced on 1 January 2013. That Act inserted the tenant guide requirement (s 6A), expanded the definition of "retail shop lease" to capture more premises, strengthened rent review information rights (s 11(3B)-(3C)), introduced confidentiality controls (s 11A), refined outgoings recovery (s 12), added relocation (s 14A), legal cost (s 14B) and refit (s 14C) protections, overhauled the minimum term rules (s 13), inserted detailed option notification rules (s 13C), and created the pre-SAT certification regime involving the Small Business Commissioner (ss 25A-25E). It also expanded SAT powers to include lease termination (s 26(1aa)) and variation for misleading pre-lease explanations (s 26(1a)).

These changes were driven by a 2009 statutory review and stakeholder consultation revealing persistent imbalances: tenants continued to suffer from inadequate disclosure, opaque outgoings, arbitrary relocation, and high exit costs. The 2011 reforms aimed to reduce information asymmetry, enhance transparency in cost recovery, prevent "landlord opportunism" during lease negotiations or centre redevelopment, and divert disputes from formal adjudication through mandatory early intervention by the Commissioner. The six-year limitation for unconscionable and misleading conduct claims (added in 2006 and retained) aligned the Act with broader consumer protection policy.

Subsequent minor amendments clarified definitions (e.g. community titles in 2018), updated cross-references to new tax and titles legislation, and fine-tuned transitional savings. The periodic five-year reviews required by s 31 have consistently identified the need for ongoing protection of small business tenants against superior bargaining power in a market dominated by institutional landlords. The overall trajectory has been toward greater prescription and procedural safeguards, reflecting a policy judgment that retail tenancy is not a purely contractual relationship but one requiring statutory rebalancing to protect the small business economy.

Although the SAT is the primary forum, Supreme Court and Court of Appeal decisions have clarified key provisions. In Hannaford v Commonwealth Bank of Australia [2012] WASCA 197 the Court considered the interaction of s 13 minimum term rights with head leases, confirming that statutory modification under s 13A operates only where related parties and commercial consistency are established. The decision underscored the relational nature of the "related" test in s 13A(4), drawing on corporations and family law concepts.

Controversy has surrounded the breadth of "unconscionable conduct". SAT decisions applying the s 15C(2) factors have grappled with whether aggressive rent negotiations based on turnover data (s 15C(2)(m)) or insistence on unreasonable fit-out costs (s 15C(2)(n)) cross the threshold. The non-exhaustive list has produced fact-sensitive outcomes, with some members treating good faith (s 15C(2)(k)) as almost a standalone duty. Parallel ACL litigation has created forum-shopping incentives, though s 27 seeks to prevent duplicative proceedings.

The compulsory Commissioner certification process (s 25D) has been challenged on jurisdictional grounds; the SAT has ruled that absence of a certificate is a jurisdictional bar except for prescribed matters. Confidentiality of valuation data under s 11A has generated disputes about what constitutes "publicly available" information (s 11A(2)) and the measure of compensatory damages for breach.

Relocation provisions in s 14A have produced controversy where landlords argue "special circumstances" under s 14A(3) to depart from the prescribed form. Tribunal approval of non-prescribed clauses has been granted sparingly, reflecting a policy of standardisation. The interaction between s 12 outgoings caps and strata levy recoveries has led to disputes over "referable" expenses (s 12(3)), particularly air-conditioning and lift maintenance benefiting both retail and non-retail lots.

Critics argue the Act has become overly prescriptive, increasing compliance costs for smaller landlords and discouraging retail investment. Proponents counter that without it, market failures would harm the small business sector that employs significant numbers of Western Australians. No High Court challenge has yet tested the constitutional validity of the statutory variation of head leases (s 13A) or the compulsory mediation gateway, but academic commentary suggests potential acquisition-of-property issues under s 51(xxxi) of the Constitution if compensation is inadequate. To date, courts have upheld the legislation as a valid exercise of State legislative power over property and commercial relations.

Most practitioners miss that s 3(2) deems any side agreement containing a provision that would be void if in the lease itself to be part of the lease, catching "side deeds" on fit-outs or contributions. The turnover definition in s 7(4) is exhaustive for the purposes of that section but does not automatically apply to lease clauses; landlords sometimes insert broader definitions that inadvertently trigger the voiding rule in s 7(2)(a) if the formula is not crystal clear.

Section 11(3B) compels landlords to provide competitor lease data to valuers; many overlook that this obligation arises on request from either party's valuer and that failure can lead to tenant applications under s 11(3C) plus potential costs sanctions via Commissioner certificates. The "notional land tax" limitation in s 12(1g) is frequently misapplied; where the retail shop comprises only part of the land, only the proportionate notional tax (as if the landlord owned no other land) is recoverable—ignoring actual tax assessments.

Sinking and marketing fund audits under ss 12A and 12B must be delivered within three months of each accounting year end; late delivery suspends tenant contribution obligations from the due date until compliance, a trap that can create cash-flow windfalls for tenants years later. The three-year limitation for fund deficiency claims runs from receipt of the auditor's report, not from discovery of the shortfall—many tenants lose recovery rights through ignorance of this trigger.

Section 13(3a) contains a little-known SAT power to extend the option exercise deadline pending determination of default disputes; combined with the deemed extension of the term, this can create unexpected lease continuations that bind assignees. The relocation protections in s 14A apply even after five years if the clause is not in the exact prescribed form; landlords attempting "special circumstances" applications under s 14A(3) must give notice to the tenant and satisfy the SAT that circumstances are truly exceptional, a high bar rarely cleared.

Unconscionable conduct claims under s 15C can succeed on "good faith" failures alone (s 15C(2)(k)), yet many advisers still treat the concept as requiring egregious misconduct. The six-year limitation in s 15F(2) runs from the conduct, not from discovery, catching stale claims. Finally, the Act's definition of "lease" in s 3(1) includes licences and agreements "whether or not entered into outside the State"; offshore drafting does not evade its operation, a fact that surprises interstate solicitors.

Compliance begins at lease negotiation. Landlords must prepare a fully completed prescribed disclosure statement and ensure the tenant guide is incorporated in the exact prescribed position (ss 6(4), 6A(4)). Both documents should be delivered at least seven days before any binding agreement or possession. Independent legal advice warnings must appear. All potentially contentious clauses—rent review basis, outgoings items and apportionment method, relocation, refit, opening hours, tenants' association rights—must be drafted to survive s 15 scrutiny or be omitted.

For rent reviews, include a single, unambiguous basis (s 11(1)). Market rent clauses must expressly exclude tenant goodwill, stock, fixtures and tenant improvements (s 11(2)). Build in the landlord's obligation to supply comparable data within 14 days and the confidentiality regime. Operating expense clauses must list every recoverable item, specify exact calculation and apportionment formulae by lettable area, payment timing (after annual estimate), and reference the audit requirement. Exclude management fees, construction amortisation and non-referable after-hours costs. Sinking and marketing fund clauses must mirror ss 12A(3) and 12B(3) language on segregation, permitted applications, audit and repayment schemes.

Minimum term compliance requires careful calculation of current term plus option; if under five years, the implied option language should be replicated or at least acknowledged. Where a head lease exists, obtain related-party advice on s 13A modification risks. Option exercise and expiry notices must be timed per s 13C and in prescribed form. Assignment consents cannot reserve ongoing liability (s 10).

Landlords should maintain central registers of disclosure delivery, audited statements and fund accounts. Engage registered company auditors for outgoings and fund reports. Before any relocation or early termination, consider seeking Tribunal pre-approval under ss 13(7) or 14A(3). Implement internal training on unconscionable conduct factors; document all negotiations to demonstrate good faith, reasonable disclosure and willingness to negotiate rent.

Tenants should obtain independent legal and, where relevant, accounting advice before signing. Request comparable lease data early in rent reviews. Retain all disclosure and guide documents. Pay operating expenses only after receipt of compliant estimates and statements; dispute apportionment via the Commissioner pathway before SAT. Form or join tenants' associations without fear, documenting any less favourable treatment.

Both parties should treat the Small Business Commissioner as the first port of call. Keep records for at least seven years given the limitation periods. Where uncertainty exists—particularly on whether premises are a "retail shop" or whether a business is "specified"—seek regulatory clarification or SAT declaratory relief under s 16. Regular compliance audits of existing lease portfolios against the Act's implied terms will minimise future SAT exposure. In all cases, err on the side of transparency: the legislation rewards clear drafting, timely disclosure and good faith dealing while penalising opacity through compensation orders and adverse costs outcomes.