Commercial Tenancy (Retail Shops) Agreements Regulations 1985

CrestWestern Australia

Commercial Tenancy (Retail Shops) Agreements Act 1985

Commercial Tenancy (Retail Shops) Agreements Regulations 1985

Western Australia

Commercial Tenancy (Retail Shops) Agreements Regulations 1985

Contents

Part 1 — Preliminary

1. Citation 1

2. Commencement 1

3. Terms used 1

Part 2 — General matters

3AA. Area of shop defined (Act s. 3(1) lettable area) 2

3AB. Leases prescribed as exempt from Act (Act s. 3(1) retail shop lease) 3

3A. Businesses prescribed (Act s. 3(1) specified business) 3

4A. Landlord exempt from Act s. 13C in some cases 4

4. Disclosure statement, form of (Act s. 6(4)) 4

5. Notice of election, form of (Act s. 7(1)(a)) 4

5A. Hours prescribed (Act s. 12(3) standard trading hours) 5

6A. Lettable area defined (Act s. 12(3) total lettable area) 5

6. Notice of exercise of option, form of (Act s. 13) 5

7. Provisions prescribed for Act s. 13 and 14A 5

8. Tenant guide, form of etc. (Act s. 6A(4)) 6

9. Matters prescribed (Act s. 25D(2)) 6

Part 3 — Transitional regulations arising from the enactment of the Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011

11. Terms used 9

12. Act s. 13C, application of 9

13. Pre-1 July 1999 leases, application of amendments to 10

Schedule 1 — Provisions for retail shop leases

Schedule 2 — Forms

Notes

Compilation table 69

Other notes 70

Defined terms

Western Australia

Commercial Tenancy (Retail Shops) Agreements Act 1985

Commercial Tenancy (Retail Shops) Agreements Regulations 1985

Part 1 — Preliminary

[Heading inserted: Gazette 30 Nov 2012 p. 5831.]

1. Citation

These regulations may be cited as the Commercial Tenancy (Retail Shops) Agreements Regulations 1985.

2. Commencement

These regulations shall come into operation on the day fixed for the coming into operation of the Commercial Tenancy (Retail Shops) Agreements Act 1985.

3. Terms used

In these regulations —

Form means a form in Schedule 2;

option expiry day, in relation to a retail shop lease, that provides, whether directly or by operation of section 13 of the Act, an option or a further option of renewal of the lease exercisable by the tenant, means the date after which the option is no longer exercisable.

[Regulation 3 inserted: Gazette 30 Nov 2012 p. 5832.]

Part 2 — General matters

[Heading inserted: Gazette 30 Nov 2012 p. 5832.]

3AA. Area of shop defined (Act s. 3(1) lettable area)

(1) The lettable area of a retail shop means so much of the surface floor area of the premises as are designed and available for use in carrying on the business that is, or will be, carried on at the shop.

(2) Each of the following areas is not part of the lettable area of a retail shop, unless a particular tenant has a right to the exclusive use of the area —

(a) areas covered by awnings or similar coverings;

(b) balconies;

(c) areas under planter boxes;

(d) terraces;

(e) verandahs;

(f) public spaces;

(g) thoroughfares or access ways for the use of service vehicles or the delivery of goods;

(h) all other areas of a retail shop that are not reasonably capable of being used in carrying on the business that is, or will be, carried on at the shop.

(3) Each of the following areas is not part of the lettable area of a retail shop, if the area is provided as a common facility in the building where the shop is situated, unless a particular tenant has a right to the exclusive use of the area —

(a) access ways;

(b) cupboards;

(c) escalators, stairwells and landings;

(d) fire hose reel cupboards;

(e) lift shafts and lobbies;

(f) plant/motor rooms;

(g) recessed doorways;

(h) storage rooms;

(i) tea rooms and other service areas;

(j) telecommunications cupboards;

(k) toilets;

(l) car park spaces;

(m) entrance halls.

[Regulation 3AA inserted: Gazette 30 Nov 2012 p. 5832-4.]

3AB. Leases prescribed as exempt from Act (Act s. 3(1) retail shop lease)

The following leases are exempt from the operation of the Act —

(a) a lease held by a body corporate whose securities are listed on a stock exchange outside Australia and the external territories that is not otherwise exempt under the Act;

(b) a lease held by a subsidiary (as defined in the Corporations Act 2001 (Commonwealth) section 9) of such a body corporate;

(c) a lease of premises for the purpose of the lessee operating only a vending machine or automatic teller machine on those premises.

[Regulation 3AB inserted: Gazette 30 Nov 2012 p. 5834; amended: Gazette 21 Jul 2017 p. 4021.]

3A. Businesses prescribed (Act s. 3(1) specified business)

Each of the following businesses is prescribed to be a specified business for the purpose of the definition of that expression in section 3(1) of the Act —

(a) drycleaning;

(b) hairdressing;

(c) beauty therapy and treatments;

(d) shoe repair (which may include key cutting and engraving);

(e) sale or rental of video tapes, DVDs, electronic games or other similar amusements.

[Regulation 3A inserted: Gazette 16 Feb 1993 p. 1270; amended: Gazette 30 Nov 2012 p. 5834.]

4A. Landlord exempt from Act s. 13C in some cases

A landlord is exempt from section 13C of the Act in respect of a retail shop lease if —

(a) but for that exemption, the landlord would be required under section 13C of the Act to notify a tenant in writing of an option expiry day provided under the lease; and

(b) the landlord is unable to give that notice within the period of time provided under that section because the notice would need to have been given to the tenant before the commencement of the current term of the lease; and

(c) the landlord has, on or before the commencement of the current term of the lease, notified the tenant in writing of the option expiry day.

[Regulation 4A inserted: Gazette 30 Nov 2012 p. 5835.]

4. Disclosure statement, form of (Act s. 6(4))

A disclosure statement given for the purposes of section 6(4) of the Act shall be in the form of Form 1.

5. Notice of election, form of (Act s. 7(1)(a))

An election under section 7(1)(a) of the Act shall be in the form of Form 2.

5A. Hours prescribed (Act s. 12(3) standard trading hours)

In accordance with section 12(3), and for the purposes of section 12(1)(c), standard trading hours are —

(a) 8.00 a.m. to 6.00 p.m. Monday, Tuesday, Wednesday and Friday; and

(b) 8.00 a.m. to 9.00 p.m. Thursday; and

(c) 8.00 a.m. to 5.00 p.m. Saturday.

[Regulation 5A inserted: Gazette 18 Jun 1999 p. 2601‑2.]

6A. Lettable area defined (Act s. 12(3) total lettable area)

The lettable area of any premises that are not retail shops is to be defined and calculated for the purposes of paragraph (b) of the definition of total lettable area in section 12(3) of the Act in the same manner as is prescribed under regulation 3AA but for that purpose —

(a) a reference in regulation 3AA to “a retail shop” or to “shop” is to be read as a reference to “premises”; and

(b) a reference in regulation 3AA to “in carrying on the business that is, or will be, carried on at the shop” is to be read as a reference to “by the tenant”.

[Regulation 6A inserted: Gazette 30 Nov 2012 p. 5835-6.]

6. Notice of exercise of option, form of (Act s. 13)

A notice under section 13(1) of the Act by which the option referred to in that section is exercised shall be in the form of Form 3.

7. Provisions prescribed for Act s. 13 and 14A

The provision set out in Schedule 1 column 2 —

(a) opposite item 1 is prescribed under section 13(6)(da) of the Act for the purposes of section 13 of the Act; and

(b) opposite item 2 is prescribed under section 14A(1)(a) of the Act for the purpose of section 14A of the Act.

[Regulation 7 inserted: Gazette 30 Nov 2012 p. 5836.]

[8. Deleted: Gazette 30 Dec 2004 p. 6907.]

9. Tenant guide, form of etc. (Act s. 6A(4))

(1) The tenant guide shall be in the form of Form 4.

(2) The tenant guide is to be located at the front of the retail shop lease to which it relates.

[Regulation 9 inserted: Gazette 18 Jun 1999 p. 2602; amended: Gazette 30 Nov 2012 p. 5836.]

10. Matters prescribed (Act s. 25D(2))

Section 25D(1) of the Act does not apply in respect of the matters set out in the Table.

Table

[Regulation 10 inserted: Gazette 23 Mar 2012 p. 1365‑6; amended: Gazette 30 Nov 2012 p. 5837-9.]

Part 3 — Transitional regulations arising from the enactment of the Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011

[Heading inserted: Gazette 30 Nov 2012 p. 5839.]

11. Terms used

In this Part —

2011 amending Act means the Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011;

commencement day means the day on which the 2011 amending Act section 3 comes into operation 1.

[Regulation 11 inserted: Gazette 30 Nov 2012 p. 5839.]

12. Act s. 13C, application of

(1) Section 13C of the Act does not apply in respect of a retail shop lease if commencement day is during the period of 6 months before the option expiry day for that retail shop lease.

(2) If a landlord is required under section 13C of the Act to notify a tenant in writing of an option expiry day and commencement day is during the period described in column 1 of the Table then that section applies in respect of the retail shop lease as if subsection (1) of that section was modified to provide that the period of time during which the landlord is required to notify the tenant was the period set out in column 2.

Table

[Regulation 12 inserted: Gazette 30 Nov 2012 p. 5839-40.]

13. Pre-1 July 1999 leases, application of amendments to

(1) In this regulation —

existing retail shop lease has the meaning given in Schedule 1 clause 3 of the Act;

pre-1 July 1999 lease means a retail shop lease that was an existing lease, as defined in the Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 section 14(1), in relation to a provision of that Act.

(2) The amendments effected by the 2011 amending Act, other than —

(a) the amendments to section 11(2) of the Act set out in section 8(1) of that amending Act; and

(b) the amendments to section 12 of the Act set out in section 10 of the amending Act,

apply to, and in relation to, a pre-1 July 1999 lease in the same way as they apply to, and in relation to, an existing retail shop lease.

(3) Section 8(1) of the 2011 amending Act is to be taken to amend section 11(2) of the Act, as that provision applied to and in relation to a pre-1 July 1999 lease immediately before commencement day, as if it read as follows:

(1) In section 11(2) delete “lease.” and insert:

lease, and is not to take into account the value of —

(a) the goodwill of the business carried on in the retail shop; or

(b) any stock, fixtures or fittings in the retail shop that are not the property of the landlord; or

(c) any structural improvement, or alteration, of the retail shop carried out, or paid for, by the current tenant.

(4) Other than as specified in this regulation, the amendments effected by —

(a) the 2011 amending Act; and

(b) the Commercial Tenancy (Retail Shops) Agreements Amendment Regulations (No. 2) 2012,

do not affect the operation of the Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 section 14.

[Regulation 13 inserted: Gazette 30 Nov 2012 p. 5840-2.]

Schedule 1 — Provisions for retail shop leases

[r. 7]

[Heading inserted: Gazette 30 Nov 2012 p. 5842.]

[Schedule 1 inserted: Gazette 30 Nov 2012 p. 5842-54.]

Schedule 2 — Forms

[Heading inserted: Gazette 30 Nov 2012 p. 5855.]

FORM 1

Commercial Tenancy (Retail Shops) Agreements Act 1985

Section 6(4)

[r. 4]

DISCLOSURE STATEMENT

Part 1 Premises

Part 2 Lease term and option/s to renew lease

Part 3 Works, fitout and refurbishment

Part 4 Rent

Part 5 Outgoings/Operating expenses

Part 6 Other costs

Part 7 Alteration works (including renovations,
extensions, redevelopment, demolition)

Part 8 Trading hours

Part 9 Retail shopping centre details

Part 10 Group of premises

Part 11 Other disclosures

Part 12 Landlord acknowledgments and signing

Part 13 Tenant acknowledgments and signing

Part 14 Attachments

• Landlord
• Tenant
• Premises
• KEY DISCLOSURE ITEMS
• 1 Annual base rent under the lease See item 10.1 $ p.a. Including GST/Excluding GST
• 2 Is rent based on turnover payable by the tenant in year 1 See item 12 🞏 Yes🞏 No
• 3 Total estimated outgoings/operating expenses, promotion and marketing costs and contributions to sinking fund for the tenant in year 1 See item 14.2 and Part 6 $ Including GST/Excluding GST
• 4 Term of the lease See item 5.2 Years months
• 5 Commencement date is See item 5.1 / /20 Actual/estimated*[Insert the commencement date, or details of how the commencement date is to be determined, e.g. on receipt of council approval]*
• 6 Handover date is See item 7.1 / /20 Actual/estimated*[Insert the handover date, or details of how the handover date is to be determined, e.g. on receipt of council approval]*
• 7 Does the tenant have an option to renew for a further period (to be exercised in the manner specified, on or before the last date stated in the option clause) See item 6 🞏 Yes ‑ see item 6.1🞏 No
• 8 Does the lease provide the tenant with exclusivity in relation to the permitted use of premises See item 2.2 🞏 Yes🞏 No

[Form 1 inserted: Gazette 30 Nov 2012 p. 5855-78.]

FORM 2

Commercial Tenancy (Retail Shops) Agreements Act 1985

Section 7(1)(a)

[Reg. 5]

NOTICE OF ELECTION THAT RENT BE DETERMINED BY REFERENCE TO TURNOVER

TO ........................................................................................................................

........................................................................................................................

........................................................................................................................

(Full name and address of the landlord)

1. Where retail shop is in a retail shopping centre —

........................................................................................................................

(Name and address of retail shopping centre)

........................................................................................................................

(Number of the retail shop)

or

2. Where the retail shop is not in a retail shopping centre —

........................................................................................................................

(Address of retail shop)

3. Where the tenant has entered into occupation of the retail shop —

.......................................................................................................................

(the business name under which the tenant conducts business)

I,..............................................................................................................................

(Full name of tenant)

of ............................................................................................................................

(residential address of tenant, or address of registered office if tenant is
a body corporate)

being the tenant of the abovenamed retail shop, give notice that I elect that the rent is to be determined *in whole/*in part by reference to the turnover of the business.

Dated:

..............................................................

(Signature of tenant or where tenant is a body corporate, the signature of a person duly authorised by the body corporate to give this notice).

• Strike out whichever does not apply.

[Form 2 amended: Gazette 18 Jun 1999 p. 2606.]

FORM 3

Commercial Tenancy (Retail Shops) Agreements Act 1985

Section 13(1)

[Reg. 6]

NOTICE OF EXERCISE OF OPTION

TO ..........................................................................................................................

of.............................................................................................................................

(Full name and address of landlord as
shown for service of notices in lease)

1. Where a retail shop is in a retail shopping centre —

......................................................................................................................

(Name and address of retail shopping centre)

......................................................................................................................

(Number of retail shop)

or

2. Where retail shop is not in a retail shopping centre —

......................................................................................................................

(Address of retail shop)

3. ......................................................................................................................

(Business name under which tenant conducts business)

I, ...........................................................................................................................

(Full name of tenant)

...........................................................................................................................

(Residential address of tenant or address of registered office if tenant
is a body corporate)

being the tenant of the abovenamed retail shop under —

(a) a lease dated ......................................., between......................................................................................................

(insert the names of each party to the lease and the capacity
of each party, e.g. lessor, lessee, guarantor)

and (where applicable)

(b) an assignment of lease dated ........................................

between .....................................................................................................

...................................................................................................................

(insert the names of each party to the assignment of lease and the capacity of each party, e.g. lessor, assignor, assignee, guarantor)

The current term of the lease of the abovenamed retail shop expires on ............... ....................

Under section 13(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985, I give notice that I exercise my option to renew the lease of the abovementioned retail shop for a term commencing immediately after the expiry of the current term and expiring on ..............................

Date: ................................................

(Signature of tenant or if tenant is a body corporate, the signature of a person duly authorised by the body corporate to give this notice).

[Form 3 amended: Gazette 18 Jun 1999 p. 2606.]

FORM 4

Commercial Tenancy (Retail Shops) Agreements Act 1985

Section 6A

[r. 9]

TENANT GUIDE

FOR NEW RETAIL SHOP LEASES FROM 1 JANUARY 2013

This guide is intended to assist you, as a tenant, to understand some of your legal rights and obligations in relation to a retail shop lease under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (the Act). This guide does not replace financial, legal or business advice.

The Act and the regulations are available from the State Law Publisher at www.slp.wa.gov.au 2.

WHAT IS A RETAIL SHOP LEASE?

Entering into a lease for a retail shop means that you (the tenant or lessee) are entering into a legally binding contract with the landlord (or lessor). The lease agreement sets out your rights and obligations in relation to the use of the retail shop.

A lease cannot override the requirements of the Act.

The Act regulates some of the provisions which may be contained in your lease agreement, including the following:

• rent reviews

• options to renew a lease

• terminating a lease

• operating expenses (or outgoings)

• trading hours.

Which leases are covered by the Act?

The Act generally applies to leases for premises with a lettable area of 1 000 m2 or less:

• that are used for carrying on a business and that are in a retail shopping centre

• that are not in a retail shopping centre, but that are used (or predominantly used) for the sale of goods by retail

• that are used for conducting a ‘specified business’ — specified businesses include, drycleaning, hairdressing, beauty therapy, shoe repair and video or DVD stores (a list of all specified businesses is available from the Department of Commerce at www.commerce.wa.gov.au).

There are some retail shops with a lettable area greater than 1 000 m2 that are also covered by the Act — a list of these premises can be obtained from the Department of Commerce at www.commerce.wa.gov.au.

The Act generally does not apply to leases to publicly listed companies.

(See section 3(1) of the Act, definition of retail shop lease.)

When is the lease “entered into”?

A lease is usually entered into when both parties have signed it. However, a lease is still valid even if the lease document hasn’t been signed by the parties if:

• the tenant takes possession of the shop premises; or

• the tenant starts paying rent.

(See section 3(4) of the Act.)

INFORMATION YOU SHOULD HAVE BEFORE ENTERING INTO A LEASE

Before entering into a lease you should do the following:

• carefully read this tenant guide

• carefully read the disclosure statement provided by the landlord or the landlord’s agent

• carefully read any written lease document (including any assignments, extensions or deeds of variation)

• obtain independent financial, legal and business advice.

Rent, the term of the lease, options, outgoings and related costs are open to negotiation with the landlord. Make sure that you understand these, and all other aspects of the lease, before signing it. To avoid disputes at a later stage, you should make sure that all agreements that you have made are in writing and that the lease documents are consistent with any representations made by the landlord or the landlord’s agents.

Tenant Guide to be located in lease

A new retail shop lease must include this tenant guide at the front of the lease.

If the landlord does not give you a tenant guide, you may have the right to do either or both of the following:

• terminate (end) the lease at any time up to 60 days after the lease was entered into (after this time you may apply to the State Administrative Tribunal for an order to terminate the lease)

• apply to the State Administrative Tribunal for an order for compensation for any monetary loss suffered by you.

(See section 6A of the Act.)

Disclosure statement to be given to you by landlord

At least 7 days before a lease is entered into the landlord must give you a disclosure statement. The disclosure statement sets out important facts about the retail shop and the lease. A copy of this tenant guide, the form of lease and annual estimates of expenditure in relation to operating expenses should be attached to the disclosure statement.

If the landlord does not give you a disclosure statement or gives you a disclosure statement that is incomplete or contains incorrect information you may have the right to do either or both of the following:

• terminate (end) the lease at any time up to 6 months after the lease was entered into

• apply to the State Administrative Tribunal for an order for compensation for any monetary loss you have suffered.

The disclosure statement should be in a prescribed form (this form is Form 1 of Schedule 2 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at www.commerce.wa.gov.au). It is important to read the statement carefully and make sure it includes all verbal and written agreements, promises or commitments made during negotiations with the landlord or the landlord’s agent (for example, any representations about customer traffic).

The disclosure statement should also contain details about the following:

• the landlord’s property, such as the total lettable area, tenancy mix and services provided

• the shop premises, such as location, area and services provided

• key terms and conditions of the lease such as rent, term of the lease, options to extend the term and rent review

• permitted use of the premises

• your contribution to the landlord’s expenses (operating expenses)

• any additional charges payable by you, such as shop fitout or contributions to marketing and sinking funds.

By signing the disclosure statement you are acknowledging that you understand the basis for the retail shop lease with the landlord. If you do not understand or agree with anything in the disclosure statement you should advise the landlord immediately.

It is vital that you are satisfied that the disclosure statement sets out all relevant information regarding the retail shop and (where applicable) the shopping centre building and property. If necessary, you should check details by making relevant enquiries and by seeking appropriate independent legal or expert advice.

(See section 6 of the Act.)

Disclosure by the tenant

The landlord may ask for details of your retailing experience and financial capacity to establish and trade profitably and professionally. Any information provided to the landlord by you must also be correct and contain no misleading information.

PERMITTED USE OF THE RETAIL SHOP

The permitted use clause in a lease is very important as it sets out the type of business that you can run from the premises. You should ensure that the description of permitted use is broad enough to cover the type of business that you want to operate and, if anticipated, to allow you to expand the business.

The kind of things to consider about permitted use include:

• for a hairdresser, does the permitted use include providing beauty treatments?

• for a takeaway shop, can the type of food be changed?

• your future plans for the business.

You should also check that any local government approvals are in place for the type of business that you plan to operate. Avoid potential disputes by getting the approvals you need in writing.

A permitted use clause in a lease does not mean that you have the exclusive right to carry on a particular type of business in a shopping centre. Exclusivity is a separate issue that needs to be agreed separately with the landlord and included in the lease agreement.

TERM OF THE RETAIL SHOP LEASE

The term of a lease is the length of time for which you can rent the shop. The lease must set out the lease term and may also include one or more options to renew or extend the term.

The length of the term of the lease is critical because it should be long enough to enable you to recover your investment, make a profit and sell the business, if you wish.

Minimum of 5 years

In most cases, the Act gives a tenant who is entering into a new lease a right to a minimum 5 year lease term. The 5 year term can be a combination of the initial term and options to extend the lease (for example, an initial term of 2 years and an option to renew of 3 years). The initial term does not need to be 5 years.

If the lease does not provide for options to extend the lease to a 5 year term, you have a legal right to do so (often called a “statutory option”). You can exercise this option by giving the landlord written notice in the standard form at least 30 days prior to the expiry of the term of the lease (the standard form is Form 3 of Schedule 2 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at www.commerce.wa.gov.au). Although the Act allows you to extend the lease to a 5 year term, you do not need to extend the lease for the whole of this period if you choose not to.

The right to a 5 year term will only apply to retail shop leases with a term of more than 6 months (this includes any lease where the tenant has been continuously in possession of the premises for more than 6 months).

(See section 13 of the Act.)

The term can be longer or shorter than 5 years

Even though the Act gives tenants a right to a minimum 5 year term, you can negotiate a term that is longer than 5 years (for example, a 10 year term, or a 5 year initial term with 2 options to renew for a further 5 years each).

In some circumstances, you may agree to a term shorter than 5 years, but this must be your decision and needs to be approved by the State Administrative Tribunal.

(See section 13(7b) of the Act.)

Exercising an option to renew

It is important that you exercise an option to renew a lease in the way set out in the lease (you may need to let the landlord know in writing and within certain timeframes). If you do not exercise an option to renew properly the landlord may not be obliged to renew the lease.

The Act requires the landlord to give you written notice of the expiry date for any options to renew (the date on which the option to renew is no longer valid). You must receive this notice between 6 and 12 months before the expiry date. If the landlord fails to give you notice the option expiry date may be extended.

(See section 13C of the Act.)

At the end of the lease term

At the end of the term of the lease and the use of any options to renew the lease, the landlord does not have to renew the lease and you will have no further rights to occupy the premises. In some instances the landlord may allow you to continue to occupy the premises on a month to month basis.

Within 12 months before the end of the lease term you can make a written request to the landlord asking whether the landlord intends to renew the lease. The landlord must reply to such a request in writing within 30 days.

(See section 13B of the Act.)

Does the lease include redevelopment or relocation clauses?

Many leases include a clause allowing a landlord to terminate a lease before the end of the agreed lease term if the premises are to be redeveloped. In some instances the landlord may offer to relocate a tenant to alternative premises.

For the initial 5 years of a lease term, a redevelopment or relocation clause may only be included in a lease if:

• it is in the prescribed form (see item 2 of Schedule 1 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at www.commerce.wa.gov.au); or

• it has been approved by the State Administrative Tribunal (if the parties have agreed to a provision that is different to the prescribed form).

If 5 years of the term have already expired, then the clause must be in accordance with the provisions of the Act — which sets out requirements in relation to notice, offer of alternative premises, payment of the tenant’s reasonable costs and payment of compensation.

(See section 14A of the Act.)

RENT

Rent is usually the largest ongoing payment required under a lease. The Act does not regulate what the rent should be. However, the Act includes some rules relating to rent based on turnover and review of rental.

Types of rent

The initial rent for a shop is a matter for negotiation between the landlord and the tenant. Rental for retail shops can vary considerably depending on the location, the size of the shop, the term of the lease and the type of business.

Some common methods of determining rent are:

• net rent — an agreed base rent plus a contribution to the landlord’s operating expenses or outgoings

• gross rent — an all inclusive payment for all the shop’s occupancy costs

• semi‑gross rent — an amount charged for rental inclusive of some outgoings (for example, the tenant may pay the semi‑gross rent plus its proportion of rates and taxes)

• turnover rent or percentage rent — a component of rent that is determined as a percentage of the tenant’s turnover during a specified period.

Rent based on turnover

Some leases base rent (or a part of the rent) on a percentage of the turnover of the tenant’s business.

If you have agreed to a rent based on turnover, then:

• the lease must set out an agreed formula

• your agreement must be formalised in writing on the prescribed form before the lease is entered into (the prescribed form is Form 2 of Schedule 2 to the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and is available from the Department of Commerce at www.commerce.wa.gov.au).

The Act also recognises the confidentiality of turnover figures to a retail business and limits the use of this information.

(See section 7 of the Act.)

RENT REVIEW

Most leases will state that the rent will be reviewed at regular intervals.

At each review time the lease must set out a single basis on which the rent is to be reviewed, this can include:

• the market rent

• an increase by reference to the Consumer Price Index (CPI)

• a set percentage increase

• an agreed formula or combination, for example, CPI + 2%.

The types of review may vary over the life of the lease (the lease may state that reviews are to alternate between CPI and market review). However, the lease cannot give the landlord the right to choose the greatest return from a range of rent types at any one review (for example, the lease cannot state that the increase is to be CPI or 5% whichever is higher).

Market rent

The Act provides that market rent is the rent obtainable for the retail shop in a free and open market if it were vacant and to be let on similar terms.

The market rent is not to take into account:

• the goodwill of the business

• any stock, fixtures or fittings that are not the property of the landlord

• any structural improvements paid for or carried out by the current tenant.

Market rent review

If your lease specifies a market rent review, the Act provides that both parties can initiate the market rent review process and if the parties cannot agree on the rental:

• appoint a licensed valuer (agreed to by both parties) to determine the new rental; or

• request that the Small Business Commissioner appoint a valuer to determine the rental; or

• each appoint a valuer to determine the rental.

A landlord is required under the Act to provide a valuer with certain information in relation to retail shops in a shopping centre or in the same building in order to assist the valuer to decide the market rent. A valuer must keep this information confidential.

A disagreement regarding the new rent may be referred to the Small Business Commissioner for mediation or to the State Administrative Tribunal for determination. Until the new rent is agreed, the current rent continues to apply. Once the higher or lower rent is agreed, adjustments will be backdated to the review date.

No “ratchet” clauses

Any provision in a lease about a market review that seeks to prevent the rent from rising or falling above or below a certain level is void. The lease must allow the rent to rise or fall to a level supported by market evidence, for example, a clause cannot stop the rent from decreasing on a market review.

(See section 11 of the Act.)

CONTRIBUTION TO THE LANDLORD’S OPERATING EXPENSES OR OUTGOINGS

You may be required to contribute to a proportion of the landlord’s expenses. The landlord’s expenses are described in the Act as operating expenses. Leases can also refer to them as “outgoings or variable outgoings”.

Operating expenses are the costs of operating, repairing or maintaining the landlord’s premises including any building common areas. Typically these costs include the rates and taxes, cleaning, air conditioning, security, insurances and other valid expenses of running the property.

Details about the operating expenses and their payment are to be set out in the lease and the disclosure statement.

No capital expenses or management fees

The landlord cannot recover the following from you as an operating expense:

• management fees

• capital expenditures in relation to a retail shopping centre (for example, asset replacement)

Operating expenses are not to exceed the “relevant proportion”

Your contributions to operating expenses are negotiable. The Act provides that a tenant cannot be required to contribute more than the “relevant proportion” in relation to an operating expense. Nothing prevents you from negotiating with the landlord to pay less than the relevant proportion.

The relevant proportion is calculated by comparing the lettable area of your shop to the total lettable area of the shopping centre or the group of premises to which the expense relates.

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Referable expenses

In certain circumstances an operating expense may be incurred in relation to only some of the businesses in a centre or group of premises, for example, specialised cleaning used by only a few tenants. This is called a “referable expense” and can be allocated using the total lettable area of only the shops to which the referable expense relates.

Landlord to provide estimates and statements for operating expenses

In order to recover operating expenses from you, the landlord must provide you with:

• an annual estimate of expenditure for each operating expense

• an audited operating expenses statement for each accounting period detailing all expenditure by the landlord (this statement must be given within 3 months after the end of the accounting period).

(See section 12 of the Act.)

SINKING FUNDS

If your shop is in a shopping centre and you have agreed to contribute to a fund for major repair and maintenance works, your contributions are protected under the Act. These funds are subject to accounting and audit provisions and should not be spent by the landlord on anything other than the purpose for which they are collected. These costs may be in addition to operating expenses charged under the lease.

Capital works must be paid for by the landlord and would include such works as the construction of extensions to the shopping centre and the replacement of major plant and equipment.

(See section 12A of the Act.)

OTHER FUNDS AND RESERVES

The landlord is also required to properly account for the administration, expenditure and auditing of any other funds or reserves that you have agreed to contribute to for specific purposes such as for marketing or promotion. These costs may be in addition to operating expenses charged under the lease.

(See section 12B of the Act.)

FITOUT AND REFURBISHMENT

Tenants are usually responsible for the costs of installing fixtures and fittings in the shop (the fitout). There may be a standard of construction required for fitouts. You may also be responsible for some or all of the landlord’s costs of preparing the shop for the fitout.

Fitout requirements must be detailed in the disclosure statement.

A provision in a lease requiring a tenant to contribute to the cost of any of the landlord’s finishes, fixtures, fittings, equipment or services will be void unless the disclosure statement notifies the tenant about the effect of the provision.

(See section 12(3A) of the Act.)

The Act provides that a clause about refurbishment or refitting will be void unless it provides the tenant with enough detail about the required refurbishment or refitting as is necessary to indicate the nature, timing and extent of work required.

(See section 14C of the Act.)

LEGAL FEES

The Act prohibits the landlord from claiming legal or other expenses from you relating to:

• the negotiation, preparation or execution of the lease (or any renewal or extension of the lease)

• obtaining the consent of a mortgagee to the lease

• the landlord’s compliance with the Act.

However, if you assign your lease or sub‑let the premises, the landlord may claim from you any reasonable legal or other expenses incurred in connection with the assignment or sub‑letting.

(See section 14B of the Act.)

TRADING HOURS

The trading hours for your shop may be affected by a number of matters.

Retail trading hours legislation in Western Australia sets out those hours that retailers may open (this can vary depending on the type of business you operate).

If your retail shop is located inside a shopping centre then for practical reasons the opening and closing times for the centre (core hours) may be different to the trading hours permitted by law. This should be set out in the disclosure statement by the landlord.

When do you have to open your shop?

A clause in a lease which requires you to open your premises at specified hours or for specified times is void under the Act. For example, you cannot be required to open your shop for the core hours for a centre. You can choose which hours to open your shop.

If you believe that your lease has not been renewed because you did not open at certain times you can apply to the State Administrative Tribunal for compensation.

(See section 12C of the Act.)

Standard trading hours and operating expenses

The Act also sets out “standard trading hours” which are used only for the purposes of allocating operating expenses.

For the purposes of allocation of operating expenses “standard trading hours” are:

• 8.00 a.m. to 6.00 p.m. Monday, Tuesday, Wednesday and Friday

• 8.00 a.m. to 9.00 p.m. Thursday

• 8.00 a.m. to 5.00 p.m. Saturday.

The Act provides that if you do not open outside standard trading hours, then you cannot be charged operating expenses related to the extended hours (for example, additional security costs).

If, however, you do open outside the standard trading hours, you may be required to pay operating expenses related to the extended hours. These expenses should be calculated based on the lettable area of those shops which were open during the extended hours.

If you are closed for a period during the standard trading hours (for example, if you do not open your shop until 10 a.m.), you may still be charged operating expenses for the time that you are closed, that is, between 8.00 a.m. and 10.00 a.m..

(See section 12(1)(c) of the Act.)

VOID CLAUSES

The lease agreement and any other verbal or written agreements cannot include clauses that are contrary to any provision in the Act.

In addition, the Act specifically precludes the lease or any other agreement from containing clauses that:

• require a tenant to pay key money, which is any money or other benefit in addition to rent paid to the landlord or others for the right to lease retail shop premises (See section 9 of the Act.)

• prevent the tenant disclosing the rent it has agreed to third parties, such as other retail tenants or their valuers (See section 11(2a) of the Act.)

• require the tenant to contribute to any fund that applies moneys to capital expenditure in a shopping centre, such as new building works (See section 12(2) of the Act.)

• require a tenant to open for specified hours or during specified times (See section 12C of the Act.)

• prevent a tenant from joining a tenant’s association or similar body (See section 12D of the Act.)

• require a tenant to provide turnover figures to the landlord, unless the tenant has agreed to pay rent based on turnover (See section 8 of the Act.).

DISRUPTIONS — COMPENSATION BY THE LANDLORD

The Act states that, if your shop is in a shopping centre, you are entitled to seek reasonable compensation from the landlord if the landlord:

• inhibits or prevents your, or customer, access to the shop premises

• disrupts trading conditions, causing loss of profits to your business

• does not properly repair, maintain or clean the shopping centre premises or common areas.

You will only be entitled to compensation from the landlord if you have given the landlord notice in writing to rectify the problem and the landlord has not done so.

If you cannot agree the amount of compensation with the landlord, you can make an application to the State Administrative Tribunal for a decision as to the amount payable.

In most cases, before making an application to the State Administrative Tribunal you must attempt to resolve the matter through the Small Business Commissioner’s dispute resolution processes.

(See section 14 of the Act.)

UNCONSCIONABLE CONDUCT AND MISLEADING AND DECEPTIVE CONDUCT

The Act provides that neither the landlord nor the tenant can engage in conduct that is:

• unconscionable (conduct that is so harsh, oppressive or unreasonable that it goes against good conscience)

• misleading or deceptive.

The State Administrative Tribunal can hear a claim for unconscionable conduct or misleading and deceptive conduct and may make an order for payment of compensation or another appropriate order (such as an order to vary a lease or an order that a party stop doing something).

In most cases, before making an application to the State Administrative Tribunal you must attempt to resolve the matter through the Small Business Commissioner’s dispute resolution processes.

(See Part IIA of the Act.)

ASSIGNMENT AND SUB‑LEASING

During the term of the lease, your circumstances may change and you may want to sell your business and assign your lease or sub‑let all or part of the premises.

Your responsibilities if you assign your lease

If you assign your lease the new tenant “takes over” and assumes all your rights and responsibilities including rent and any other obligations under the lease from the date of assignment.

Although the Act gives you a right to assign your lease, the landlord may withhold consent on reasonable grounds. Examples of reasonable grounds include:

• if the landlord believes that the new tenant would not be able to meet their financial obligations; or

• if the proposed use of the premises is contrary to the use permitted in the lease.

You will need to write to the landlord seeking consent for assignment of the lease. If the landlord doesn’t reply within 28 days, you are entitled to assume the landlord has consented to the assignment.

You may have to pay the landlord’s reasonable expenses for assessing a prospective tenant to take over your lease.

Your responsibilities if you sub‑lease your shop

If you sub‑let all or part of your premises you effectively become the landlord and the person you sub‑let to is your tenant. Sub‑leasing means that you will still be responsible under the lease to your landlord (for example, you may be liable for the rent if the sub‑lessee does not pay).

You will also have obligations to the person you sub‑let to, for example, you will need to provide a tenant guide and disclosure statement to your sub‑tenant.

Your lease may include restrictions on sub‑leasing. You should check your lease and seek advice as to its requirements on sub‑leasing.

You may need to write to the landlord seeking consent to sub‑lease. If the landlord doesn’t reply within 28 days, you are entitled to assume the landlord has consented to the sub‑lease.

(See section 10 of the Act.)

DEFAULT OR BREACH OF LEASE

Most leases allow the landlord to terminate (or end) the lease on a breach or default by the tenant (for example, failure to pay rent). You should ensure that you understand the procedures set out in the lease in relation to default. For example, in many instances, your obligation to pay future rent will continue even after a lease has been terminated.

DISPUTES BETWEEN THE TENANT AND LANDLORD

State Administrative Tribunal

If you are unable to resolve a dispute with your landlord over any aspect of your retail shop lease the Act allows the State Administrative Tribunal to deal with these disputes.

Either you or the landlord may initiate this action with the Tribunal by making an application and paying the appropriate fee. The Tribunal generally deals with matters through an initial directions hearing, a mediation process or in a hearing.

(See section 16 of the Act.)

Small Business Commissioner

In most cases, before making an application to the State Administrative Tribunal you must attempt to resolve the matter through the Small Business Commissioner’s dispute resolution processes.

(See Part III of the Act and regulation 10.)

KEEP RECORDS

You should make sure that you keep records of all agreements, undertakings, correspondence (including emails) and other communications with the landlord. Where possible you should confirm things in writing.

Make sure that you diarise important dates in relation to your lease.

If you need to make a claim in the Tribunal you will need to provide appropriate evidence to support your claim.

[Form 4 inserted: Gazette 30 Nov 2012 p. 5878-901.]

[Form 5 deleted: Gazette 30 Dec 2004 p. 6907.]

[Form 6 deleted: Gazette 30 Nov 2012 p. 5901.]

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Notes

This is a compilation of the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 and includes amendments made by other written laws. For provisions that have come into operation, and for information about any reprints, see the compilation table.

Compilation table

Other notes

1 The Commercial Tenancy (Retail Shops) Agreements Amendment Act 2011 s. 3 commenced on 1 Jan 2013 (see s. 2(b) and Gazette 30 Nov 2012 p. 5773).

2 The Act and the regulations can be accessed electronically at www.legislation.wa.gov.au.

Defined terms

[This is a list of terms defined and the provisions where they are defined. The list is not part of the law.]

Defined term Provision(s)

2011 amending Act 11

commencement day 11

existing retail shop lease 13(1)

Form 3

landlord Sch. 1

new retail shop Sch. 1

option expiry day 3

pre-1 July 1999 lease 13(1)

redevelopment Sch. 1

retail shop Sch. 1

retail shopping centre Sch. 1

standard trading hours 5A

substitute lease Sch. 1

tenant Sch. 1

termination date Sch. 1, Sch. 1

termination notice Sch. 1