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Part Part 2 - Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 - Requirements applicable to all premises | Zoe

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Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998

Part 2Requirements applicable to all premises

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Part 2 Requirements applicable to all premises

3. Unconscionable conduct

(1) A person must not engage in conduct that is harsh, unjust or unconscionable.

(2) Without limiting the generality of subclause (1) , unconscionable conduct may include the threat by a property owner –

(a) to subsidise a competitor to the tenant in nearby premises; or

(b) not to renew a lease unless the tenant –

(i) agrees to a proposal of the property owner; or

(ii) is prepared to pay a rental in excess of the market value rent.

4. Clarity of documentation

A disclosure statement, lease or other document is to be –

(a) easily legible and clearly expressed; and

(b) printed clearly in a minimum print size of 10 point.

5. Negotiation of leases

(1) A person must not make a representation to another party that the person knows is not accurate, truthful and without omission of any material matter at the time it is made.

(2) A property owner is to provide to a tenant a copy of the proposed lease and a copy of this Code as early as practicable in the negotiations.

(3) A person must not offer to enter into a lease or invite an offer to enter into a lease unless the person has a written copy of the proposed lease available for inspection by a prospective lessee.

6. Disclosure statements

(1) A property owner is to give a tenant a disclosure statement at least 7 days before the earliest of the following:

(a) the signing of a written lease;

7. Failure to give accurate statement

(1) A property owner must notify a tenant in writing of any material change to the information in the disclosure statement that occurs after the disclosure statement is given to the tenant but before a lease is signed or the tenant enters into possession of the premises, whichever is the earlier.

(2) Notification under subclause (1) is to be provided to the tenant before the tenant signs the lease or enters into possession of the premises.

(3) Where a property owner fails to notify the tenant of any material changes, or the notification contains false or misleading information, the tenant, in addition to exercising any other rights, may give the property owner written notice of termination of the lease at any time within 3 months after its commencement.

(4) Subject to subclauses (5) , (6) and (7) , a notice of termination takes effect from the date it is served and both the property owner and the tenant are released from their future obligations under the lease after that date.

(5) A property owner, within 7 days after receiving notice of termination, may contest the termination on the grounds that –

(a) the property owner has acted honestly and reasonably; and

(b) the property owner ought fairly to be excused for the contravention; and

(c) the tenant is substantially in as good a position as he or she would have been if there had been no contravention.

(6) A property owner may contest a notice of termination by invoking the dispute resolution procedures set out in Part 4 of this Code.

(7) If a property owner successfully challenges a notice, the notice is taken never to have been served.

(8) A tenant is entitled to recover from the property owner any loss the tenant incurs as a result of the termination under this clause of a lease.

(9) The tenant is to take all reasonable steps to mitigate any loss or damage he or she incurs and is not entitled to be paid for any loss that could have been avoided by taking those steps.

(10) A tenant is not required to contribute towards the cost of any fixtures, fittings, equipment or services provided by the property owner which are not set out in the lease and the disclosure statement.

10. Lease terms

(1) Immediately above the space for the tenant's signature to a lease the following statement is to appear in bold print and a minimum print size of 12 point:

| "Tenants should read all documents closely and obtain independent legal and financial advice before signing this lease. Failure to seek advice may place full responsibility for the consequences of this signing upon the tenant. Tenants should ensure that they have received a disclosure statement at least 7 days before entering this lease." |

(2) Lease documents are to contain all terms and conditions agreed to during lease negotiations.

(3) Subject to subclause (4) , the minimum term of a lease is 5 years.

(4) A lease may be for a period of less than 5 years if a prospective tenant obtains a certificate from his or her legal advisor certifying that the legal advisor has explained to the prospective tenant the effect of a reduced lease period.

(5) The amount of rent or the basis of calculation of rent must be clearly shown in the lease documentation and the disclosure statement.

(6) A tenant is not required to disclose turnover figures unless any part of the rent is calculated on the basis of the turnover of the tenant's business.

(7) The property owner must not disclose to any person any information provided by the tenant otherwise than –

(a) with the tenant's consent; or

(b) in a document giving the aggregate turnover information about a shopping centre in a manner that does not disclose information relating to the turnover of an individual tenant's business; or

(c) to a court or arbitrator in the course of any mediation or valuation under this code or a lease; or

(d) in compliance with a requirement under this code; or

(e) in good faith to the property owner's legal or financial advisers or the proper officer of a bank, building society or credit union to enable the lessor to obtain finance; or

(f) in good faith to a prospective purchaser of the retail premises or building of which it forms part.

(8) A person who suffers loss resulting from the release of confidential information to any other person is entitled to take action to recover the loss.

18. Recoverable outgoings and operating expenses

(1) In relation to any outgoings that are directly attributable to the operation of premises, a lease is to state in detail –

(a) which outgoings are recoverable and how any unforeseen outgoings are generally to be dealt with; and

(b) the method to be used for calculating that part of the outgoings to be met by the tenant; and

(c) the time for payment of the outgoings.

(2) A tenant is not liable for the following outgoings:

(a) capital expenditure in relation to the premises;

(b) any contribution by the property owner to depreciation or a sinking fund;

(c) any contribution by a property owner to promotion and advertising;

(d) any interest or charge on money borrowed by the property owner;

(e) any insurance premium for loss of income by the property owner;

(f) any outgoings not specified in the lease that were reasonably foreseeable at the time the lease was entered into.

(3) The proportion of outgoings to be paid by a tenant is to be calculated as –

(a) the ratio of the lettable area of the tenant's premises to the lettable area of all lettable premises sharing the benefit of a particular outgoing; or

(b) the ratio of the assessed annual value of the tenant's premises to the assessed annual value of all lettable premises sharing the benefit of a particular outgoing.

(4) A property owner may not recover depreciation from the tenant.

(5) A lease may provide for –

(a) the funding of major items of repair and maintenance to the premises to be charged as outgoings if the funds are set aside in a separate account for use only for the purposes specified in the lease; and

(b) an estimate of outgoings and payments for a particular period, with a reconciliation of those outgoings and payments to be made between the parties at the end of the period.

(6) If requested by a tenant in writing, a property owner is to give the tenant –

(a) a detailed list of estimated recoverable outgoings for the next accounting year for the premises at least one month before the start of the accounting year; and

(b) a statement showing the recoverable outgoings expenditure for a specified period of the accounting year for the premises.

(7) A property owner may refuse a request under this clause if the property owner considers it to be unreasonable or overly frequent.

(8) Any dispute arising under subclause (7) is to be resolved by the Committee.

20. Exercise of options

(1) A lease which includes an option to renew is to specify the period for which the renewed lease may apply.

(2) If an option is to be exercised at current market value rent, the tenant, no less than 4 months or more than 6 months before the expiry of the period to exercise the option, may request the property owner to state the proposed rent to apply from the commencement of the new term.

(3) A request is to be in writing.

(4) If a request is made under subclause (2) , the property owner is to give written notice of the amount of the proposed rent not less than 3 months before the expiry of the period to exercise the option.

(5) Within 30 days after receiving the property owner's notice, the tenant is to notify the property owner that the tenant –

(a) exercises the option at the rent proposed; or

(b) does not agree with the rent proposed, but wishes to negotiate an amount in accordance with subclause (8) ; or

(c) requires the rent to be determined in accordance with clause 21 .

(6) If the property owner fails to comply with this clause, the rent to apply in the first year of the option term is to be determined in accordance with clause 21 .

(7) If a tenant fails to comply with this clause, the rent proposed by the property owner is to be the rent that is payable in the first year of the option term.

(8) If a tenant does not make a request under subclause (2) , or notifies the property owner that he or she wishes to negotiate the rent under subclause (5)(b) , the property owner and tenant may agree at any time before the option is due to be exercised what rent is to apply in the first year of the option term.

(9) If a property owner and tenant cannot agree on a rent to apply under an option, either party may initiate an independent valuation in accordance with clause 21 before the expiry of the date for exercising the option.

(10) A property owner may refuse to grant a new lease if –

(a) the tenant does not exercise the option by the required date; or

(b) at the time of exercising the option or before the commencement of the new lease, the tenant is in default under the existing lease.

21. Market rent review

(1) Except where a dispute over market value rent is determined in accordance with clause 39 , such a dispute is to be determined by an independent valuation.

(2) An independent valuation is to be initiated by the appointment of valuers in accordance with subclause (3) .

(3) For the purposes of subclause (1) , an independent valuation is to be made –

(a) by a valuer selected by both parties; or

(b) by 2 valuers, one being selected by each party; or

(c) [Part 2 of Schedule 1 Amended by No. 17 of 1996, Applied:01 Jan 2011] if the valuers cannot agree on a valuation or if a party fails to select a valuer, by a third valuer appointed by the Director of Consumer Affairs and Fair Trading after consulting with the President of the Australian Institute of Valuers and Land Economists.

(4) [Part 2 of Schedule 1 Amended by No. 17 of 1996, Applied:01 Jan 2011] The Director of Consumer Affairs and Fair Trading is not to appoint a valuer unless –

(a) requested by the property owner or the tenant; and

(b) the parties agree that the valuer's decision is binding.

(5) A valuer must make a valuation in accordance with the principles set out in Appendix A to this code.

(6) Each party is to pay the costs of the valuer the party selects and the costs of the third valuer are to be shared evenly by the parties.

(7) If the date for the exercise of an option, or the renewal of a lease, passes while an independent valuation is being carried out, the date for exercising the option or for renewing the lease is to be deferred until one month after the tenant receives written notice of the rent.

(8) Within one month of receiving an independent valuation, the tenant must give the property owner one month's notice of the tenant's decision to exercise the option or not.

(9) The rent charged for premises is not to be adjusted until the tenant is given written notice of any independent valuation.

(10) A rent determined by an independent valuation is applicable from the due date of the rent adjustment or the date of the commencement of the new lease, whichever is applicable.

23. Compensation

(1) A property owner is to compensate a tenant if the owner –

(a) inhibits access of the tenant to the premises rented by the tenant in any substantial manner; or

(b) takes any action, other than action required under any legislation that would substantially alter or inhibit the flow of customers to the premises; or

(c) causes, or fails to make reasonable efforts to prevent or remove, anything which adversely affects the tenant's trading; or

(d) fails to have rectified as soon as practicable any breakdown of plant or equipment –

(i) which is under the property owner's care and maintenance; and

(ii) the breakdown of which causes a loss of profits to the tenant; or

(e) acts in a manner which, in all the circumstances, is unconscionable; or

(f) terminates a lease dishonestly, maliciously or for a purpose that is not genuine; or

(g) in relation to a shopping centre, fails to take reasonable steps to ensure the cleaning, maintenance or repair of the shopping centre, including any common area; or

(h) fails to take reasonable steps to ensure the premises are kept in good order and repair; or

(i) relocates the tenant's business to other premises during the term of the lease or any renewal of it; or

(j) fails to take reasonable steps to ensure that any defect in the shopping centre or retail premises is rectified; or

(k) causes the tenant to vacate the premises before the end of the lease or any renewal of it because of any extensions, refurbishment or demolition.

(2) A lease is not to limit liability for compensation in the circumstances referred to in subclause (1)(a) , (b) , (c) , (d) or (g) unless –

(a) before the execution of the lease, the property owner brings the specific disturbance to the tenant's quiet enjoyment during the term or currency of the lease to the tenant's attention; and

(b) there is a clause in the lease that specifies a formula for compensation in the event of that specific disturbance occurring.

(3) A provision in a lease that purports to limit liability for compensation under subclause (1)(e) or (f) is invalid.

(4) The enlargement of a shopping centre or a change in its tenancy is not, of itself, a ground for compensation.

28. Assignments

(1) A tenant may request in writing a property owner to consent to the assignment of a lease.

(2) A property owner must not unreasonably withhold consent to the assignment.

(3) A property owner, within 14 days of receiving a request to consent to an assignment, is to advise the tenant in writing of the information that the property owner requires to make a decision concerning the assignment.

(4) A property owner may require a tenant to provide the following:

(a) information on the financial standing of the prospective assignees, including any approval for finance;

(b) information on the relevant business skills of the prospective assignees;

(c) information on the financial standing of any prospective guarantors;

(d) information as to the proposed use of the premises by the proposed assignee;

(e) 2 references.

(5) A property owner is to give written notice of his or her approval or rejection of an assignment within 21 days of receiving all information required to be given.

(6) If no objection is made within the 21 day period, the property owner is taken to have approved the application.

(7) A property owner may reject the assignment of a lease if –

(a) the proposed assignee intends to change the use of the premises; or

(b) the proposed assignee does not have the financial standing to conduct the business; or

(c) the proposed assignee does not have the necessary business skills to conduct the business;

(d) the proposed assignee does not enter into a written agreement with the property owner in accordance with some or all of the terms of the lease or as otherwise reasonably requested by the property owner.

(8) A property owner is entitled to recover from an outgoing tenant the reasonable costs of investigating any assignee and processing assignments.

(9) A tenant, by notice in writing, may require the owner to substantiate the costs.

(10) A property owner is to advise all parties to a tenancy of any changes made to a lease following any assignment of the lease.

(11) If, on an assignment, the property owner changes the terms of a lease with the agreement of the original tenants and their guarantors, the original tenants and their guarantors remain liable for any pre-existing guarantees.

(12) The original tenants and guarantors are released from any liability if the terms of a lease, other than the rent, are changed after an assignment without their agreement.

29. Termination and renewal of leases

(1) A lease may be terminated or renewed at any time before its expiry by written agreement between the property owner and the tenant.

(2) In the absence of any agreement, and subject to subclause (3) , not less than 3 months before the expiry of a lease the property owner is to give to the tenant notice in writing stating –

(a) the conditions on which he or she is prepared to renew the lease; or

(b) that the lease will not be renewed; or

(c) that the tenant will be able to remain as a periodical tenant under the terms of the lease; or

(d) that the tenant may continue to occupy the premises on a monthly tenancy for the time being on terms to be agreed.

(3) Within 30 days of receiving a notice under subclause (2)(a) , the tenant is to give to the property owner notice in writing stating that he or she –

(a) accepts the conditions for the renewal; or

(b) wishes to negotiate the conditions, stating the alterations to the conditions the tenant seeks; or

(c) does not wish to renew.

(4) If a tenant fails to give notice under subclause (3) , the lease is not renewed.

(5) Within 30 days of receiving a notice under subclause (2)(c) or (d) , the tenant is to give to the property owner notice in writing stating whether he or she agrees to the continuation of the lease as proposed.

(6) If the property owner fails to provide the information set out in subclause (2) , the term of the lease, at the tenant's election, may be extended so that, before being required to vacate the premises, the tenant has the information for the period required under that subclause.

(7) The tenant's election is exercisable by notice in writing given to the owner within 2 weeks after the last date on which notice under subclause (2) may be given.

(8) If the tenant fails to give the notice required under subclause (5) or (7) , the tenant is taken to not wish to renew.

(9) If a property owner offers to renew a lease, the rent under the renewed lease is to be the market value rent for those premises determined in accordance with clause 21 unless there is agreement to the contrary.