What distinguishes a “retail shop lease” from a commercial lease? The terms can be confusing, given that a lease may not be a retail shop lease even if the shop does do retail business.
Why does it matter?
A lease which is considered to be a retail shop lease will be covered under the Retail Shop Leases Act 1994 (Qld) (the “Act”), thereby giving the tenant the relevant benefits and protections under the Act.
These benefits and protections include the following:
- The landlord has restrictions on outgoings;
- The landlord cannot pass on land tax to the tenant;
- There are restrictions on rent review mechanisms; and
- Tenants may be entitled to early determination of current market rent if they have an option to renew or extend the lease (to allow new rent to be determined before the option to renew is exercised).
How can you tell if you have a retail shop lease?
Every state has its own definition of what a retail shop lease is. This article focuses on the characteristics of Queensland retail shop leases in particular.
There are 2 ways for your lease to qualify as a retail shop lease:
- Your business is located in a Retail Shopping Centre; or
- Your business is use wholly or predominantly for the carrying on of a Retail Business.
All the terms in italics are further defined in the Act.
How to tell if your business is located in a Retail Shopping Centre
Under section 5D of the Act a Retail Shopping Centre is a cluster of premises which have all of the following attributes:
Primary use of premises
5 or more of the businesses are used wholly or predominantly for carrying on retail businesses.
AND Ownership of premises
All the premises:
· are owned by 1 person; or
· have 1 lessor or head lessor, or, if the premises were leased, would have 1 lessor or head lessor; or
· comprise lots within a single community titles scheme under the Body Corporate and Community Management Act 1997.
AND Location of premises
All the premises are located in:
· 1 building; or
· 1 or more buildings if
o The buildings are adjoining; or
o If the buildings are owned by 1 person, the buildings are separated by common areas or other areas owned by the owner or road; or
o If the premises are not owned by 1 person, the buildings are separated by common areas or a road.
AND Promotion or holding out of premises
The cluster of premises is promoted, or generally regarded, as constituting a shopping centre, shopping mall, shopping court or shopping arcade.
How to tell if your business is used wholly or predominantly for the carrying on of a Retail Business
Retail Business is defined in section 5C of the Act to mean a business prescribed by regulation as a retail business. You can check the Schedule 1 of the Retail Shop Leases Regulations 2016 (Qld) to see if your type of business fits within one of the predefined categories.
However, exclusions do apply (see section 5A of the Act). Following recent amendments to the Act, your lease is not a retail lease if the lease premises:
- have a floor area of more than 1000m2;
- are located on a level of a multi-story building, or a standalone build where 25% or less of the total area is retail. This means that non-retail premises located on a floor of a shopping centre is not a retail shop if 75% of the total lettable area of the floor is used for professional or commercial offices;
- are for an information, entertainment, community or leisure facility;
- are for telecommunication equipment;
- are for an automatic teller machine;
- are for a vending machine;
- are for an advertisement display;
- are for storage; or
- are for parking.
If you would like to find more information about the recent amendments to the Act, our commercial team has written an article which addresses these amendments here.
How Corney & Lind Lawyers can help
It isn’t always easy to figure out whether your business is covered by the Act. Our commercial team has a wealth of experience in commercial and retail leases and our experienced lawyers can help you review your lease documentation and give you practical legal advice moving forward. Call our Business Development Officers on 07 3252 0011 or email us today to make an appointment.