Retail landlords must be aware of their obligations to give notices to tenants with the form of notice dependent on whether or not the lease contains an option to renew.

The requirement for retail landlords to give notices to tenants was introduced by the Retail Shop Leases Amendment Act 2006 (Qld) (Amendment Act) which amended the Retail Shop Leases Act 1994 (Qld) (RSLA).

The Amendment Act placed new obligations on retail landlords and tenants where a lease is entered into on or after 3 April 2006 (except if it was entered into pursuant to an option contained in a lease entered into prior to this date). The notice obligations do not apply to leases entered into before 3 April 2006 nor do they apply to leases entered into on or after 3 April 2006 if those leases resulted from the tenants’ exercise of an option to renew given in leases entered into before 3 April 2006.

As the requirement for retail landlords to give notices depends on the date upon which each lease was entered into, it may be cost effective for retail landlords to adopt a practice of giving notices to all tenants regardless of the date of entry upon which each lease is entered into. Otherwise, each retail landlord will need to conduct an audit of its retail leases to ascertain the date when they were entered into and also whether or not they were entered into pursuant to an option to renew granted in a lease entered into before 3 April 2006.

The following comments assume the lease is one entered into as from 3 April 2006 and not pursuant to the exercise of an option contained in a lease entered into before that date.

If the lease contains an option to renew

If the lease contains an option to renew, section 46 of the RSLA requires the retail landlord to give the tenant written notice of the option date (the date stated in the lease as the date by which the tenant, if it intends to exercise the option, must exercise it) at least two months, but not longer than six months, before the option date.

If the retail landlord fails to give the notice to the tenant, the tenant may argue there is a retail tenancy dispute and lodge a dispute notice with the Chief Executive of the Retail Shop Leases Registry asserting that it should be allowed to exercise its option out of time. The retail landlord may also be hit with a financial penalty up to a maximum of 40 penalty points (at the present time one penalty point is worth $75, a total fine of $3,000).

Section 27A(2) of the RSLA permits a tenant to serve a notice on the retail landlord within a specified time period requesting an early determination of the market rent for an option term. This enables the tenant to know the new proposed rent before deciding whether to exercise the option and commit to a further term.

For leases of:

• not more than one year, the notice period commences on the date which is three months before the option expiry day and ends on the date which is one month before the option expiry day, and
• more than one year, the notice period commences on the date which is six months before the option expiry day and ends on the date which is three months before the option expiry day.

There is no obligation on a retail landlord to notify the tenant of its right to request an early determination of rental.

The delivery of a notice by the tenant requesting an early rent determination may trigger an automatic ‘bringing forward’ of the date by which the notice of exercise of the option is due to the date which is 21 days from the date the tenant receives notice of the determined market rent under the provisions of the RSLA.

The last day on which the option may be exercised is the earlier of the following:

• 21 days after the tenant receives written notice of the current market rent determined as a result of the request for early determination, and
• the day the lease ends.

When a retail landlord is negotiating a lease with a major lessee (being a tenant of five or more retail shops in Australia), the retail landlord may exclude the tenant’s right to request an early determination of rent.

If the lease does not contain an option to renew

If the lease does not contain an option term, section 46AA of the RSLA requires a retail landlord to give the tenant a written notice towards the end of the lease advising them either:

• the retail landlord does not intend to offer a renewal or extension of the lease, or
• the retail landlord offers the tenant a further term and details of the terms of that offer including the proposed rent and other commercial terms.

For leases of:

• not more than one year, the time period for serving the notice to the tenant starts on the date which is six months prior to the end of the lease and ends on the date which is three months prior to the lease expiry date, and
• more than one year, the time period for serving the notice to the tenant starts on the date which is one year prior to the end of the lease and ends on the date which is six months prior to the lease expiry date.

If the retail landlord fails to do this, the tenant may, before the original lease expiry date, request an extension for a further six months term with that term to run from the date the retail landlord does give the notice. The tenant may terminate the lease before the extended period ends by giving at least one month’s written notice of termination to the retail landlord.

Service of notices

When serving these notices, the retail landlord must ensure that it complies with the method of service prescribed in the lease and factor in the timeframe required if the retail landlord intends effecting service by post.

For further assistance or enquiries please contact:

Stephen Jones on 07 3233 8973
Anne-Marie Loeskow on 07 3233 8564.