On 1 January 2013 the amendments to the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) and the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA) (Regulations) will come into effect.
The amendments to the Act and the Regulations will have a significant effect on the way that managing agents, landlords and tenants deal with retail leasing. It is important that landlords and tenants familiarise themselves with the amendments and the transitional provisions giving effect to those amendments to avoid breaching the provisions of the Act.
These amendments have been the subject of previous publications which can be accessed here. This update provides a very simple overview of what will happen on 1 January 2013.
Some of the more significant amendments include:
the introduction of a new Disclosure Statement, which significantly increases the level of disclosure to be given to the tenant by the landlord, and a new Tenant Guide to be provided to the tenant as part of the lease documentation;
an obligation on the landlord to advise its tenant of its option expiry date between six and 12 months prior to the option expiry date; and
a prescribed standard relocation clause which a landlord may include in its retail shop lease to avoid the need to seek approval of the redevelopment provision from the State Administrative Tribunal.
In summary, the standard relocation clause requires six months notice to the tenant, details of the alternative premises, an offer of a new lease on the same or better terms as the existing lease, the payment of relocation costs and compensation as prescribed by the Act and paying for the tenant’s legal advice in relation to the new lease and relocation.
The commencement of the amendments on 1 January 2013 will have an impact both on existing leases and leases that are in the course of being negotiated as at that date.
There are transitional measures which have been put in place to deal with the impact of the amendments on leases which have been executed prior to 1 January 2013.
Managing agents and landlords should be aware that any leases which have been negotiated but are not executed prior to 1 January 2013 will result in the landlord having to issue a new Disclosure Statement in the amended form, provide the updated Tenant Guide and potentially amend the lease to ensure that the lease conforms with the requirements pursuant to the amendments.
The amendment regarding the landlord’s obligation to notify the tenant of the expiry date of its option to renew applies to existing and new leases. The Regulations provide for the following transition arrangements for this notification:
Option expiry date
Date on which notice must be given
Before 1 July 2013
The landlord is not required to give notice under the Act
1 July 2013 – 30 September 2013
Between 1 January 2013 and the date that is two months before the option expiry date
1 October 2013 – 31 December 2013
Between 1 January 2013 and the date that is three months before the option expiry date
After 1 January 2014
Between six and 12 months before the option expiry date
The effect of the amendments as they relate to existing and new leases can be summarised as follows:
Existing leases (leases signed prior to 1 January 2013)
The following changes do not apply to existing leases:
changes regarding the form of the Disclosure Statement and the tenant’s resulting right to terminate the lease;
changes regarding the form of the Tenant Guide document;
the requirement to include details about a landlord’s fixtures and fittings in the Disclosure Statement;
changes to section 13 of the Act concerning:
the application of the right to a five year term to leases of more than six months;
clauses allowing for termination of a lease prior to the expiry of the guaranteed five year term;
the new provisions set out in section 14 A of the Act in relation to relocation clauses; and
the requirement that refurbishment and refitting provisions contain adequate detail.
Changes applying to all retail shop leases
The following changes apply to all retail shop leases:
the requirement to provide information on request to a valuer who is undertaking a market review of rent;
the obligation on landlords to notify tenants of the option expiry date;
the prohibition on passing on legal fees to tenants; and
the prohibition on misleading and deceptive conduct will apply to all leases but only in relation to conduct that occurs after 1 January 2013.
Checklist for landlords
To prepare for the introduction of the amendments we suggest that landlords do the following:
Check that any standard lease documents to be used from 1 January 2013 comply with changes to the Act:
relocation provisions, including clauses in leases where five years of the term have already expired; and
refurbishment and refitting provisions;
use the updated Tenant Guide and Disclosure Statement for leases entered into after 1 January 2013;
be prepared to provide lease information to valuers;
be aware that the right to a five year tenancy will apply in relation to leases of more than six months;
determine when notices about option expiry dates must be given and develop systems for ensuring that this happens within the necessary timeframes; and
make sure that after 1 January 2013, you do not claim from the tenant any legal or other expenses relating to:
the negotiation, preparation or execution of the lease, a renewal of the lease or an extension of the lease;
obtaining the consent of a mortgagee to the lease; or
the landlord’s compliance with the Act.
Lavan Legal comment
It is important that landlords prepare now for the introduction of the amendments. If a lease does not comply with the amendments and is entered into after 1 January 2013 there is potential for the landlord to be in breach of the Act and run the risk of provisions of the lease being void.