Termination Of Retail Tenancies - Recent Case Examples

The Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) regulates a landlord’s ability to relocate a tenant or end a lease during the first five years of the lease.  The sections of the Act that deal with this are often the subject of debate and confusion.  In this article, we comment on these sections and recent case law that has provided some clarity on these matters.

Termination During The First Five Years Of A Lease

Section 13 of the Act provides that tenants have a statutory right to a five year term, provided the lease term is more than six months but less than five years.

Section 13 also provides that a landlord generally may not terminate a lease within the first five years of the lease unless SAT approves that termination.¹  

In the recent decision of Hyde Park Management Limited v Teresina Ann Pearson [2023] WASAT 12 (Hyde Case), the landlord sought SAT’s approval of a standard clause that permitted the landlord to terminate if the premises were destroyed.

The termination clause was contained within an extension of the tenant’s lease.  The term of the extension was three years.  The tenant had already had five years of continuous occupation under the original lease.

SAT held that it did not need to approve the termination clause in the extension of lease as the tenant had already enjoyed five years of continuous occupation.

The Hyde Case indicates that:

•  Landlord’s will generally not be prevented from terminating a lease under s13 where the tenant has had continuous occupation of the premises for five years; and
• this is the case whether the period of occupation arises under a single lease agreement (for instance, where an option to renew is exercised) or successive lease agreements.²

Relocation Provisions

Section 14A of the Act provides that a clauses in a lease about the relocation of a tenant’s business is void unless it meets numerous requirements (including payment of compensation to the tenant) or is approved by SAT.

Landlords commonly wish to relocate a tenant’s business in circumstances where the premises, or centre in which the premises are located, is being redeveloped.

Previously, there was doubt on whether provisions permitting a landlord to terminate for a re-development are governed by s14A.  This was particularly so, given the prescribed relocation terms that must apply after the first five years of the lease term contemplate that the landlord may not offer the tenant alternative premises and instead pay the tenant compensation.³ 

Recent case law has now made clear that provisions entitling a landlord to terminate a lease for re-development are not governed by s14A.⁴  This is provided the relevant provision doesn’t also provide for relocation of the tenant’s business.  However, section 13 will apply to this early termination clauses.  Accordingly, a clause permitting termination for redevelopment within the first five years of the lease term will require SAT approval.

Summary

The sections of the Act restricting a landlord’s ability to relocate a tenant or end a lease during the first five years of the lease are often the subject of debate and confusion.  The recent cases referred to above provide some additional clarity on these matters.  When negotiating lease terms, care must be taken by landlords to ensure that termination rights will be enforceable and will not inadvertently fall foul of the Act.  Care must also be taken to ensure that the tenant does not inadvertently become entitled to a new five year term.

Lavan has significant experience advising on the Act.  If you have any queries, please don’t hesitate to contact us.