Commercial leasing - When does the Retail Shop Leases Act 1994 apply?

The Retail Shop Leases Act 1994 (Qld) (RSLA) applies to all retail shop leases in Queensland. It can be difficult sometimes, however, to determine if the business the proposed lessee intends to operate at the premises falls within the scope of a ‘retail shop’ in accordance with the RSLA. 

It is important to know when the RSLA applies as it will impact what type of lease your client can offer for their premises, what costs and outgoings can be charged to the tenant, important time frames that impact the lease and it imposes certain disclosure obligations that don’t exist for other types of commercial premises.

What is a ‘retail shop’?

Under ss 5B and 5C of the RSLA, a retail shop means premises that are either situated in a retail shopping centre or used wholly or predominantly for the carrying on of a retail business.

A ‘retail business’ means a business prescribed to be a retail business under the Retail Shop Leases Regulation 2016 (RSL Reg). Schedule 1 of the RSL Reg sets out types of businesses which are prescribed retail businesses. This includes (but is not limited to):

• food and beverage businesses (restaurant, café, fast food, bakery, butcher, liquor shop, supermarket/grocery);
• clothing, cosmetics, pharmacy, hairdressing, tattoos, piercings, jewellers;
• domestic appliance retailers (computers, white goods, household appliances);
• domestic hardware and household goods (kitchenware, lighting products, tools, furniture, paint, fabrics and textiles);
• pets, pet supplies, flowers, garden/outdoor appliances, sport and camping goods
• video, photo and music equipment;
• newsagency, book shop, stationery; and
• service station.

Even if a business does not fall within the ‘retail business’ category, the RSLA may still apply if they are situated in a retail shopping centre.

A ‘retail shopping centre’ under s5D of the RSLA, is a cluster of premises having all of the following attributes—

1. five or more of the premises are used wholly or predominantly for carrying on retail businesses;

    

2. all the premises—
   1. are owned by the one person; or
   2. have the 1 lessor or head lessor, or, if the premises were leased, would have the 1 lessor or head lessor; or
   3. comprise lots within a single community titles scheme under the Body Corporate and Community Management Act 1997;
      
      
      
3. all the premises are located in—
   1. one building; or
   2. two or more buildings if—
      1. the buildings are adjoining; or
      2. if the premises are owned by the one person—the buildings are separated by common areas or other areas owned by the owner or a road; or
      3. if the premises are not owned by the one person—the buildings are separated by common areas or a road;

    

4. the cluster of premises is promoted, or generally regarded, as constituting a shopping centre, shopping mall, shopping court or shopping arcade.

Exclusions

Regardless of the above requirements, under s5A of the RSLA, a retail shop lease does not include a lease of:

• a retail shop with a floor area of more than 1,000m2;
• a retail shop within the South Bank corporation area if the lease is a perpetual lease or a lease for a term of at least 100 years;
• a premises used for the carrying on of a business by a lessee for a lessor as the lessor’s employee or agent;
• a premises in a theme or amusement park;
• a premises at a flea market, including an arts and crafts market;
• a temporary retail stall at an agricultural show, trade show, carnival, festival or cultural event;
• a premises that, if the premises were not leased, would be premises within a common area of a retail shopping centre, but only if the premises are used for:
  1. an information, entertainment, community or leisure facility;
  2. telecommunication equipment;
  3. an automatic teller machine;
  4. a vending machine;
  5. an advertisement display;
  6. storage; or
  7. parking.

Also, a retail shop lease does not include a lease of premises located in a retail shopping centre if—

• the premises are not used wholly or predominantly for carrying on a retail business; and
• at the time the lease is entered into, either:

1. if the premises are located on a level of a multi-level building—the retail area of the level is 25% or less of the total lettable area of the level; or
2. if the premises are located in a single level building—the retail area of the building is 25% or less of the total lettable area of the building.

Case Study – does the RSLA apply?

A small family medical practice wishes to lease a site in a single-storey commercial building with 8 leased premises including: a café, a hairdresser, a fish and chip takeaway, a chemist, a drycleaner and a real estate office. The medical practice would be situated next to the chemist and at this site, would have the best access to a sizeable car park.

The business itself does not fall within the scope of a ‘retail business’ as it is a medical practice. 

It needs to be determined whether the building would be categorised as a ‘retail shopping centre’ under the RSLA. 

Looking at the above requirements, the building may be deemed as a retail shopping centre because:

1. There are at least five retail shops that carry on a retail business (café, hairdresser, takeaway, chemist, drycleaner);
2. All of the premises are owned by one party;
3. All of the premises are located in one building; and
4. The precinct is referred to as a shopping plaza.

When it’s not clear whether the RSLA applies

If it is not clear whether a proposed lessee is operating, or intends to operate, a retail shop at the premises, then it is best practice to refer your client to seek legal advice to determine whether the RSLA applies.  

Regardless of any agreement to the contrary, the RSLA cannot be contracted out of. Under s16 of the RSLA, any provision of a retail shop lease that purports to avoid the RSLA will be deemed void. 

The requirements will apply to the lease, even if there is no formal acknowledgement set out in the lease. For this reason, it is important that a specific retail shop lease is prepared by the parties’ solicitors.

For short form leases (ie. leases shorter than three years including option periods), the REIQ has the Retail Shop Tenancy Agreement available in Realworks. This Tenancy Agreement facilitates a retail shop lease, in compliance with the RSLA. It is important that commercial agents using this document have an understanding of the requirements of the RSLA, to ensure that transactions can be facilitated compliantly and validly.

Read more from the REIQ: Important changes to property law in Queensland: Sellers Disclosure Regime.

Or browse our suite of articles.