Why retail tenancies could be in for big changes in WA
Scheduled for review every five years, the laws that govern Western Australia’s retail tenancies are once again under the microscope, and this time they could be in for a shake-up.
On 15 October 2024, the latest review of the state’s Commercial Tenancy (Retail Shops) Agreement Act 1985 (CT Act) was officially submitted to the Parliament of Western Australia.
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This act regulates the laws around small shops both within and outside of shopping centres which primarily sell goods, and requires a review to be conducted every five years.
The state’s consumer protection agency released a discussion paper outlining the issues and reform under consideration for the act in 2022. The government incorporated submissions made by organisations in composing the report that was recently tabled before Western Australian Parliament, and will be considered when drafting legislation to potentially implement changes to the CT Act.
The report notably proposed that the act expand its coverage beyond its previous scope to include specified small business with a lettable area greater than 1,000 square metres, and also include additional service-based business located outside shopping centres, which would encompass businesses such as real estate offices and travel agencies.
Landlords would also be required to provide a tenant with a notice of intention around the renewal of a lease from between three to six months before a lease ends.
The report outlined a variety of information which would need to be included in disclosure statements, with landlords having to include information such as the the number and location of nearby current or proposed tenants with the same or substantially similar types of business, whether planned alterations works will result in an additional cost to the tenant, and a standard list of operating costs at the property.
Another change would also mandate that the maximum amount payable by a tenant for fit-out works carried out by or on behalf of the landlord has to be pre-agreed, with tenants explicitly not liable to pay more than the agreed amount.
Moreover, tenants would also not be required to use a contractor selected by a landlord, provided that the contractor chosen by a tenant is “suitably experienced and qualified” and approval is granted by the landlord in a specified time frame and not “unreasonably withheld”.
However, the report recommended that landlords can require their tenant to use a specified contractor in “certain limited circumstances” where fit-out work would impact the landlord’s building or relate to compliance and safety obligations of the landlord.
While the report supported the statutory right to a five-year term for a lease being retained, it notably motioned for the CT Act to clarify that this right does not apply if a tenant has been granted a new lease for a retail premises when a tenant has already been in continuous and seamless occupation for five years or more.
Notably, Consumer Protection also advised against the current implementation of a first right of refusal for commercial tenancies in Western Australia, which would enable tenants to have the first opportunity to purchase the property they are leasing before a landlord sells the site to a third-party.
The paper also stated that the CT Act should not be revised to prohibit landlords from passing on land tax to tenants as a recoverable operating expense, and also elected to not recommend that a maximum amount be imposed that a landlord can collect as a security bond or require as a bank guarantee.
On the subject of dispute resolution, the report recommended that the CT Act be changed to enable the State Administrative Tribunal (SAT) to hear matters without the matters of the dispute being listed on a certificate issued by the Small Business Commissioner (SBC), and empower the SAT to grant leave to proceed in the absence of an SBC certificate.
Consumer Protection also advised that consideration of the potential introduction of an unfair trade practices provision around retail leases should be deferred until a decision has been cast on national level regarding amendments to the Australian Consumer Law.
As Western Australian Parliament begins drafting legislation around changes to the state’s CT Act, this process will involve further consultation with industry bodies such as the Real Estate Institute of Western Australia, leading the institute to state that “it’s unlikely there will be any legislative changes before 2025”.