Commercial tenancy agreements

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Commercial tenancy

Consumer Protection administers the Commercial Tenancy (Retail Shops) Agreements Act 1985 which regulates retail shop tenancies. The Act principally focuses on the need for transparency of information and fairness in the contract.

The following information is not a comprehensive statement of the laws or a substitute for expert opinion. It is vital however, for all parties involved in retail shop leasing such as tenants, property owners and commercial property managers to be informed about these laws.

The Act regulates retail lease arrangements between landlords and tenants and outlines some of their rights and responsibilities in relation to their lease agreement.

Small Business Development Corporation (SBDC)

Any small business operator in Western Australia seeking advice or assistance with a business to business, or business to government complaint or dispute, as well as those concerning retail tenancies or unfair market practices affecting small business should contact the Small Business Development Coroporation (SBDC).  

You can contact the SBDC Alternative Dispute Resolution service by calling 131 249 or visiting the SBDC website.

Which shops does this Act apply to?

The focus of the Act is on retail business; however leases for some non-retail use such as businesses in shopping centres and other specified businesses are also covered by the Act.

The Act generally applies to leases for premises with a lettable area of 1000 m2 or less and are:

  • used for carrying on a business and that are in a retail shopping centre (a group of premises, 5 or more of which are used for the sale of goods by retail or a specified business);
  • not in a retail shopping centre, but that are used (or predominantly used) for the sale of goods by retail; or
  • used for conducting a ‘specified business’.

The regulations set out what is classes as a 'specified business' as at 1 January 2013, these are:

  • drycleaning;
  • hairdressing;
  • beauty therapy and treatments;
  • shoe repair (which may include key cutting and engraving); and
  • sale or rental of videos tapes, DVDs, electronic games and other similar amusements.

The Act allows for some retail shops with a lettable area greater than 1000 m2 to be prescribed as also being covered by the Act.  As at 1 January 2013 no shops had been prescribed.

The Act generally does not apply to leases to publicly listed companies.

What is the Commercial Tenancies Act?

The purpose of the Act is to:

  • regulate commercial tenancy agreements in relation to retail shop leases;
  • provide for dispute resolution and the determination of questions arising under a lease by providing access to alternative lower cost mediation and dispute resolution mechanisms offered by the Small Business Commissioner and the State Administrative Tribunal; and
  • prohibit unconscionable, misleading and deceptive conduct in relation to retail shop leases.

The Act principally focuses on the need for transparency of information and fairness in the contract by:

  • requiring the landlord to provide a disclosure statement and tenant guide to the tenant;
  • establishing a consistent and fair process for rent reviews;
  • including special requirements regarding the payment of turnover or percentage rent;
  • giving most tenants an entitlement to a minimum lease period of up to 5 years;
  • regulating the distribution of specified landlord expenses (operating expenses) to tenants; 
  • providing certain provisions in a lease to be void – for example, a provision requiring the tenant to open during specified times,
  • requiring landlords to give tenants notice of the date on which an option to renew a lease is no longer exercisable; and
  • prohibiting landlords from passing on some of their legal fees to tenants.

Trading hours

The Act prevents leases from including a clause which requires the shop to be open for specified hours or times. 

If a retail shop chooses not to open outside of standard hours, the tenant is not required to contribute to operational expenses incurred by the landlord as a result of the shopping centre opening during those hours.  The Allocation of operating expenses for non-standard trading hours information sheet provides more details.

Seek professional advice

Tenants should seek independent legal and business advice before entering into a lease. 

In some instances a tenant may wish to consider registering a lease, or lodging a caveat to protect their interests, particularly if the lease is for a period exceeding five years.  

Tenants should seek legal advice as to what is appropriate for their circumstances and in relation to preparation of the neccessary documents.

Pre 1 July 1999 leases

If your lease was entered into prior to 1 July 1999 some of the provisions of the Act may not apply.  Further information on this issue can be obtained from the Small Business Development Corporation.

Commercial tenancy forms and publications

The following forms are:

Disclosure Statement - Form 1

The disclosure statement includes details about the proposed terms and conditions of the lease and must be given to the tenant at least seven days before entering into a lease.

Notice of Election - Form 2

If a retail shop lease contains a provision for rent to be determined, either in part or in whole, by reference to the turnover of the business, the tenant should receive a copy of the Notice of Election form before the provision is included. The tenant has the choice of electing to base the rent on turnover and in so doing needs to complete and provide the Lessor with this form.

Notice of Exercise of Option - Form 3

If a lease does not include an option to extend the term to five years, the Act gives most tenants a right to do so (statutory option).  To exercise this option a tenant must use a Notice of Exercise and give it to the landlord at least 30 days before the end of the lease. 

Tenant Guide - Form 4

The tenant guide provides information to retail/commercial tenants covered by the Act to help them understand their rights and obligations.

The tenant guide must be attached to the front of the lease and included with the disclosure statement. 

Prescribed relocation clause

Prescribed relocation clause can be included in a lease without the approval of the State Administrative Tribunal. 

Act and regulations

Copies of the Act and Regulations are available from the State Law Publisher’s website.  

​Further information and assistance from Government agencies

In addition to industry experts such as lawyers, valuers, accountants and tenant advocates, the Government has established a framework of assistance for retail/commercial shop tenants.

SBDC can provide general advice about commercial tenancies. 

Australian Government Treasury's booklet "Look before you lease: Avoiding the pitfalls in retail leasing" is designed for people thinking about signing a new lease for a business location. It can help answer general questions about retail leasing all over Australia, but remember there are some specific differences among the States and Territories.

The State Administrative Tribunal is responsible for providing a mediation service and determining disputes in relation to retail and commercial shop lease matters​, telephone: 9219 3111

The Consumer Protection advice line can provide advice on the policy, content and review aspects of the retail/commercial shop tenancy laws.

Authorised copies of the Commercial Tenancy (Retail Shops) Agreements Act 1985, amendments and associated regulations can be obtained from the State Law Publisher telephone (08) 6552 6000 .

Property owners can obtain the new land tax scale and their assessment by contacting the Office of State Revenue on 9262 1200.

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