Australia: Property Update

The Retail Shops and Fair Trading Legislation Amendment Bill 2003 was tabled in Parliament on 15 October 2003. It was not proclaimed and has now been reintroduced as the Retail Shops Fair Trading Legislation Amendment Bill 2005. If proclaimed, the Bill will amend the Retail Trading Hours Act 1987, the Commercial Tenancy (Retail Shops) Agreements Act 1985 (Act), and the Fair Trading Act 1987.

This Update sets out some of the key amendments to the Commercial Tenancy (Retail Shops) Agreements Act 1985. The purpose of the amendments is to enable landlords and tenants to litigate disputes relating to unconscionable conduct in the State Administrative Tribunal. While tenants can currently raise such disputes in other courts, this is viewed as a less expensive and more accessible tribunal for tenants.

The Bill also provides protection for tenants who wish to form or join tenants’ or merchants’ associations.

The Bill draws the unconscionable conduct provisions from section 51AC of the Commonwealth Trade Practices Act into the Commercial Tenancy (Retail Shops) Agreements Act 1985. In particular, the proposed Part IIA mirrors section 77(2) of the Retail Leases Reform Act (Vic).

Part IIA will apply to retail shop leases introduced or renewed after the commencement of the amendments to the Act, but the provisions are retrospective and will apply to leases in existence before the operation of the amending Act.

While the Bill will apply to leases drafted before the Act came into operation, or to leases drafted pursuant to options or agreements introduced before the Act came into operation, the conduct complained of must occur after the commencement of the unconscionable conduct provisions.

The unconscionable conduct provisions have been expressed in terms of drawing down the Trade Practices Act provisions of Section 51AC. The Trade Practices Act refers to the supply ‘or possible supply’ and the acquisition ‘or possible acquisition’ of goods and services. However, Part IIA of the Commercial Tenancy (Retail Shops) Agreements Act 1985 only refers to ‘a retail shop lease’. Does that mean that the proposed Part IIA will only apply to leases in existence and not to negotiations for a lease or the renewal of an existing lease (at least where the renewal is not made pursuant to an option to renew contained in an existing retail shop’s lease)?

Neither the tenant nor the landlord may engage in unconscionable conduct. The Tribunal is given guidance as to what matters it may consider when determining whether conduct is unconscionable. These include:

• The relative strengths of the bargaining positions of the landlord and the tenant.

• Whether the parties are able to understand any documents relating to the lease.

• Whether any undue influence or pressure was exerted, or any unfair tactics employed by one party against the other.

• The extent to which one party’s conduct towards the other was consistent with that party’s conduct in similar transactions.

It will not be considered unconscionable conduct merely because:

• One party institutes legal proceedings or refers a dispute or claim in relation to the lease to arbitration.

• The party fails to renew the lease or enter into a new lease.

• The party does not agree to have an independent valuation of the current market rent carried out.

A landlord or tenant or former landlord or tenant who suffers loss because of unconscionable conduct may recover the loss by application to the Tribunal. The application must be lodged within six years of the alleged occurrence of unconscionable conduct. This means that the Tribunal will have jurisdiction over expired retail shop leases.

A provision in a retail shop lease will be void if it purports to prevent a tenant from forming, joining or taking part in a tenants’ association. If a tenant does so, a landlord must not treat the tenant less favourably than a tenant who has not joined a tenants’ association. If the landlord does treat a tenant less favourably, the tenant may make an application to the Tribunal for an order that the landlord pay compensation or refrain from doing anything the tenant has specified in the application.

There is clearly some doubt as to whether these provisions will apply to negotiations for a lease or the renewal of an existing lease not made pursuant to an option. If this is the case, this is a significant gap in the coverage of the unconscionable conduct provisions of the Commercial Tenancy (Retail Shops) Agreements Act 1985 with respect to lease negotiations.

There is a view that the Tribunal is not equipped to deal with the complex issues raised by disputes concerning unconscionable conduct. The Victorian Act on which the provisions are modelled is the newest legislation in this area and, as such, there is little guidance as to whether the provisions are workable. It is open to the parties to appeal decisions of the Tribunal to the District Court.

Section 39 of the State Administrative Tribunal Act 2004 provides that a person may appear on their own behalf or be represented by a legal practitioner. This area of unconscionable conduct is an evolving area of the law. Judgements have been issued by the High Court and other superior courts, and the issues are quite complex. Legal advice and representation is advisable on these complicated matters of law.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.