In Western Australia, most retail shop leases are regulated by the Commercial Tenancy (Retail Shops) Agreements Act 1985.
Having an understanding of the Act is essential if you intend to lease premises to operate a retail business.
This information is intended as a guide and it does not replace the need to seek independent legal, financial and business advice before signing a lease or associated documentation, paying rent or other monies, or occupying the leased premises.
The Act was amended in recent years and these amendments came into effect from 1 January 2013. Not all of these amendments apply to leases entered into before this date. We have produced a series of commercial leasing publications (available to download below) to answer common questions about the Act specific to those leases entered into after 1 January 2013.
Retail shops covered by the Act
The Act generally applies to leases for premises with a lettable area of 1000 m2 or less and that are:
- used for carrying on a business and are in a retail shopping centre (or a group of premises, of which five or more 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 classed as a 'specified business' as at 1 January 2013, these are:
- dry cleaning
- beauty therapy and treatments
- shoe repair (which may include key cutting and engraving)
- 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 also be covered by the Act. As at 1 January 2013 no shops had been included.
The Act does not apply to leases:
- to publicly listed companies
- of premises for the purpose of operating only a vending machine or automatic teller machine.
Purpose of the Act
The purpose of the Act is to:
- regulate commercial tenancy agreements in relation to retail shop leases
- provide access to alternative low-cost mediation and dispute resolution services
- 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 lease 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 five 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
- prohibiting landlords from passing on some of their legal fees to tenants
The Act requires a landlord to provide to a tenant the following documents when a lease is being considered:
- a disclosure statement
- a tenant guide (must be attached to the front of the lease and included with the disclosure statement)
- a proposed lease
- an operating expenses budget
These documents should be provided to the tenant at least seven days before entering into the lease.
The Act prevents leases from including a clause which requires the shop to be open for specified hours or times.
Under the Act, the Small Business Commissioner’s role is to provide assistance to attempt to resolve disputes relating to retail shop leases. Both tenants and landlords can approach us for assistance to resolve their dispute. Depending on the nature of the dispute, it may be appropriate for the dispute to be referred to mediation. You can learn more about our dispute resolution service.
In most circumstances, parties wanting to apply to the State Administrative Tribunal (SAT) must first obtain a certificate from the Small Business Commissioner and include this with their application.
Parties may go directly to the SAT for certain administrative or urgent matters. Use the SAT Wizard to determine whether you need to obtain a certificate from the Small Business Commissioner.
Common questions about the Commercial Tenancy Act: for leases entered into on or after 1 January 2013
- Visit the Department of Mines, Industry Regulation and Safety website for information on commercial tenancy agreements.