1. The following measures should be pursued by State and Territory governments to further improve transparency and accessibility in the retail tenancy market:
- Enhance the use of simple language in all tenancy documentation and provide clear and obvious contact points for information on leases and dispute resolution
- Elaborate the significance of jurisdictional differences in the definitions of unconscionable conduct and align definitions where practicable.
2. State and Territory governments should seek to improve the consistency of lease information across jurisdictions in order to lower compliance and administration costs. They should:
- Encourage nationally-consistent (plain English) models for retail tenancy leases and for tenant and landlord disclosure statements (for example, all jurisdiction and other specific provisions could be set out in annexes to the standard documents)
- Institute nationally-consistent reporting by administering authorities on the incidence of tenancy inquiries, complaints and dispute resolution.
3. State and Territory governments should relax key restrictions in retail tenancy legislation to better align the regulation of the retail tenancy market with the broader market for commercial tenants.
4. All unnecessarily prescriptive elements of retail tenancy legislation are removed. State and Territory governments should seek, where practicable, to establish consistent template legislation for retail and commercial tenancies available to be drawn down in each jurisdiction.
5. While recognising the merits of planning and zoning controls in preserving public amenity, State and Territory governments should examine the potential to relax those controls that limit competition and restrict retail space and its utilisation.
The Commission also believes that in the long term there should be a nationally-consistent framework for tenancy leases through the drawing down of nationally-consistent template legislation for commercial (including retail) leases to each jurisdiction.
While the Association welcomes a number of the recommendations, the Draft Report has failed to address a number of keys issues raised in the various submissions and has taken an economic rationalist viewpoint while demonstrating a lack of understanding of the operation of the retail leases market. The Commission has chosen to lump retail leases in with commercial leases and has treated them as being one and the same animal. The Commission acknowledges that planning and zoning may be an issue, however it has not understood the drivers of retailers and the space in which they must operate. Retailers cannot pick up their business and take their clientele with them as can accountants, solicitors and other commercial operators. Retailers are reliant upon passing trade, ease of access and convenience for survival and they are much more limited in the range of space available for them in which to trade.
To concentrate its report on shopping centre leases and ignore strip shops only compounds the Commission's lack of understanding of the market. It is worthwhile noting that while acknowledging the success of the dispute resolution procedures, the Draft Report has failed to observe that at least half of all disputes reported to the various authorities across Australia are for strip shops. There are a number of inconsistencies in its report.
A major failing of the Draft Report is its failure to address the imbalance in information between landlord and tenant in negotiating leases. The Commission in its handling of the provision of sale figures has chosen to ignore its misuse of those figures in favour of the landlord who it believes needs them to be able to mix the centre. The provision of such figures is a historical matter from a time when landlords charged rents that had an occupancy cost of six percent of sales as being an incentive to get the tenants in and then charged a percentage over and above if the retailer was successful. Occupancy costs in these circumstances never exceeded ten percent of sales. Today occupancy costs are in excess of 15 percent for most retail categories in regional shopping centres. There are no other businesses that we are aware of where a condition of getting a lease is to disclose the income being derived from the business.
The Association will be responding to the Draft Report in a number of public hearings that are being conducted in the capital cities and challenging a number of the assumptions made by the Commission together with a number of issues that the Draft has ignored. We shall keep you informed.
