The ARA has welcomed the recommendations in the Productivity Commission’s Market for Retail Tenancy Leases final report, but remains concerned about the Commission’s silence on the required disclosure of tenants’ turnover figures.
ARA's Executive Director Richard Evans said the well overdue release of the Productivity Commission's report on retail leasing has recommendations welcomed by retailers, including nationally consistent model legislation and the introduction of a voluntary code to curb robust behaviour. However, the Commission had still failed to recognise disclosure requirements of turnover as a significant form of tension between shopping centre tenants and landlords.
“We are in a period of significant downturn in consumer demand and this report will come as good news for retailers, but with the significant caveat that the Rudd Government must now act to improve the retail tenancy market nationally. When other Federal Governments have ignored the issue as being too hard, the new Government – with its policy of reducing the cost burden of differing state legislations – must now act.
“We encourage the Government to move forward with haste to help retailers with the following issues that must be addressed in any new legislative framework:
- Code of Conduct to improve operational and negotiation behaviour
- Full disclosure by the landlord of true rent and plans for the shopping centre
- Non-disclosure of turnover figures directly to the landlord
- End of lease negotiation
- Separation of shopping centres from other retail activity
- Low cost dispute mechanisms.
“This report confirms what governments have been told for many, many years yet seemingly do not have the courage to resolve – that is major shopping centres are a very different retail market compared to strip and small retail sectors. These shopping centres operate in a virtual monopoly due to planning laws and therefore have restrictive competition practices within their negotiations with retail tenants. Tenants are at a disadvantage at the negotiation table due to one-sided disclosure requirements and this issue can be remedied by simplifying the legislative template nationally and applying a code of conduct. The challenge the Rudd Government has is to show leadership when others have not,” Evans said.
Productivity Commission recommendations:
- State and territory governments should take early actions to further improve transparency and accessibility in the retail tenancy market. They should:
- Encourage the use of simple (plain English) language in all tenancy documentation.
- Provide clear and obvious contact points for information on lease negotiation, lease registration and dispute resolution.
- Encourage a one page summary of all key lease terms and conditions to be included in retail lease documentation.
- To increase the transparency of the market, state and territory governments should facilitate the lodgement by market participants of a standard one page lease summary at a publicly accessible site.
- State and territory governments, in conjunction with the Commonwealth, should:
- Encourage the development of a national reference lease with a set of items (and terminology) to be included in all retail tenancy leases and in tenant and landlord disclosure statements.
- Institute nationally consistent reporting by administering authorities on the incidence of tenancy enquiries, complaints and dispute resolution.
- The significance of jurisdictional differences in the provision for unconscionable conduct, as applying to retail tenancies, should be detailed by state and territory governments in conjunction with the Commonwealth, and aligned, where practicable.
- A voluntary national code of conduct for shopping centre leases that is enforceable by the ACCC. The code should:
- Include provisions for standards of fair trading, standards of transparency, lodgement of leases, information provision and dispute resolution; and
- Avoid intrusions on normal commercial decision making in matters such as minimum lease terms, rent levels, and the availability of a new lease.
- State and territory governments should remove those key restrictions in retail tenancy legislation that provide no improvement in operational efficiency, compared with the broader market for commercial tenancies.
- As unnecessarily prescriptive elements of retail tenancy legislation are removed, state and territory governments should seek, where practicable over the medium term, to establish nationally consistent model legislation for retail tenancies, available to be adopted in each jurisdiction.
- While recognising the merits of planning and zoning controls in preserving public amenity, states and territories should examine the potential to relax those controls that limit competition and restrict retail space and its utilisation.
