Retail Tenancy Leases in Australia - Productivity Commission Inquiry

The Productivity Commission Inquiry, released on 31 March 2008, analyses the current market for retail tenancies in Australia, seeking remedies to the difficulties encountered by small retailers. These difficulties are believed to be due to the imbalances in bargaining power between small tenants and large landlords. 

The Commission has made a number of recommendations to the States and Territories (States), to be implemented within the next 2 years, the aim of which is to reduce constraints on the retail tenancy market, improve the efficiency within which it operates and provide a pathway to lowering compliance administration and information search costs.

The measures for the immediate future highlighted by the Commission are:

  1. States should avoid widening the gap between the retail tenancy market and the market for commercial tenancies and avoid more stringent and prescriptive legislation. 
  2. The Commission recommends that transparency be increased in the market by facilitating the lodgement of a standard one page lease summary at a publicly accessible site.
  3. Improve the national consistency of tenancy information - States in conjunction with the Commonwealth should encourage the development of a national reference lease.
  4. The jurisdictional differences in the provisions for unconscionable conduct applying to retail tenancies should be aligned where practicable.
  5. The Commission recommends the removal of retail tenancy legislation which provides no improvement in operational efficiency, compared with the broader market for commercial tenancies.  

The recommendations of the Commission for the medium term are:

  1. That the more prescriptive elements of retail tenancy legislation are removed. 
  2. While recognising the merits of planning and zoning controls in preserving public amenities, the Commission recommends the examination and potential relaxation of the controls that limit competition and restrict retail space and its utilisation.

In the long term, the Commission recommends that States in conjunction with the Commonwealth facilitate the introduction of a voluntary national code of conduct, enforceable by the ACCC for shopping centre leases. The Commission also recommends the introduction of a nationally consistent regulatory framework with reference to a nationally consistent model legislation, with the view to lower compliance and administrative costs.

We will keep you informed on any new revelations in the retail tenancy legislation following the Commission's recommendations.

 

Written by Vincent Tripodina, Solicitor