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Retail Shop Leases in Queensland

 – pitfalls for tenants exercising options to extend or renew


Those that that rent their business premises typically invest substantial capital and resources in establishing themselves in that particular location. This includes the costs of the store fit out, in addition to as branding and other marketing activities. In order to ensure this investment is not lost upon the initial lease term expiring, tenants will often negotiate one or more options to extend the lease beyond the initial term.

 

Exercise of option

 

Where a Queensland Retail Shop Lease contains an option to renew or extend the lease, section 46 of the Retail Shop Leases Act 1994 (Qld) (RSLA) requires the landlord to give the tenant written notice of that option date. This notice must be given at least two months before the option date, but not more than six months prior to the option date.

Whilst this obligation is clearly stated in the RSLA, a landlord’s failure to comply with the obligation, whilst potentially exposing the landlord to a fine of up to 40 penalty units ($5,046 as at 1 July 2017), this will not excuse the tenant’s failure to comply with the option exercise procedure contained in the lease. If the option date is missed, regardless of whether the landlord failed to give the required notice, the tenant will lose their ability to exercise any right to renew or extend the lease.

This can potentially result in very significant consequences for the tenant, as the tenant can be being forced to vacate the leased premises on short notice, regardless of the resources invested to establish their business at the leased premises.

 

Where the lease does not contain an option

 

Where a Queensland Retail Shop Leases does not contain an option to renew, section 46AA of the RSLA requires the landlord to give the tenant written notice offering to either renew or extend the lease, or alternatively advise the tenant that a renewal or extension is not to be offered. This notice must be given to the tenant at least three months but not more than six months before the lease expires, or for leases of over one year, at least six months but not more than one year before the lease expires.

If the landlord fails to give this notice, the tenant may, by submitting an extension request to the landlord in writing prior to the expiry of the lease, automatically extend the lease until six months after the landlord gives the required notice. However, this will only apply if the tenant submits the extension request prior to the lease expiring, failing which the opportunity to do so will be lost.

 

What should tenants do?

 

Tenants should ensure that they are familiar with their rights and obligations under any lease and must not rely on the landlord to remind them of any important dates, as ignorance of those rights is not a valid excuse.

In order to ensure any options to extend are not lost, it is imperative that tenants put adequate procedures in place to diarise important dates so that they are not missed. If there is any uncertainty, legal advice should be sought at the earliest opportunity.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 06 July 17