Treasury consultation targets Australia’s eight retail lease regimes

A national consultation into retail leasing laws is due to close on October 12, with businesses, landlords and property groups being asked where differences between jurisdictions create unnecessary cost, confusion or delay.

For retailers operating across multiple states, those differences can mean changing lease documents, seeking separate legal advice and adjusting processes depending on where a store is located.

Landlords with properties across the country face the same problem from the other side of the negotiating table.

Treasury is now examining whether some of those rules could be made more consistent, without requiring every state and territory to adopt an identical system.

Same same, but different

Retail leases cover shops and many other commercial premises occupied by businesses such as retailers, franchisees and service providers.

The Commonwealth does not currently set most of the rules governing those leases – that responsibility sits with the states and territories.

It means a retailer opening a second shop interstate cannot necessarily use exactly the same leasing process it followed for the first.

The Australian Retailers Association and National Retail Association, which have since combined to form the Australian Retail Council, argued in an earlier submission to government that differences extend to the definition of a retail lease, disclosure requirements, rent reviews, security arrangements and dispute processes.

They said national and multi-state retailers may have to alter lease documents and obtain separate legal advice for different jurisdictions, with some retailers reporting that duplicated reviews and documentation can add tens of thousands of dollars in legal costs to a store rollout.

Assistant Productivity Minister Andrew Leigh said businesses should not need a new rule book each time they cross a state border.

“Different leasing rules can mean extra legal costs and extra work for a business wanting to open in another state,” he said.

The government is not proposing that every retail leasing law become identical.

Instead, Treasury is examining where differences create unnecessary costs, delays or confusion, and which rules could operate more consistently without removing differences that have a reason to remain.

A lease on simpler rules

The consultation covers some of the most important parts of the relationship between a commercial landlord and tenant.

These include the information that must be disclosed before a lease is entered into, how and when rent can be reviewed, responsibility for property outgoings, transferring a lease to another operator and what happens when the landlord and tenant disagree.

Exactly which areas could eventually be standardised remains undecided.

The Australian Property Institute, which represents property professionals including valuers, has singled out rent determination as one area where national consistency could help.

The Institute attended a Treasury technical roundtable in September and said valuers could effectively be asked to perform the same task under eight different sets of rules.

It argued the processes used to determine rent should receive greater attention as part of the reforms.

Landlords have also backed the broader push.

Shopping Centre Council of Australia chief executive Angus Nardi said greater consistency in retail lease legislation could reduce “unnecessary cost, complexity and delays”.

A level playing field for leasing

The issue extends beyond retailers.

Owners of shopping centres and other retail properties must also comply with different tenancy requirements when operating across several states, while property lawyers, valuers and leasing agents work within the rules that apply in each jurisdiction.

The Australian Retail Council has argued that the burden can be particularly significant for franchise businesses, where an individual franchisee may be a small operator even though the brand itself has stores around the country.

The push for more consistent leasing laws is part of the federal government’s broader National Competition Policy agenda, aimed at removing regulatory barriers that make it harder for businesses to grow across Australia.

Small Business Minister Anne Aly said the government wanted to identify where the existing system was creating unnecessary complexity for businesses trying to expand.

But any reform would ultimately require cooperation with the states and territories, which currently controlled their own retail tenancy frameworks.

Submissions close on October 12.