The Western Australia (WA) Commercial Tenancy (Retail Shops) Agreement Act 1985 is currently under review, marking significant potential changes for commercial property landlords. The WA Commercial Tenancy (Retail Shops) Agreement Act primarily covers retail shop leases. These are defined as premises located within a retail shopping centre or premises predominantly used to conduct a retail business.
If your lease fits within these criteria, it’s most likely covered by the Act. Although the Act predominately addresses retail shop leases, it also offers some coverage for small commercial businesses. Understanding your commercial property rights and responsibilities is vitally important, both as a landlord or tenant.
Proposed Changes to the WA Commercial Tenancy Act
A review of the operation and effectiveness of the WA Commercial Tenancy Act is carried out every five years. The review aims to modernise the legislation to ensure it remains fair and relevant in the current property landscape. Transparency is likely to be a main feature of changes to the Act. Despite the State Government not yet announcing a timeline for the completion of the review, it’s important to consider its potential impact on commercial property owners and tenants ahead of time. The WA Department of Mines, Industry Regulation and Safety released a consultation paper that outlined the key proposed changes to be considered in the latest review. The publication consultation period closed in August 2022.
The proposed changes to the Act include:
Enhanced Protection for Tenants
The review is primarily focused on enhancing protections for tenants, particularly small businesses. This ranges from measures to ensure fairer lease terms and conditions, more transparency in negotiations, better dispute resolution processes and the possibility of early termination for businesses facing severe financial hardship.
Changes to Rent Reviews and Lease Costs
The review suggests potential changes to rent review processes and lease costs to ensure they are fair and transparent. This may include restrictions on upward-only rent reviews to require landlords to provide tenants with all relevant information during rent negotiations. Landlords should be prepared for potential changes in how they review and negotiate rent.
Disclosure Obligations
The review is considering enhancing disclosure obligations to provide tenants with more information before entering a lease. This may include details about outgoings, rent reviews and any plans for property redevelopment. If implemented, landlords may need to provide more extensive pre-lease documentation.
Dispute Resolution Process
The proposed changes aim to streamline the dispute resolution process to make it more accessible and effective for both landlords and tenants. This could mean faster, cheaper and less formal avenues for resolving disputes.
Penalties for Non-compliance
The review also suggests introducing penalties for non-compliance with certain provisions of the Act. This could include fines for landlords who do not comply with their disclosure obligations or other key requirements.
How will the Proposed Act Changes affect Commercial Business?
These takeaways represent potential changes and are not yet confirmed. Although the Act predominately addresses retail shop leases, it also offers some coverage for small commercial businesses. A small commercial lease usually involves a business with fewer than 20 full-time equivalent employees. The level of coverage under the Act for these types of leases can vary, so it’s important to check the specific details of your lease and seek professional advice if necessary.
What’s Next?
If you are currently a retail shop or, in some instances, a small commercial business, the WA Commercial Tenancy (Retail Shops) Agreements Act will cover you under the current guidelines. If you’re not already aware of how the Act impacts your business, The Small Business Development Corporation provides a handy practical guide on the Commercial Tenancy Act.
Proposed changes could expand the Act’s coverage significantly, and provide an opportunity to implement balanced, effective legislation for the WA commercial property sector. As a landlord or tenant, it’s crucial to stay informed about these potential changes and seek professional advice if you’re unsure about how the Act applies to your property or lease.
The public consultation period for the review closed in mid-2022 and the industry now waits as the State Government prepares to debate the proposed reforms. Keep your eyes peeled, as the changes will come into effect quickly.
If you are unsure of your rights and responsibilities as a landlord or tenant, get in contact with us today.
