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The inquiry by the Economic Reference Committee was established in June 2014 with independent South Australian Senator, Nick Xenophon, expecting the inquiry would point to the need for a single Federal Act covering retail leasing.
Perhaps showing exhaustion or frustration with government reviews and inquiries, the Senate Inquiry drew only 28 submissions on retail leasing, and the committee’s report included just three recommendations.
The committee recommended the Australian Government give recognition to and “wherever possible support” the work of the small business commissioners appointed by the states and territories who oversee dispute resolution processes for retail tenancy issues.
The committee argued all states and territories should establish small business commissioner offices with dispute resolution powers.
The second recommendation was to re-establish the National Retail Tenancy Working Group to consult widely with stakeholders and develop a national disclosure statement.
Its third recommendation was for the Commonwealth to take on a “greater leadership role” in encouraging the states and territories to move towards a harmonised approach to retail tenancy leasing through the Council of Australian Governments framework.
Xenophon lodged a minority report that expressed disappointment that the Senate committee failed to “express a view on the majority of matters explored during the inquiry”.
He said meaningful reform in retail tenancy legislation is urgently needed, with greater transparency required in terms of incentives offered by landlords to tenants, particularly where they have the effect of distorting market rents.
In his minority report, Xenophon is arguing for a national lease register and full disclosure of incentives offered to tenants and contends the cost of fitouts should be a factor in determining the length of a lease.
He recommends a code of practice that incorporates the broad reporting of sales and occupancy costs in Australian shopping centres be finalised and implemented, with the code prohibiting specific commercial in confidence sales and occupancy data being provided to landlords.
While acknowledging the value of sales trend data for retail planning, Xenophon does not believe landlords should have the actual sales figures of tenants because of concerns about the inappropriate use of the data in rent negotiations.
Xenophon’s minority report also recommends that bank guarantees on tenants should be limited to 28 days and that ratchet clauses should be excluded from retail leases unless expressly agreed to by the tenant.
He argues that whatever terms are struck in a lease at the time the contract is entered into ought to continue for the full term of the lease, “unless explicitly agreed to otherwise”.
The two most significant recommendations in the minority report are for the rights of renewal of a lease to be enshrined on a national basis and the extension of the jurisdiction of the Australian Consumer and Competition Commission to oversee a new national industry code of conduct providing for “fair, effective, and cost efficient dispute resolution”.
Xenophon wants to assure tenants of a “first right of refusal” for the renewal of leases.
He has expressed disappointment with the Senate Inquiry, which he claims has highlighted support from industry groups representing both retail landlords and tenants for a national coordinated approach to retail tenancy issues and “ultimately a single Federal act”.
The Senate Economics Reference Committee had six members and the final report was delivered by NSWs Labor Senator, Sam Dastyari.
The terms of reference for the inquiry sought examination of issues such as the first right of refusal for tenants to renew their lease, bank guarantees, a fair form of rent adjustment, provision of sales results, contractual obligations relating to store fitouts and refits, and full disclosure of incentives.
The terms of reference also called for consideration on the need for a national lease register, the implications of statutory rent thresholds, and a means to achieve affordable, effective and timely dispute resolution processes.
The final report has scant reference to most of the issues that the committee was asked to examine and provides an opinion on only three matters, the value of small business commissioners, the need to reconvene the National Retail Tenancy Working Group to draft a national disclosure document, and the need to encourage states and territories to harmonise legislation.
The report is of little value to the industry or to any constructive dialogue on tenancy issues amongst the states and territories or industry groups.
Xenophon appears to have been the only Senator who really had any interest in the inquiry at all, not surprising though, as it was his motion that established the terms of reference.
This story first appeared in Inside Retail PREMIUM issue 2040. To subscribe, click here.