Retail and Commercial Leases (Rent Threshold for Application of Act) Amendment Bill

July 5, 2017

Introduction and First Reading

 

The Hon. J.A. DARLEY ( 16:41 :09 ): Obtained leave and introduced a bill for an act to amend the Retail and Commercial Leases Act 1995. Read a first time.

 

Second Reading

 

The Hon. J.A. DARLEY ( 16:42 :20 ): I move: That this bill be now read a second time.

 

This bill seeks to clarify the parliament's intentions with regard to the Retail and Commercial Leases Regulations. In 2011, changes were made to the Retail and Commercial Leases Regulations. One of the changes made was to increase the threshold by which the Retail and Commercial Leases Act will not apply. Under section 4 of the regulations, if the annual rent of a retail shop lease is more than $400,000 the provisions of the act do not apply. Prior to 2011, this amount was $250,000.

 

Section 30 of the Retail and Commercial Leases Act outlines that lessees who have an annual rent that is higher than the threshold can have land tax recovered from them by the owner. That is to say that lessees would be liable to pay for the land tax if this was outlined by the lease. The threshold increase has resulted in a situation whereby owners who had previously passed on land tax to their tenants prior to the change were now held liable for the land tax. Through no fault of their own, as a result of a change of the regulations, owners were suddenly faced with having to pay land tax bills to the tune of tens of thousands of dollars.

 

In May this year, in the case of Diakou Nominees Pty Ltd v Gouger Street Pty Ltd, the Hon. Justice Stanley confirmed that, in the above circumstances, the owner is liable for the land tax. Prior to 2011, the rent for Gouger Street Pty Ltd was $250,500, which was $500 over the threshold at that time. As lessee, Gouger Street Pty Ltd knew it was liable for land tax as part of the outgoings.

 

The existing lease commenced on 1 September 2006 for a period of five years, with six options to renew for a further five years per option. The lease was renewed on 1 September 2011, but the court held that a renewal of a lease is considered to be an entry into a new lease and not an extension of a pre-existing lease.

 

As the threshold had increased on 4 April 2011 to $400,000, Gouger Street Pty Ltd argued that, as their rent was now under the threshold, they were now protected by section 30 of the act, which outlined that land tax is not to be recovered from the lessee. This saved them thousands in land tax, but put the burden of the account onto the owners.

 

The court found in favour of the lessees, but I do not believe that this was the intention of the government or this parliament. When a lease is entered into, both parties are aware of the terms and obligations as outlined in the lease agreement. A change in the regulations has resulted in the terms of the lease agreement being changed significantly for both parties and this is not fair.

 

This bill would clarify that if a lease was entered into or renewed before 4 April 2011, which is when the threshold increased, and that the rent at that time was more than $250,000, then the act will not apply. The bill will have no financial implications to the government as the land tax will be paid no matter what the outcome. It will only affect the existing leases and protect the existing rights and obligations of owners and lessees.

 

Debate adjourned on motion of Hon. D.G.E. Hood.

 

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©2017 BY JOHN DARLEY.