Rent payable by a Lessee in a retail shop lease can now decrease at a market review. A clause in a lease which prevents the lease decreasing is commonly known as a Ratchet Clause.
The Retail Shop Leases Act has been amended by inserting a provision that makes a ratchet clause in a retail shop lease void. A ratchet rent provision is defined as any provision of a retail shop lease that:
a) Prevents, or enables the lessor or another person to prevent, the rent decreasing under a rent review; or
b) Limits or specifies, or allows the limitation or specification of, the amount by which the rent may decrease under a rent review; or
c) Prevents, or allows the avoidance of, the rent review by the lessor or another person for a purpose mentioned in paragraph (a) or (b).
Any retail shop lease which contains such a provision is void where the lease is entered into on or after 4 April 2011.
The amendment has been passed to close a loophole created by the Court of Appeal which upheld the validity of a ratchet clause in a retail shop lease which prevented rent decreasing.
All Queensland landlords of retail shops will need to review their rent review clauses in leases entered into from 4 April 2011.
Please feel free to contact me if you have any questions.
The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.
Prefer to get in touch?
With offices in Brisbane, Sunshine Coast, North Queensland and Sydney, our team is well equipped to provide both advice and support across a broad range of legal areas.