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.