If you are a business owner in Mackay or the surrounding areas, it is likely that you have felt the pressure as a result of the mining downturn, especially if you are a small business. It is not uncommon for business owners to close over weekends or reduce the days in which they trade each week to try and to lower expenses and increase their profit margin. However, it is not uncommon that retail Lessees in large shopping centres are forced to open their doors due to an obligation under their lease that if the shopping centre or complex is trading they must be as well.
Being forced to trade when it is not viable can have serious consequences on the financial stability of your business. It is important that if you are a retail Lessee you are aware of your rights, which as of November are being widened with legislation coming into force regarding unfair contract term protections for small businesses.
Under the Retail Shop Leases Legislation a retail shop lease may include a condition that the Lessee is to keep the premises open for trading during the core trading hours of the retail shopping centre. The core trading hours of a centre are trading hours that Lessees of the centre are required by the Lessor to keep shops open for. A condition in a contract that requires a Lessor to trade beyond those core hours is potentially void under the Retail Shop Leases Legislation.
However, this poses a problem from those businesses whose premises may be situated in large shopping centres where the majority of the businesses are owned by large companies, who often open over weekends and can have extended trading hours. This means that the core trading hours of the shopping centre may be increased. This could potentially have a significant impact on the small business owners in the centre.
The new legislation
From 12 November 2016 the unfair contract legislation will be extended to small businesses that have entered into standard form contracts. A small business is classed as a business with less than 20 people employed. A standard form contract is a contract that has been prepared by one party and is not subject to negotiations.
In order to use the protections, the upfront contract price payable must not exceed $300,000 or $1 million if the contract is for more than 12 months. While the protections are not retrospective they will apply to:-
- contracts that are varied from 12 November 2016, specifically the varied term;
- for automatically renewed contracts, the provisions will apply from the rollover date; and
- if the contract is rolled over on a month to month basis, the protections will apply from the first rollover date after 12 November 2016.
A term of a contract may be considered unfair where it would cause a significant imbalance between the parties, it does not protect the legitimate interests of the party that would benefit from its inclusion and the term would cause financial or other detriment. While the Court must assess the fairness of the term itself, it must also assess its fairness in light of the contract as a whole.
If a term is found to be unfair a Court may:-
- declare all or part of the contract void;
- vary the contract;
- refuse to enforce the term or all of the terms under the contract;
- direct a party to refund monies that have been paid or return property; and
- direct the party to provide services to the small business.
If the term is found to be void it will be treated as if it never existed.
It is important that before entering into a lease, small business owners are aware of the terms contained in the lease and the potential consequences if those terms are not complied with.
While the new protections are not retrospective, it is important that as a Lessee, if you are considering renewing your lease, you consider the obligations those terms may impose in light of how your business is performing. Especially since, breaching conditions of your lease may result in further expenses.
If you require lease advice please do not hesitate to contact our office to arrange an appointment with our experienced team.
