Retail Shop Leases in WA

When the Retail Shops Act Applies (and When It Doesn’t)

The Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Retail Shops Act) is an important piece of legislation that offers protection to a wide range of commercial tenants in Western Australia.

One of the key objectives of the Retail Shops Act is to address the imbalance of power often present in relationships between small retail businesses and their landlords by promoting greater transparency and fairness in lease agreements.

Landlords and their agents should pay careful attention to whether the Retail Shops Act applies to any commercial leases they hold or are proposing to enter into for themselves or their clients.  The Retail Shops Act has a number of restrictions on what can be included in or claimed from a tenant and it prescribes special disclosure documents be provided to the tenant, prior to them entering into the lease. 

The failure to provide this disclosure may entitle the tenant in certain circumstances to terminate the lease early without penalty.

It can sometimes be difficult to determine whether a lease is covered by the Retail Shops Act.  That is because the Retail Shops Act does not only apply to retail shops.  In other cases it may be unclear whether the Retail Shops Act applies because the nature of the tenant’s business only partly involves the sale of retail goods.

Whether the Retail Shops Act applies to a commercial lease depends on a range of factors including:

• the type of premises being leased;
• the nature of the business to be operated by the tenant;
• the size of the tenancy; and
• whether any specific exemptions apply.

Premises used for Retail Business

A lease will be covered by the Retail Shops Act as a ‘Retail Business’ where the leased premises are used wholly or predominantly for the carrying on of a business that engages in the sale of goods by retail.

The focus on this definition is the provision of retail goods as opposed to the provision of retail services which are not automatically captured under the Retail Shops Act.  Stores which sell clothing, or small convenience stores which sell pre-packaged food and groceries would clearly fall within this category of stores which primarily sell retail goods.

However, in other cases it may be less obvious as to whether the business is considered to be engaged predominantly in the sale of retail goods.  There are many businesses which engage in the provision of both services and goods such as those businesses which sell food and drinks that are prepared on the premises.  The State Administrative Tribunal has found that both cafes[1] and restaurants[2] are Retails Businesses for the purposes of the Retail Shops Act even though they engage in the dual role of providing both services and goods to their customers.  What is required is an examination of all the uses of the leased premises involved in the conduct of the business. 

Where there is any uncertainty as to whether the tenant’s business may at least partially be involved in the sale of retail goods we would recommend the landlord obtain legal advice as to the application of the Retail Shops Act to the premises.  This advice is best sought prior to entering into the lease.

Premises used for a Specified Business

The Regulations made under the Retail Shops Act also specify several businesses that are considered to be Retail Businesses, even if they are not engaged in the sale of retail goods.  This has allowed a number of service-orientated businesses to be captured by the Retail Shops Act.

This list may be updated in the Regulations from time to time, but currently includes businesses which provide the following services:

• drycleaning;
• hairdressing;
• beauty therapy and treatments;
• shoe repair (including key cutting and engraving); and
• sale or rental of video, DVD’s or electronic games.

Premises located in a Retail Shopping Centre

Even if the tenant does not operate a Retail Business, the Retail Shops Act will still apply if the premises are located within a “Retail Shopping Centre”.  This could bring a range of businesses under the coverage of the Retail Shops Act even if they don’t engage in the sales of goods such as travel agents, real estate agents and dentists.

The definition of a Retail Shopping Centre includes any cluster of premises where there are 5 or more premises carrying on a retail business which:

• have the same head lessor/owner; or
• are lots on a single strata plan.

Landlords and their agents looking to lease premises that are part of a cluster of 5 or more leased premises should pay careful attention to these requirements when considering whether to use a Retail Lease when leasing their premises.

Size of the Premises

Some leases are excluded from the coverage of the Retail Shops Act, even if they would fall within any of the above categories.  The Retail Shops Act will NOT apply to a commercial lease where:

• the premises have a lettable area greater than 1000m;
• the tenant is a publicly listed company or is a subsidiary of a publicly listed company (depending on where that company is listed); or
• the lease is exclusively for the operation of an ATM or vending machine.

Conclusion

Determining whether a commercial lease is subject to the Retail Shops Act is not always straightforward and depends on a combination of factors.  Given the significant consequences that can arise if the Retail Shops Act applies (and has not been accounted for in the preparation of the lease) where there is any doubt as to whether the Act applies landlords should look to obtain legal advice at an early stage.

[1] Dacheva and Superflash Pty Ltd [2017] WASAT 77

[2] Mistelle Bickley Pty Ltd And Sykes [2023] WASAT 69