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On a short leash. National reform needed on retail leasing

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For more information contact Jeremy Roberts on 0433 620 850 or Nick Xenophon on 0411 626 677

19 / 3 / 2015

Senate Inquiry exposes exorbitant rents and hidden lease terms that keep retailers:

ON A SHORT LEASH. NATIONAL REFORM NEEDED ON RETAIL LEASING Independent Senator for South Australia, Nick Xenophon, has called for national laws to make retail leasing fairer and more transparent for small businesses following alarming evidence to a Senate inquiry. The call followed a Senate inquiry that uncovered exorbitant rents, secret inducements to attract new tenants but mislead the market on property values as well as so-called ‘ratchet clauses’ that prevent drops in rents. “Small and medium retailers are hurting due to the unfair and antiquated patchwork of rules across the country. The lease over their place of business is a retailers’ most important agreement but many are being exploited and taken advantage of by land lords,” said Nick. Retail consultant Stirling Griff (and Nick’s running mate at the last election) said: “It is time to harmonise laws across the country to standardise the best arrangements from each state.” Mr Griff said that some landlords were using loopholes in current state laws to force retailers to pay exorbitant rentals. A lack of disclosure of incentives or rent discounts for new tenants led to banks, financiers and valuers potentially being misled as to the true value of a shopping centre, he said. Senator Xenophon criticised the majority report of the Senate Economics Legislation Committee inquiry into retail leasing as a “missed opportunity” and made a series of recommendations to level the playing field for retailers. In his additional comments to the inquiry report, Senator Xenophon also recommended:  That existing tenants be awarded rights of renewal enshrined on a national basis.  An industry code of conduct in respect of fair, effective, and cost efficient dispute resolution be implemented, to be managed by the ACCC.  Ratchet clauses (that prevent rent decreases when rent rates are reviewed) be excluded from retail leases, unless expressly agreed to by the tenant.  Bank guarantees on tenants be limited to 28 days rental and rules about when a land lord can access the guarantee.  A code of practice that incorporates the broad reporting of sales and occupancy costs in Australian shopping centres be finalised and implemented as soon as practicable. Such a code should prohibit specific commercial-in-confidence sales and occupancy data being provided to landlords. “Small and medium retailers have been suffering uncertainty and extortionate lease negotiations for too long - it’s time to show national leadership and fix retail leasing,” said Nick.