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Thursday, 19 March 2015
Page: 2019


Senator XENOPHON (South Australia) (18:12): I seek leave to go back to document No. 3, the Senate Economics References Committee report Need for a national approach to retail leasing arrangements.

The PRESIDENT: You certainly can. Thank you, Senator Xenophon.

Senator XENOPHON: Thank you, Mr President. I will keep my remarks fairly brief. Yesterday, the Senate Economics References Committee tabled its report on the terms of reference that I put to the Senate on the need for a national approach to retail leasing arrangements. The report process was—as usual by the Senate economics committee—extremely comprehensive. I am incredibly grateful to the iconic Dr Kathleen Dermody, who did such a terrific job with her secretariat in the depth of material provided to the committee and the way that the inquiry was run, and to my colleagues for the way that they participated fulsomely in this report. But I am disappointed with the majority report, the bipartisan report. It simply does not address the issue, in my view, that there ought to be a national approach to leasing, that the Commonwealth government has a key role in respect of this and that there are too many commercial retail tenants in this country in a difficult position because they do not have the safeguards of a national approach in respect of leasing.

I will just cover a few of those, but before I do I want to acknowledge Stirling Griff, who happened to be my running mate at the last federal election and hopefully will be running again at the next federal election, whenever that may be, whether it is in three months, six months or 18 months.

Senator Polley: A double D or not?

Senator XENOPHON: What?

Senator Polley: A double D?

The PRESIDENT: Order! To the chair, Senator.

Senator XENOPHON: I will not comment, Mr President, about double dissolution elections, but I can say that I think the electorate is doubly disillusioned. There is a difference between the two. But I will say this. Mr Griff knows a lot about retail leasing. He was head of the Retailers Association in South Australia a number of years ago. He has a lot of expertise in this field, and his contacts and the people that he has advocated for have been very helpful in this inquiry. I am incredibly grateful to Stirling Griff for his support in this inquiry.

We need to address a number of issues at a national level. We need to address the issue of the first right of refusal for tenants when renewing their leases. We need to adopt the Tasmanian Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 as a template, because the Tasmanians have it right. That is the best practice model in the country. It gives tenants some real rights around renewal of leases.

We need to have affordable, effective and timely dispute resolution processes. This is a broader problem to do with access to justice in this country if you are involved in a commercial dispute. Too many Australians cannot afford to go to court even if they have a legitimate grievance in a commercial matter because the cost can be absolutely crippling. If you are up against Westfield or another giant landlord, for them as a multibillion dollar corporation $50,000, $100,000 or $200,000 is virtually loose change. But for a small tenant where their only asset backing their businesses is their family home that is too crippling to consider. So we need to have an industry code of conduct for fair, effective and cost-effective dispute resolution to be implemented and managed by the ACCC.

There also needs to be a fair form of rent adjustment so that ratchet clauses can be excluded from retail leases unless expressly agreed to by the tenant. Otherwise it is just a one-way street where rents go up even though economic circumstances may mean that rents should go down. We also need to look at statutory rent thresholds. You should not be able to opt out of the protections for tenants because a lease goes over a certain threshold in legislation. Bank guarantees are also a problem for tenants because there can be unreasonable requests which cause crippling problems for tenants' cash flow.

There also needs to be a national lease register and full disclosure of incentives because they can distort the rental market. If someone is offered three or six months rent free on a lease or all sorts of other incentives, that can distort the market significantly. That is why there needs to be a standard form to be completed by landlords when entering into a lease. This form should include the disclosure of the commercial terms of the contract, including all incentives offered to the tenant. Otherwise, some of the holdings of some of these landlords can be grossly overvalued. There also needs to be a code of practice that incorporates the broader reporting of sales and occupancy costs. This turnover tax that tenants have is quite unfair, so that needs to be reformed.

We need a national approach to this. This issue will not go away. There are tens of thousands of tenants in this country that want the certainty of fair terms and conditions. To hazard a guess, if we had those fair terms and conditions, more and more people in this country would be prepared to go into a tenancy, which would ultimately be good for landlords.

I want to finish off by referring to the comments from my state colleague the Hon. John Darling MLC who has considered this issue and is doing work at a state level on improvements for tenants. He believes that tenants are paying rents for their own fixtures and fittings when there are valuations. That seems to be unfair. That needs to be addressed. When the lessor moves to increase rent, the lessor needs to be transparent about the documents they are relying on because there have been cases where tenants have had to pay for a valuation and the landlord has refused to show up for them. That is unfair. Also, for instance, land tax at a single holding rate should be transparent in leasing documents.

I have gone beyond the time I indicated to you that I would, Mr President. I apologise for that. But I indicate that this issue will not go away. Thousands of small businesses tenants around the country want some fundamental fair reforms which ultimately will strengthen commercial tenancies in this country. I think it will be a win-win for both landlords and tenants. I seek leave to continue my remarks later.

Leave granted; debate adjourned.