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Commercial tenancy agreements



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http://www.democrais.org.au/wa/comnitenancy.htmI

Give Small Business A Fair Go

The Commercial Tenancy (Retail Shops) Agreements Act 1985

The Commercial Tenancies Act and the required amendments to it represents a hot political issue. It represents the conflict between thousands of small and medium businesses versus big business interests. It represents the conflict between big business influence, lobbying, and money, and how that affects the Court Coalition, and the legitimate needs of small and medium business.

The Property Council of Australia and the Builders and Owners Management Association (BOMA) have waged a well funded and politically very successful campaign against the advancement of tenants rights throughout Australia. The major political parties have been

significantly influenced by these campaigns. But much better rights for commercial tenants is a major issue and will not go away.

The Commercial Tenancies matter has been extensively reviewed, reported on and canvassed in W.A., especially by such authoritative bodies as the Small Business Development Corporation. It is now time to act. The amendments drawn up must be enacted.

Australian Democrats Commitment

The Australian Democrats strongly support the retention of the Commercial Tenancies Act. If elected to the W.A. Parliament the Australian Democrats WILL put forward the amendments to the Commercial Tenancies Act which have been drawn up but which the Court Government has refused to

implement.

Planning and Monopolies

Modern planning and modem business practices favour the development of landlord monopolists. Modern planning results in newly developed residential areas being interspersed with isolated commercial areas such as shopping centres. Any landlord who can gain control of such centres enjoys a local monopoly. The high costs of developing such centres also means that frequently they are developed by developers and institutions

specialising in such activity. In many areas therefore an oligopoly of institutions enjoy a series of local monopolies.

Local monopolists enjoy full control of the pricing of their product (premises) to their various tenants. This leads to excessively high prices

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(premises) to their various tenants. This leads to excessively high prices and returns to landlords. The usual outcome of monopoly land pricing is that tenants pass on these costs to their customers in their retail pricing, or sooner or later, they go out of business.

Secret Pricing and Shopping Centre Rents

Rental pricing has 2 parts : Rent - which is nearly always secret - a matter between the particular tenant and the landlord; and Outgoings - which are not secret. Outgoings are often (but not always) on a common formula basis, and are therefore generally known to all tenants of a landlord

Because landlord pricing of retail premises is usually secret, tenants may not appreciate that they are victims of unfair and wrongfully discriminatory pricing. Governments in Australia have been happy to advocatethe deregulation and micro-reform of labour and capital markets, but due to the

strong influence and power of land holders, land and leasing activities are still a very restrictive practice. As a principle, secret pricing is generally a stratagem which allows the vendor (in this instance the landlord) and those with unusual or exaggerated market power (such as landlord or retail oligopolies), to maximise their returns and to unjustifiably discriminate between similar buyers with similar needs, but differing abilities to negotiate or pay (namely small retailers).

The Australian Democrats call for

q the end to secret rent pricing, and the full disclosure of rents paid per square metre within each shopping complex. This will result in fair and open retail rental conditions. The prices of commercial goods and services are rightly public by law. The price of commercial land (rents) should also be fully disclosed;

q the establishment and enforcement of the principle of Section 49 of the Trade Practices Act to landlords - that they may not discriminate between purchasers of goods (i.e. premises) of like grade and quality in relation to prices and service provided; and q small retailers should no longer heavily subsidise big stores on an

unfair and distorted rental basis.

Rent Reviews

Market rent must be able to go down as well as up. Market rent must be assessed on the basis of vacant premises and by fully independent evaluation. Rents should not be set or based on turnover and tenants should not be required to detail their finances other than to prove an ability to

service the lease.

The Democrats Will Also Campaign For:

q a national approach to the issue of commercial tenancies; q a full debate on gross versus net rentals, to resolve or reduce arguments about stewardship and accountability of variable outgoings;

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q market rent to mean market rent - it can go down; q a thorough review of how tenants are adversely affected when existing shopping centres are redeveloped; q educational campaigns for prospective tenants, particularly in

ascertaining potential sales levels, calculating and bench marking occupancy costs ratios to sales and profits, amortising fit-out expenditure for the lease period, and general retail education. This could mean a certificate from TAFE and be compulsory for new retailers; q a standard lease for Australian retailers; q the maintenance of a low cost dispute resolution process; q heavy penalties for drafting leases in breach of the legislation; q existing tenants to automatically have the first right of refusal on a

new lease unless the landlord would be disadvantaged. A lessee to be entitled to written reasons for refusal to renew the lease with the reasons being the basis for judicial review; q rent must be capable of judicial review if it is determined to be harsh and unconscionable.

Authorised by Julie Ward 121 Colin Street West Perth 6005

WA Democrat Office: (09) 322 4211 - fax (09) 322 5833 Comments and inquiries I Senator Andrew Murray

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AUSTRALIAN DEMOCRATS URL:http://www.democrats.org.au/wa/commtenancy.html First Published: November 1996. Last Updated: 1 December 1996. Web Design and Maintenance: Tim Law and Graham Jenkin.

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