Retail leases – ACCC goes on the offensive

20 Aug 2009

For the first time in many years, the ACCC has recently, through both public media comment and legal action, signalled an increased focus on retail leasing and the behaviour of both landlords and tenants.

This has taken the form of:

  • court proceedings on behalf of a tenant in the Dukemaster case, which resulted in the landlord being found liable for unconscionable conduct as well as misleading and deceptive conduct arising from the manner in which it conducted lease negotiations
  • the ACCC’s public statements in relation to retail leases, since the Dukemaster decision having used substantially stronger language such as “bullying landlords” indicating a new aggressive stance over landlord conduct and behaviour
  • a 12 month national investigation into restrictive covenants / exclusive use clauses in supermarket leases in shopping centres
  • comments by Graham Samuel at the recent National Retail Forum that the ACCC believes that exclusive use clauses are illegal and anti-competitive and will require both landlords and tenants to remove them from leases or face prosecution and substantial fines for breach of the Trade Practices Act
  • calls for the Federal Government to enact national legislation to prohibit exclusive use clauses in retail leases
  • suggestions to shopping centre tenants that they collectively bargain with landlords to increase their commercial bargaining power and achieve more favourable lease terms

For retailers, this move by the ACCC will have a number of significant effects, including:

  • landlords will most likely now refuse to grant exclusive use rights to any tenant given the legal and financial risks
  • the prospect of national legislation dealing with a retail lease issue may give renewed emphasis to the recent recommendations of the Australian Productivity Commission for more national uniformity in retail lease legislation
  • landlords will be more restrained and wary of making representations in lease negotiations and are much more likely to play things “by the book”

The ACCC seems determined to continue its current focus for some time with an increasing ripple effect throughout the retail leasing sector and the probability that it will identify and tackle other common retail lease issues.

For both landlords and tenants it is very much a case of big brother is watching.

MST has a dedicated group to service the Retail industry.

Author:  Mark Kemp