Recent amendments to the Retail Shop Leases Act 1994 (Qld)(RSLA) mean that rent review provisions preventing decreases in rent will now be invalid. These provisions are often referred to as ‘ratchet clauses’.
These changes have occurred in order to overcome the effect of Connor Hunter (A Firm) v Keencrest Pty Ltd (2009) where a ratchet clause in a lease was held valid. Prior to this case there was a widely held view that all ratchet clauses were prohibited in retail shop leases and the legislative changes have now reinstated this position.
The new s36A declares ratchet rent provisions void. ‘Ratchet provision’ is defined as a provision in a lease that:
There have also been some changes to the RSLA’s compensation provisions. An assignee will now be entitled to compensation for loss or damage caused by entry into a lease on the basis of false or misleading statements, or misrepresentation, by the lessor.
The amended provisions apply to retail shop leases entered into after 4 April 2011. Landlords of retail shopping centres should now ensure they review the rent provisions in their standard leases to remove ratchet clauses.