Page 342 - Week 02 - Tuesday, 20 February 1990
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It became apparent during the inquiry that tenants must consider the term of the lease when they are borrowing capital to move into a business or establish one because once the term of a lease expires and there is no option for renewal the landlord is under no moral or legal obligation to renew the lease. If it is not renewed the tenant, if overcommitted, could be left in a financially difficult situation.
As Mrs Nolan has already mentioned, the committee has not made recommendations as to what the code of practice should include, as this must be agreed upon by the participating organisations. However, in paragraph 4.9 of the report the committee has made some suggestions because there were issues which were repeatedly brought to the committee's attention.
The first issue is providing for an appropriate disputes settlement mechanism. As I mentioned earlier, a code of practice would provide for a more appropriate and flexible disputes mechanism. At present the Australian Institute of Valuers and Land Administrators in the ACT offers an independent disputes mechanism. However, as the institute is considered to have interests which lean towards landlords, this mechanism is not widely used by tenants.
Another issue which was brought to the committee's attention was rent reviews. This was a major grievance for many tenants. Generally, rent can be calculated in three different ways - midterm reviews, reviews to a current market level by regular increases, or rent can be set as a percentage of turnover - or a combination of any of the three.
A number of submissions indicated that increase in rent can sometimes outstrip the profit that a business is making in turnover, leaving a tenant in a financially difficult position and on some occasions having to retrench staff. At present rent disputes are heard by a qualified member of the Australian Institute of Valuers and Land Administrators.
The next issue was compensation and relocation. Although the committee accepted that the owner has the right to redevelop or renovate the premises, it did have concerns as to who should pay for the renovations of the premises or relocation of a business. The committee was told of instances in which tenants were required not only to relocate their premises but also pay for renovations of a capital nature which are not removable once a lease is terminated. If a tenant is forced to relocate a business, the new premises should be as economically viable as the previous location, otherwise the tenant should be compensated. However, claims for compensation can be offset by other benefits - for example, longer leases.
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