Page 3240 - Week 11 - Wednesday, 21 September 1994
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Before discussing some of the provisions of the proposed code, I would like to point out that when the code is accepted it will not be the end of the story; it will be just the start. It is the Government's intention to monitor the ongoing operation of the code. We will invite various groups - such as CARTA, BOMA and the Canberra Property Owners - to join in an ongoing dialogue so that when the code comes into operation, hopefully on 1 January next year, we can get a feel for how it is working and where there might be a need for changes. In addition, I think it would be worth while to conduct a complete review of the code after it has been in operation for, say, 12 months.
A number of amendments have been made to the draft code of practice that was circulated for public comment in June this year. Most of these amendments have been made in response to submissions received, and some have been made to remove unnecessary duplication in the code or to tighten up drafting. I do not have the time here to go through a thorough explanation of the proposed code. The draft explanatory booklet for the proposed code gives a detailed explanation of its provisions, and I would commend it to Assembly members, who have been able to examine it over the last week. However, I would like to draw your attention to the major amendments that have been made since the draft code was released.
First of all, I will deal with the most difficult issue, namely, the question of what rights a tenant will have in relation to the renewal of leases. There is agreement that a minimum lease term of five years is necessary to ensure that business investments can be recouped by tenants within the period of a lease; so the code will provide for that. However, a number of tenants consider that a five-year lease alone is not sufficient. Many tenants want to be assured of automatic renewals and, where a renewal is not granted, want compensation to be payable. Alternatively, CARTA has proposed that an owner should not be able to unreasonably refuse to renew a lease, with the proposed tenancy tribunal having the power to determine the reasonableness or otherwise of any claim for renewal. Tenants have pointed out the particular difficulties in Canberra, where, unlike in other cities, owners face limited competition in the supply of premises. It is very difficult in many parts of Canberra for a tenant to simply pick up and move a block away, thus retaining goodwill in that area, when the relationship between owner and tenant is unsatisfactory. In other words, in Canberra, especially when it comes to renewals, tenants believe that they are in a very vulnerable position.
In addition to some guarantee of tenure, tenants have argued that once they have set up a business in a particular position it costs a fair amount of money to move somewhere else and re-establish the business. In these circumstances, an owner knows that an existing tenant will be willing to pay a premium over and above the market value for those premises because extra rent will not be as burdensome as moving. Accordingly, tenants have argued that there should be a cap on the rent charged for renewals. The rent should not exceed the market rent for those premises.
Owners, in contrast, have pointed out that there are important reasons why there should not be automatic renewals. In particular, owners have an investment from which they seek to maximise their return. They argue that a more profitable shopping centre, with an attractive tenant mix, is better for all concerned, not just the owner. The tenants benefit from having more customers, and consumers benefit from having more choice.
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